What’s employment practices liability insurance (EPLI)?

People, as we like to remind our bosses every now and then, are a business's most important asset. Most of the time.

Because let's face it, they can also be unpredictable and downright demanding. That jokey bloke who you employed on gut feeling may turn out to be not so much fun after all.

Throw a shedload of ever-changing employment legislation into the mix, and you've got a recipe for potential problems. The expensive, time-consuming, keep-you awake-at-night kind of problems that employment practices liability insurance (EPLI) is designed to help with.

The trouble with employment legislation...

The reality of current legislation means that if there is a people problem, the balance of protection is tipped very much in your employee's favour. You certainly need your wits about you.

The Employment Act 2002, the Race Relations Act, the Disability Discrimination Act, the Sex Discrimination Act and the Equality Act (to name but five) exist to ensure employees are treated fairly. They also give them enforceable rights if they're not. Or even if they think they're not.

Those acts protect employees' interests when it comes to such things as flexible working, maternity and paternity, holiday, sickness, sexual orientation, race, age, religion, working hours, data protection, redundancy, pay, disciplinary and grievance, harassment ... the list goes on.

But with so many rules and regulations to fall foul of, it doesn't take much to trip up and find yourself with a disgruntled employee and a legal case to answer.

How employment practices liability insurance can help

So what can you do?

A good HR department or consultant can keep on top of the legislation and help you stay on the right side of it. But many small businesses can't afford either of those.

And if you're hit with accusations of, say, wrongful dismissal or racial discrimination, all the HR support in the world won't pay for your day at the employment tribunal. Or for the thousands of pounds of compensation you could be liable for.

There must be something else.

Well, a fraction of the cost buys you employment practices liability insurance. If you find yourself fending off an employment-related claim, it'll buy you a solicitor's expertise, pay your legal costs and pick up the tab for any awards to the claimant.

Employment practices liability insurance in action

Here are some real-life scenarios where EPLI has helped out:

Unfair dismissal: a former employee and Territorial Army volunteer, made redundant by his employer, claimed against a director. He alleged he'd been let go because he'd been called to serve in the Gulf.

Constructive dismissal: a finance director was named in a case by a former employee. She alleged he'd made her job unbearable through sexual harassment and other inappropriate behaviour, including sending texts outside work hours and inviting her on nights out.

Discrimination: an office manager sued her employer after finding out her male colleagues with similar skills and experience earned loads more than her. It cost the company almost £12,000 in compensation.

Misconduct: an employee is dismissed for breaching company email policy. However, it transpires that the company didn't follow the proper process when they let him go and were ordered to pay him five-figure compensation.

EPLI logistics

Employment practices liability can usually be added to directors' and officers' insurance as part of a 'suite' of cover for bosses. If you're wondering if it's worth it, talk to an insurer. They'll tell you that the majority of claims against directors are related to employment practices issues.

It's an unfortunate by-product of that 'compensation culture', you see. Even more so when times are hard. It's always someone else's fault – especially if there's a quid in it.

People, eh? Can't live with 'em, can't issue a final written warning and dismiss them without first seeking legal advice and then ticking every box in the HR best practice manual.

If you'd like to know more, you can always give us a ring on 0345 222 5391. Or click here.

Image used under license from Shutterstock.