Employment practices liability insurance protects your business from common claims and lawsuits brought by your employees. The number of lawsuits in the industry is rising and the cost to defend yourself against a claim can be substantial. Now more than ever it’s important to make sure your business is protected.

Even though employment practices liability insurance (EPLI) is an important risk management tool for businesses with employees, the benefits of coverage aren’t always clear. A quick anatomy lesson on EPLI can help business owners understand:

  • Why EPLI matters in the current franchise industry
  • How coverage protects your business and
  • How to get the best price on coverage to protect your business

The Heart of EPLI for Franchises

The heart of EPLI is the benefit that it provides to your business. Laws around fair treatment of employees in the workplace are complex and include numerous statutes such as:

  • Title VII of the Civil Rights Act of 1964
  • Equal Pay Act of 1963
  • Age Discrimination in Employment Act of 1967
  • Equal Employment Opportunity Act of 1972
  • Immigration Reform and Control Act of 1986
  • Americans with Disabilities Act of 1990

Even with the best of intentions, it’s possible to make a mistake that results in a claim. Workers in the industry have won six- and seven-figure settlements for claims of:

  • Discrimination based on gender, age and other protected characteristics
  • Being passed over for promotion and career advancement opportunities
  • Denial of accommodation for pregnancy and other health conditions
  • Hostile work environment due to nicknames, jokes and mistreatment

A claim with drawn-out litigation, a big settlement or significant publicity could do major damage and threaten the future of your business. EPLI is coverage designed to protect this core vulnerability of your business.

The Brain of EPLI for Franchises

The brain of EPLI is the method that it uses to protect you. A lot of thought goes into the design of coverage to help protect your business from the most common claims and reduce the overall risks you face.

Your EPLI policy is designed to protect against the threat of specific claims that may be brought against the business. These include:

  • Discrimination—Such as claims of discrimination based on age, sex, family status, pregnancy, religion, national origin or disability status brought over hiring, firing or during the course of employment.
  • Wrongful termination—Such as claims resulting from an employee being terminated due to layoff, policy violation or performance alleging discrimination based on age, race, religion, disability, pregnancy, hostile work environment, harassment, FMLA violations, or retaliation for pay disputes, whistleblowing, or worker’s compensation claims.
  • Sexual harassment—Such as claims of sexual harassment and other hostile workplace behaviors alleging inappropriate comments, questions, requests or physical interactions by supervisors, employees or other third parties.
  • Wage and hour law—Such as claims for back wages, bonuses, pay discrepancies, employee misclassifications and denied overtime that may be brought individually or as part of a class action lawsuit over work contracts, job roles, job duties, pay scales and time sheets.

EPLI is designed specifically to cover the costs associated with the claims made against your business, including the cost of defending against allegations in court, regardless of whether you win or lose the case, as well as any judgements or settlements that may result.

The Guts of EPLI for Franchises

The guts of EPLI are the factors considered when building your policy. Insurance policies have many internal workings designed to carefully manage the risk of insuring your business. Your insurer offers EPLI policies that take several factors into account to determine the cost of your premium and level of coverage.

Here are a few factors that business owners should be aware of:

  • Number of employees—The number of employees on your policy is key. Much of the risk of an EPLI policy depends on how many employees need to be covered. The more employees you have, the greater the risk of a claim and the higher your premium.


  • Rate of turnover—The rate of turnover at your business is another top factor. Businesses with higher rates of turnover can present a greater risk for wrongful termination and other key claims. Therefore, the premium may be higher.


  • Policies and procedures—The way human resources are managed at your business can impact the rate you pay for an EPLI policy. Having HR policies and procedures designed to prevent, address and correct employment issues can lower your premium.


  • Risk by industry—The risk level of your industry can also has an effect. Franchise businesses face an elevated level of risk. Due to a higher level of claims, premiums are often higher too.


  • History of claims—The history of EPLI claims at your business is another factor. Companies with EPLI claims made in the last three years may face higher premiums due to an increased risk. Those with a clear history will likely pay less for coverage.


  • Policy limits—The limits you choose for your policy will impact your premium. Higher limits mean the safety of more insurance but can come at the cost of a higher premium. With the cost of many claims reaching six figures, a higher limit is advisable.


  • Policy deductible—The deductible you choose for your policy plays a role in your premium. A lower deductible transfers more risk to the insurer and results in a higher premium for the policyholder, but too high a deductible may leave you underinsured.

While not all the factors affecting the inner workings of your policy or your premium are within your control, some of them are. You can lower your premium by choosing policy terms, limits and deductibles that cover your exposures without going overboard.

You can also lower your premium and minimize your risk of a claim by implementing the right policies and procedures and reducing unnecessary turnover.

EPLI for Franchises

The anatomy of EPLI works together to help protect your business from risk and reduce the frequency and severity of claims.

With EPLI for franchises from Lockton Affinity, your business is protected from the costs associated with employment practices claims should a potential, current or former employee file a claim against your business.

To see what Lockton Affinity’s EPLI coverage will look like for your business, request a price indication today.