In today’s workplace environment, even small or family-owned businesses are not immune to legal risks. Employment Practices Liability Insurance (EPLI) has become an increasingly common safeguard for employers who want to protect their business from employee-related lawsuits. But is it really worth the cost for smaller operations? Let’s take a closer look.
What Is EPLI?
EPLI stands for Employment Practices Liability Insurance. It helps protect business owners from lawsuits related to employment practices—such as wrongful termination, discrimination, harassment, or retaliation. Essentially, it covers the legal costs and potential settlements that arise when an employee or job applicant feels their rights were violated.
Why Lawsuits Are on the Rise
According to the U.S. Equal Employment Opportunity Commission (EEOC), workplace discrimination charges have risen significantly in recent years. Between 2021 and 2024, there was a 44% surge in reported cases. This increase signals a growing legal exposure for all types of employers—large or small. Even a single claim can cost thousands of dollars in legal fees, settlements, and reputational damage.
Examples of Situations Covered by EPLI
To understand its value, it helps to look at the kinds of scenarios EPLI can cover:
- A long-time employee files a wrongful termination claim, alleging they were fired due to age discrimination.
- A job applicant believes they were passed over for a position because of their race or religion.
- An employee accuses a manager of harassment or creating a hostile work environment.
- A former worker alleges retaliation after reporting unsafe or unethical practices.
Even if none of these claims are true, defending your business against them can be expensive—and that’s where EPLI can make a difference.
The High Cost of Legal Defense
Many small businesses underestimate how quickly legal fees can pile up. Working with an attorney to resolve a claim before trial can cost an average of $75,000. If the case goes to court, those expenses can easily double. EPLI can help cover attorney fees, court costs, and even settlements, which can protect your business from financial strain or even closure.
Why Small Businesses Are Especially Vulnerable
Large corporations usually have human resources teams, legal advisors, and established policies to prevent employee-related disputes. Smaller businesses often don’t. Family-run operations may rely on informal communication and personal trust rather than formal HR procedures, which increases the risk of unintentional errors or misunderstandings.
For example, failing to document performance issues or inconsistently applying company policies can make it harder to defend against claims. EPLI coverage provides a layer of security for these situations, giving small business owners peace of mind.
When EPLI Might Not Be Necessary
That said, EPLI isn’t essential for every business. You may not need it if:
- You operate as a solo entrepreneur with no employees.
- Your workforce consists only of close family members and turnover is extremely low.
- Your business operates in a low-risk industry, such as consulting or creative freelancing.
- You already have robust HR systems and employee training programs in place.
Even in these cases, though, it’s important to periodically reassess your risk. As your business grows or you hire more employees, the potential for disputes increases.
Balancing Cost and Protection
EPLI premiums vary depending on factors like company size, industry, and claim history. For small businesses, the cost can range from a few hundred to a few thousand dollars annually. While that may seem steep, it’s often far less than the cost of defending even a single claim. For many small or family-owned businesses, EPLI can serve as an affordable safeguard against unpredictable legal expenses.
Keeping Compliance Simple
Beyond financial protection, many insurers offer resources to help businesses improve compliance. This might include HR policy templates, employee training materials, and access to legal advice. These tools can help business owners avoid the very issues that lead to lawsuits in the first place.
Final Thoughts
For small and family-owned businesses, EPLI can be a wise investment—especially if you employ non-family staff or operate in an industry with high turnover. While not every business needs it, EPLI provides peace of mind by helping cover legal costs and settlements related to employment disputes. As your company grows, consider reviewing your insurance coverage regularly to ensure you’re adequately protected.
Even if you decide EPLI isn’t right for you right now, keep an eye on how your business evolves. The cost of one lawsuit could far outweigh years of premiums—making this policy a valuable safety net for many small business owners.
