Over the weekend, the story of Food Network star Paula Deen’s use of racially offensive language sparked a firestorm across social media and the blogosphere. While some commentators consider Deen’s actions overtly racist, others believe her behaviors are understandable, given that Deen is a product of the Deep South of the 1950s and offered a sincere apology for her actions.
Whatever you believe, the Paula Deen case provides a vivid example of how Employment Practices Liability works – and how the type of insurance known as EPLI (Employment Practices Liability Insurance) can protect a business facing a lawsuit.
What Is Employment Practices Liability Insurance?
EPLI is a kind of business insurance that takes effect when a business is charged with…
- Discrimination based on gender, age, race, or sexual orientation.
- Wrongful termination or demotion of an employee.
- Mismanagement of employee benefits.
- Contract breaches.
- Creation of an emotionally or mentally stressful environment.
If and when an employee feels that their boss committed one of the above offenses, they can file a lawsuit seeking damages. In the Paula Deen incident, a former employee of a restaurant co-owned by Paula Deen and her brother filed a lawsuit alleging that she was subjected to discrimination and racial slurs, creating an overtly hostile work environment.
While the lawsuit is still ongoing, Deen admitted in a deposition that she has used racial slurs and that she had considered hiring an all-black wait staff for a family wedding. In the court of law, Deen’s liability is still up in the air, but in the court of public opinion, the outlook is more severe. The Food Network announced that it would not renew her contract after it expires at the end of this month.), Deen quickly recorded and released three video apologies to address the public outcry over the incident.
Who Needs Employment Practices Liability Insurance?
So how does EPLI fit into all of this? This type of coverage pays the cost associated with discrimination lawsuits filed against a business. To give you an idea of what those costs might be, here’s a closer look at Paula Deen’s case:
- The woman who filed the discrimination suit apparently did so more than a year ago, meaning that the case has been active for some time. In other words: Deen and her business have likely been paying lawyers for months to examine the charges and build a legal defense.
- Settlements and judgments for EPLI cases are considerable. The average cost of legal fees along in a discrimination suit is roughly $45,000, and fully 10 percent of cases result in damage awards of $1 million or more.
Without EPLI, Deen could face expenses significant enough to put her personal and / or business assets in jeopardy.
How Do I Get EPLI?
Employment Practices Liability Insurance can be purchased as a standalone policy or as a rider (aka an add-on) to a Directors & Officers Insurance policy, but the option only makes sense if you require D&O protection, coverage primarily used by nonprofit businesses. (Read More: Do I Need D&O Insurance for My Nonprofit? Hint: Yes)
While EPLI tends to be one of the more expensive types of business insurance, it can prove invaluable to a business facing an internal operations discrimination lawsuit, as these tend to be some of the most costly to defend.