What is employment practices liability insurance (EPLI)?

No workplace is entirely immune to risk, even those that are well-managed. An employee claim—whether for wrongful termination, harassment, or discrimination—can lead to costly lawsuits, reputational damage, and time-consuming litigation. That’s why many employers turn to employment practices liability insurance (EPLI) to protect themselves against these risks and cover the cost of potential claims.

In this guide, we’ll explain what EPLI is, what it covers, and why this form of liability insurance matters—particularly for companies operating in the United States, where litigation risk is high. We’ll also share practical tips to help you reduce risk, stay compliant with employment law, and limit exposure to costly employee claims.

What is employment practices liability insurance (EPLI)?

Employment practices liability insurance (EPLI) helps employers cover, among other things, the cost of defending against claims brought by current, former, or prospective employees who believe their rights were violated in the workplace. This type of liability insurance typically covers legal fees, settlements, and judgments tied to a wide range of employment-related claims, including:

• Discrimination: Allegations of unequal treatment based on age, race, gender, religion, disability, or other protected characteristics protected by law
• Wrongful termination: Claims that an employee was unlawfully fired, whether in violation of anti-discrimination laws or an employment contract
• Negligent evaluation: Cases where an employee argues that a flawed performance review resulted in demotion, missed promotion, or termination
• Wrongful discipline: Claims that disciplinary actions were unfair, inconsistent, or based on bias
• Harassment: Allegations tied to hostile work environments, including sexual harassment and other forms of workplace misconduct

What ELPI doesn’t cover

Like most insurance policies, EPLI coverage comes with exclusions. Most policies typically do not cover:

• Criminal or civil fines
• Intentional misconduct
• Bodily injury or property damage
• Wage and hour violations
• Workers' compensation claims
• Fraud or dishonesty
• Unemployment insurance
• Immigration
• Punitive damages
• Violations of federal laws like the Occupational Safety and Health Act (OSHA) or the Worker Adjustment and Retraining Notification Act (WARN)

Why does my business need EPLI?

One employee claim can set off a costly chain reaction—legal fees, settlements, and reputational damage. EPLI coverage exists to keep those risks from derailing your business. Whether it’s a wrongful termination lawsuit or a discrimination claim, even unfounded allegations can cost thousands (or more) to defend.

And claims are more common than you might think. In 2024, the U.S. Equal Employment Opportunity Commission (EEOC) recovered nearly $700 million for over 21,000 workers—a reminder that no employer is immune. U.S. federal law caps damages based on company size, but even a single case can drain resources if you don’t have the right liability insurance in place.

Even though federal law caps damages in employment-related lawsuits, the limits can still represent a major financial hit, especially for smaller employers. And without EPLI, you’d be responsible for covering those damages and the legal defense costs out of pocket.

What influences the cost of EPLI?

Like other types of liability insurance, the cost of EPLI coverage depends on how much risk your insurance company believes your business presents. Most EPLI policies cover legal defense costs, judgments, and settlements tied to employee lawsuits, regardless of whether the employer is found liable. That includes claims involving wrongful termination (or unfair dismissal), negligent evaluation, wrongful discipline, harassment, and discrimination.

Several factors can influence your premiums, including:

• Company size: The more employees you have, the greater the potential for claims.
• Industry risk: High-turnover industries or those with a history of workplace lawsuits tend to pay more.
• Claims history: If your company has been sued for discrimination, harassment, or wrongful termination, expect higher rates.
• Location: Legal environments vary by region, and some states or countries have more plaintiff-friendly courts or complex employment law.
• Policy structure: Your coverage limits, deductibles, and what your EPLI actually includes will also affect cost.

How to avoid risks and stay compliant

Avoiding employment-related lawsuits takes more than EPLI coverage. It starts with responsible, people-first practices that support your team and align with current employment law. Smart compliance goes beyond legal protection—it lays the groundwork for a fair, supportive work environment.

Besides maintaining a comprehensive EPLI policy, every employer should follow these best practices:

Implement fair, consistent hiring practices

Standardize your hiring process to focus on skills and experience, reducing the risk of bias. This includes avoiding geographical discrimination—when candidates are evaluated unfairly based on where they live or work remotely.

Communicate policies and provide training

Define your workplace policies around harassment, discipline, and conduct in an accessible, easy-to-understand employee handbook. Ask employees to acknowledge that they’ve read and understood your guidelines. Provide training on your policies as needed. Keep in mind that some U.S. states may require certain types of training, such as anti-harassment.

Review and update policies regularly

Labor laws around sexual harassment, discrimination, and other issues evolve regularly. Review and update internal policies to reflect current legal standards and best practices. Partnering with a global HR compliance expert like Oyster can make this easier.

Provide clear reporting procedures

Employees should know where to turn if there’s a problem—and feel safe doing so. Set clear, confidential reporting channels for concerns around violations of company policies or practices, and/or state or federal employment laws, and train your team to respond with care and urgency.

Document everything

Maintain thorough, consistent records of employee complaints, performance reviews, and disciplinary actions. Good documentation can be your strongest defense in the event of wrongful termination, harassment, or discrimination claims.

Stay compliant with Oyster

While EPLI helps cover the financial fallout from lawsuits and claims, the best defense is putting the right policies and compliance processes in place from the start—and that’s exactly what Oyster helps you do.

Oyster simplifies global hiring with built-in legal safeguards, localized employment agreements, and expert insight in 180+ countries. From contracts to classification, Oyster helps employers reduce risk, align with local laws, and confidently manage every stage of the employment lifecycle.

Learn how Oyster ensures global compliance as you scale across borders.

Disclaimer: This blog and all information in it is provided for general informational purposes only. It does not, and is not intended to, constitute legal or tax advice. You should consult with a qualified legal or tax professional for advice regarding any legal or tax matter and prior to acting (or refraining from acting) on the basis of any information provided on this website.

About Oyster

Oyster is a global employment platform designed to enable visionary HR leaders to find, hire, pay, manage, develop and take care of a thriving global workforce. It lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.

Oyster enables hiring anywhere in the world with reliable, compliant payroll, and great local benefits and perks.