Employment Practice Liability Part I: Breach of Contract

TJ Woods - Employment Practice Liability - Worcester, MAAs a business, your general liability insurance does not protect you from claims against your professional negligence or the correct performance of your professional duties. A different type of insurance known as Employment Practices Liability Insurance (or EPLI) protects businesses against claims by workers in which they feel their rights have been violated by the company which employees them. Recently, there have been an increasing number of law suits filed against corporations in this category. While large corporations are the most frequent target, smaller companies are also vulnerable to these claims. In this series, we will cover some of the most common specific EPLI claims.

For a more general understanding on employment practice liability, click here.

What is a Breach of Contract Claim

One of the areas covered under EPLI is a breach of contract claim. When an employer fails to keep the terms of an employee’s contract, it is considered to be a “breach of contract.” Where such a breach occurs, an employee is likely to seek to be awarded damages which would compensate them for any wrong they have suffered. In some cases, they may be seeking to have an injunction stop an unfair termination. Employment contracts include contracts created orally, in writing, or a combination of the two. Other documents may be included, such as awards, agreements, or job descriptions which help define the terms of an employment contract.

Example of Breach of Contract

While there have be high profile examples of breached contract claims, including the artist Prince and Martha Stewart, however, most claims look more like this: an experienced sales rep is hired by a tech company. After a few months, he fails to receive items he believes were promised him (car allowance, secretary, staff, etc.). After a few more months, he does not meet a sales target and is terminated. If this individual believes he was wronged he would likely claim that when he was hired he was promised benefits which the company soon removed to cut costs, once he had taken the job. He could claim he was wrongfully terminated and the company had breached an implied contract and seek to recover benefits, punitive damages, and fees. There’s no way of knowing how a real judge would rule in this situation, as there are many variables which come into play. However, these cases happen all the time.

How Employment Practice Liability Insurance Protects You

While it seems that the obvious solution would be to just keep all your contractual agreements, it is not always that easy. Despite every good intention, misunderstandings and mistakes occur. EPLI will help to cover you from the possible damages and legal fees associated with these hearings. Often, parties choose to settle for a reduced amount instead of drag out an entire trial. As your company grows, your insurance coverage should too.

Any kind of lawsuits can devastate a company’s finances and morale. Other things EPLI covers are front/back pay, legal fees, compensatory damages, emotional distress, and many others. Since the incidence rate of employee lawsuits is growing, many businesses are adding this coverage. If you have questions about employment practices liability or the insurance that covers it, contact the experienced professionals at TJ Woods Insurance Agency today.