When an Employee Layoff Goes Bad


Bill runs a café on the West Side.  Since a nearby hi-tech facility had a major layoff, lunch business has dropped 25%. In fact, Bill had to let Willie, one of his waiters go last week. Now, Bill’s wife Elaine stands in the kitchen with a concerned expression on her face and an official-looking letter in her hand. Willie hired an attorney and filed a lawsuit alleging wrongful termination and discrimination.

Elaine calls the café’s insurance agent. Good news! Bill & Elaine followed their agent’s recommendation by adding Employment Practices Liability Insurance (EPLI) to their portfolio of coverage last year. When the agent explained that the average cost of defending a groundless lawsuit is $20,000, they knew they couldn’t afford the risk. Their agent explained that the insurance company would respond on their behalf, hire a lawyer if necessary, and pay any damages if they are found liable. Bill and Elaine just avoided a huge expense  one that could have forced them to close their business.

Are you smart, like Bill and Elaine? Has your insurance agent recommended EPLI coverage to you? If not, you might consider:

5 Myths About Employment Practices Lawsuits

1. Employee Lawsuits Are Rare

Employment related lawsuits happen more than you think. Six in ten employers in the U.S. have faced an employment-related lawsuit in the past 5 years.

2. Only Large Employers Get Sued For Employment Practices

Nationwide, more than 40% of employment-related practices claims are brought against employers with fewer than 100 employees.

3. Employee Lawsuits Don’t Happen in Maine

Think again. The Maine Human Rights Commission or Maine Workers’ Compensation Board handle more than 800 employment-related practices complaints every year.

4. It’s Covered by Liability or Workers’ Comp Insurance

Unless you have specifically purchased EPLI coverage, the costs of defense or damages are NOT covered by standard Workers Comp, General Liability or Professional Liability insurance policies.

5. EPLI Insurance is Expensive

Depending upon the type of business you operate, Maine Employment-Related Practices Insurance costs as little as $30 per employee per year – or $0.58 per weekly payroll period.


What does EPLI Cover?

  • Legal Representation to defend you against claims from current, former or prospective employees, including:
    • discrimination (age, sex, disability, race, religion, etc.)
    • wrongful termination
    • sexual harassment or hostile work environment
  • Damages you’re legally obligated to pay.
  • Court costs and related expenses.
  • Some policies also offer counsel with an employment law professional to help you during the hiring employment and termination process.

If you have employees, your business is at risk. For answers to your Maine employment liability insurance questions or Maine workers compensation insurance questions, call Noyes Hall & Allen at 207-799-5541.