Employment Practices Liability

Employment practices liability (EPL) insurance covers claims made by employees or former employees alleging wrongful workplace conduct. This includes unfair dismissal, discrimination, harassment, bullying, and failure to promote.

It typically covers the legal defence costs and any settlements or compensation payouts. In Australia, EPL is usually included as a component of a management liability package rather than sold as a standalone policy.

Why It Matters

• Unfair dismissal claims are among the most common workplace disputes in Australia. Even a straightforward case can potentially cost tens of thousands of dollars in legal fees.
• You don’t have to have done anything wrong. A disgruntled former employee can lodge a claim, and you’ll need to defend it.
• Small businesses without dedicated HR teams are more vulnerable to process errors that can lead to EPL claims.
• Fair Work, anti-discrimination tribunals, and the courts all have avenues for employees to bring claims against employers.

What It Typically Covers

• Unfair dismissal - claims that an employee was terminated without proper process or justification.
• Discrimination - allegations of discrimination based on age, gender, race, disability, or other protected attributes.
• Harassment and bullying - claims of workplace bullying, sexual harassment, or hostile work environment.
• Failure to promote - allegations that an employee was unfairly passed over for promotion.
• Breach of employment contract - claims related to contract terms, entitlements, or conditions.
• Defence costs - legal fees for defending any of the above, regardless of the outcome.

Simple Examples

• A small business fires an underperforming employee without following a formal performance management process. The employee lodges an unfair dismissal claim with Fair Work. EPL covers the defence costs and any settlement.
• A manager makes inappropriate comments to a team member. The team member lodges a harassment complaint. EPL covers the legal response.
• A long-term employee is made redundant during a restructure but claims the redundancy was actually a disguised dismissal. EPL covers the dispute.

Common Mistakes or Misunderstandings

• Thinking it only matters for large businesses. Small businesses are often more exposed because they lack formal HR policies and processes.
• Assuming workers compensation covers employment disputes. Workers compensation covers workplace injuries. EPL covers workplace conduct disputes. They’re completely different.
• Not having documented processes. Lack of written policies around performance management, dismissal, and grievance handling makes it harder to defend a claim.
• Forgetting about former employees. Claims can come from people who left months or even years ago.

When to Speak to a Broker

If you employ staff in any capacity (full-time, part-time, casual, or contract), it’s worth discussing EPL cover with a broker. The exposure starts the moment you have your first employee.

Need help?

Want to understand how employment practices liability insurance fits into your business insurance? Reach out to Tank Insurance and we’ll walk you through it.

Related Terms

• Management Liability - EPL is typically included as a section within a management liability policy package.
• Directors and Officers (D&O) Insurance - D&O covers directors for alleged mismanagement; EPL covers employment-related claims. Both sit under the ML umbrella.
• Insurance Premium - EPL premiums are influenced by your number of employees, industry, HR practices, and claims history.