Breaking Down EPLI for Employees and Contractors

Hiring contractors instead of full-time employees has become common amongst many employers. Forbes found that freelancers now make up 35 percent of the U.S. workforce.

While this particular staffing approach gives business owners more flexibility and lower costs in the long run, it also means that organizations are feeling uneasy about particular topics, like insurance coverage for their employees. That’s why it’s so important to break down employment practices liability insurance (EPLI) for the staffing agency that needs it.

For example, Uber found in a settlement that they could continue to classify certain drivers as independent contractors. However, they also need to be counted for it. Uber paid up to $100 million in order to settle this particular lawsuit. So how do you avoid this massive fee that’s looming over your head? Here’s what you need to know.

Why the Term “Employee” Needs to be Clearly Defined

Contractors aren’t full-time employees. While it’s imperative to include contractor under your employee term, it’s also important to see why this definition is triggered under certain ownership.  Employment practices policies can define an employee differently, which can be misleading to a client. All workers should be included in certain aspects because if you don’t, you’re going to have to handle it when they leave your workplace.

If an employer decides to terminate a contracted employee, it could end up as a wrongful termination claim, which isn’t going to benefit anybody. Dealing with a claim is a hassle both monetarily and emotionally for both parties.

It’s hard to get insurance carriers to add this kind of coverage since there’s a lack of federal and state guidelines around contractors and what type of control an employer has over these individuals.

The biggest difference between employees and contractors is the benefits they receive. Contractors aren’t going to get healthcare or overtime in any capacity. Those that are employees, always will.

How to Avoid Gaps in Coverage Effectively

Thanks to the Uber settlement, things have changed. Those that are hiring contractors are now making sure that there’s either no gaps in their coverage or they are not liable for any type of accident. Certain things are going to have to abide by your coverage, including a background check.

Here’s some steps that agents and brokers should take when working with a client that requires coverage for contractors:

  1. Find legal counsel with professionalism in both employment law and human resource procedures in the state of the insured; also should have employees and contractors.
  2. Coincide with the client to make sure they harbor similar hiring and training techniques for both contractors and employees alike.
  3. Make a point to returning clients the importance of documenting interactions with contractors, even if they would turn to an employee to aid because of a potential claim.

Although there’s potential complications, employing contractors can save money long-term and be beneficial in multiple ways. This particular trend will most likely continue to grow in the future. Both brokers and agents should take advantage and work closely with their clients to ensure they are properly covered for liabilities as their ratio of contractors to employees shifts.


About World Wide Specialty Programs

For the last 50 years, World Wide Specialty Programs has dedicated itself to providing the optimal products and solutions for the staffing industry. As the only insurance firm to be an ASA commercial liability partner, we are committed to that partnership and committed to using our knowledge of the industry to provide staffing firms with the best possible coverage. For more information about Staffing Professional Liability Insurance or any other coverage, we have available to protect your staffing business, give us a call at (800) 245-9653 to speak with one of our representatives.