Why Employment Practices Liability Insurance Is Essential for Staffing Agencies
Workplace discrimination suits have spiked since 2021, and staffing agencies can find themselves in the crosshairs. In 2024, for instance, one staffing firm paid $2.2 million for a lawsuit alleging hiring discrimination. That same fiscal year, the Equal Employment Opportunity Commission (EEOC) recovered a record $700 million for victims of employment discrimination.
Many staffing firms remain underinsured for these employment-related risks and lack specialized employment practices liability insurance (EPLI) - creating major liability exposure and a crucial opportunity for insurance agents.
What does EPLI cover, specifically? With decades of EPLI underwriting experience, Philadelphia Insurance Companies (PHLY) has assembled this guide to help agents secure protection for their staffing clients.
One of the Modern Staffing Firm’s Biggest Liability Risk
The staffing industry can be especially vulnerable to employee claims at every stage of the employment life cycle, from hiring and placement through termination. In co-employment relationships, staffing agencies share liability with their clients for workplace violations. As the legal employer for temporary workers, they face significant exposure to employment practices claims in a number of areas:
Wrongful Termination & Retaliation: When temporary workers are terminated or face adverse actions after complaints, staffing agencies can be a target for retaliation claims. In one case, a staffing agency paid half of a $2 million judgment after a group of warehouse employees were subjected to racist comments from coworkers as well as retaliation. In fact, retaliation appeared in nearly half of all EEOC charges filed in fiscal year 2024, making lawsuits for retaliation a major source of judgments against staffing agencies.
Discrimination: Discrimination claims on the basis of age, gender, race, or disability can hit staffing agencies at multiple points, from hiring to promotion. For instance, a group of job applicants sued a retail store after learning they had been denied employment strictly based on their race. The defense costs and settlement totaled $200,000. Staffing agencies who accommodate discriminatory client preferences, even under pressure, can undergo devastating liability.
Workplace Harassment: Staffing agencies remain liable when their temporary workers experience third-party harassment at client worksites. In 2024, a large staffing company paid $500,000 to female workers it had placed at a food production facility. The workers charged they had been subjected to a sexually hostile work environment and widespread harassment, despite on-site supervision from the staffing agency.
What Does Employment Practices Liability Insurance Cover?
When staffing agencies place employees across diverse worksites, they face a legal paradox: They’re liable for compliance with labor laws, yet have limited control over the workplace conditions where many claims originate. This can result in catastrophic financial and reputational damage from a single claim.
EPLI provides coverage against employee claims of wrongful termination, retaliation, and harassment. EPLI addresses the inherent risks of temporary, leased, and seasonal employees while providing robust protection against all types of discrimination claims, lawsuits for retaliation.
PHLY’s robust employment practices liability coverage protects staffing agencies. Its features include:
Automatic Third-Party Liability Insurance Coverage: This protects staffing firms from allegations by clients, vendors, or other external entities, helping manage legal costs and settlement expenses.
Broad Definition of Employee: Definitions include part-time, seasonal, temporary, and volunteers - plus available Independent Contractor Coverage via endorsement.
Optional Duty To Defend Provision: The insured can choose defense counsel or tender the defense to the carrier.
Breach of Contract Protection: This helps agencies handle disputes related to employment agreements, reducing the risk of legal challenges.
Global coverage
Access to The PHLYGateway: Professional Liability Risk Management Platform and a free Best Practices Help Line that provides consultations and education via phone on how to effectively manage employer-employee relations issues.
The PHLY Difference: Specialized EPLI for the Staffing Industry
Standard EPLI policies aren’t built for the unique co-employment exposures that your staffing agency clients face daily. With EEOC enforcement at record levels, specialized Employment Practices Liability Insurance is nonnegotiable for staffing companies looking to protect their reputation and longevity.
Insurance agents’ expertise in EPLI positions them as trusted advisers to the staffing industry, and a specialized policy can shield their clients from costly claims. PHLY’s specialized EPLI coverage gives staffing agencies peace of mind and the tools to navigate evolving risks.
To learn more, contact product manager James Trapp at 800-873-4552 or James.Trapp@phly.com.