The Lawsuit No One Saw Coming

It started as a typical Monday. Your dev team was heads-down, sprinting toward your next product release. HR was onboarding a new engineer. Sales was chasing a big enterprise deal.

Then, an email lands in your inbox.

“I have retained legal representation regarding my termination. Expect further correspondence from my attorney.”

Your stomach drops. The employee you let go last month is suing for wrongful termination.

You’re confident you followed proper procedures. But confidence doesn’t pay legal fees—and lawsuits are never cheap.

Suddenly, you’re staring down months of litigation, six-figure legal costs, and potential reputational damage. And the worst part? It all could have been avoided.

This is the hidden iceberg of employee lawsuits—and for software companies scaling fast, hiring remotely, and navigating evolving employment laws, the risk is greater than ever.

The good news? Employment Practices Liability Insurance (EPLI) can keep your company afloat.

Table of Contents

1. The Rising Tide of Employee Lawsuits in the Software Industry
2. What Is EPLI and Why Does It Matter?
3. Common Scenarios Where EPLI Protects Your Business
4. The Financial and Reputational Costs of Ignoring EPLI
5. How to Choose the Right EPLI Policy for Your Software Company
6. Proactive Steps to Reduce Legal Risks

The Rising Tide of Employee Lawsuits in the Software Industry

The software industry moves fast—and so do its hiring and firing cycles. Companies scale at breakneck speed, often hiring and managing employees remotely while navigating a maze of HR laws, diversity policies, and compliance regulations.

These dynamics create risk.

Did you know? Businesses in the U.S. have at least an 11.7% chance of facing an employment lawsuit, according to Hiscox. And for companies with fewer than 500 employees, that risk is even higher.

Software companies, in particular, face increased exposure due to:

• Remote Work & Dispersed Teams: Managing employee conduct across different locations can be challenging.
• High-Turnover Culture: With rapid hiring and layoffs, wrongful termination claims spike.
• DEI & Compliance Pressures: Companies are expected to meet evolving diversity and inclusion policies—any missteps can lead to claims of discrimination or retaliation.
• Blurry Work Boundaries: The mix of casual communication (Slack, Zoom) and official HR processes creates gray areas that could be legally challenged.

When an employee dispute turns into a lawsuit, EPLI is your defense against financial and reputational ruin.

What Is EPLI and Why Does It Matter?

Employment Practices Liability Insurance (EPLI) protects your business from employee lawsuits related to:

• Wrongful Termination – Claims that an employee was unfairly let go.
• Discrimination – Allegations of bias based on gender, race, age, disability, or other protected factors.
• Sexual Harassment – Legal action arising from workplace misconduct.
• Retaliation – Claims that an employee was punished for reporting issues.
• Wage & Hour Disputes – Some policies cover claims related to unpaid wages or overtime.

Without EPLI, even one claim can cost your company over $160,000 in legal defense and settlement costs.

Think your airtight HR policies will protect you? Even unfounded claims can be costly to fight. EPLI ensures that your company isn’t left footing the bill for an employee dispute—whether you’re at fault or not.

Common Scenarios Where EPLI Protects Your Business

Here’s how EPLI saves companies from financial disaster:

1. The Discrimination Claim

A junior software engineer claims they were denied a promotion due to gender bias. They file a lawsuit, alleging workplace discrimination. Your EPLI policy covers the legal fees and any settlement costs.

2. The Harassment Allegation

A remote employee reports inappropriate conduct in a Slack thread. Despite company action, they take legal steps, claiming a hostile work environment. EPLI covers the investigation, defense, and potential damages.

3. The Retaliation Complaint

A project manager raises concerns about excessive overtime, then gets laid off in a restructuring. They claim wrongful termination and retaliation. EPLI absorbs the legal costs of defending your company.

These lawsuits aren’t rare—they happen every day. The difference between a company that survives and one that goes under? Preparation.

Find the right EPLI coverage for your company.

The Financial and Reputational Costs of Ignoring EPLI

Still think you don’t need EPLI? Consider this:

• The average cost of an employment lawsuit is $160,000 (EEOC).
• Over 41% of employee lawsuits are filed against companies with fewer than 100 employees.
• Even winning a lawsuit still means tens of thousands in legal fees—and hundreds of lost work hours.

It’s not just about money—it’s about reputation.

A public lawsuit damages your employer brand. It affects future hiring, investor confidence, and client trust. One viral headline about a workplace dispute can do more damage than the lawsuit itself.

EPLI isn’t just about financial protection—it’s about keeping your company’s reputation intact.

Protect your business today. Get an EPLI quote.

How to Choose the Right EPLI Policy for Your Software Company

Choosing EPLI isn’t one-size-fits-all. Here’s how to find the best coverage:

• Assess Your Risk – Do you have remote employees? A high-growth hiring plan? EPLI needs scale with your company.
• Work with a Broker – A software-focused insurance broker can help you navigate coverage limits and exclusions.
• Understand the Fine Print – Not all EPLI policies cover wage disputes or independent contractor claims.

Many enterprise clients require proof of EPLI coverage before signing contracts. Having the right policy doesn’t just protect you—it enhances credibility.

Speak with an EPLI specialist today.

Proactive Steps to Reduce Legal Risks

While EPLI is essential, it’s only one piece of the puzzle. Preventing lawsuits before they happen is the smartest strategy.

How to Strengthen HR Practices and Reduce Risk:

• HR Training: Educate managers on hiring, termination, and conduct policies.
• Updated Employee Handbook: Ensure clear policies on harassment, discrimination, and performance expectations.
• Regular Legal Reviews: Have a lawyer review contracts, termination procedures, and dispute-resolution policies.
• Anonymous Reporting Mechanisms: Allow employees to raise concerns without fear of retaliation.

Strong HR policies + EPLI coverage = a resilient software company.

Learn more about reducing employment risks.

Final Thoughts: Will Your Company Sink or Stay Afloat?

Employment lawsuits aren’t a question of if—they’re a question of when.

You can’t predict when an employee dispute will escalate, but you can prepare.

EPLI is the difference between a lawsuit that ruins your business and one that’s just a temporary bump in the road.

Don’t wait until it’s too late.

Get EPLI coverage today and safeguard your company’s future.

FAQs

1. Is EPLI worth it for small software companies?
Yes! 41% of employee lawsuits are against companies with fewer than 100 employees.

2. Does EPLI cover independent contractors?
Some policies do—make sure to verify coverage details with your broker.

3. How much does EPLI cost?
Costs vary, but basic coverage starts at a few hundred dollars per year—a fraction of what a lawsuit costs.

Protect your business today.