In California’s construction industry, even well-intentioned employers can face career-ending legal battles over discrimination, harassment, or wrongful termination. The costs are staggering—and most contractors are far less protected than they think.
This article will walk you through what Employment Practices Liability Insurance (EPLI) covers, why California contractors face some of the highest risks in the nation, and how to protect your business with proven prevention strategies and the right coverage.
We’ll explore what EPLI is and why it’s vital in California, real-world claim scenarios that have devastated unprepared contractors, the ways state laws increase your exposure, practical steps to prevent claims, how to structure coverage for maximum protection, the factors that influence cost and how to control them, and a clear implementation roadmap to get you started.
EPLI protects your business from the financial fallout of workplace-related lawsuits—claims that general liability, workers’ compensation, and even D&O insurance won’t address. For California contractors, it’s essential protection against some of the most common and costly risks in the industry.
This coverage addresses allegations of discrimination based on characteristics such as race, gender, age, religion, disability, sexual orientation, and pregnancy. It also applies to harassment cases, including sexual harassment and hostile work environment claims, wrongful termination disputes that often arise in seasonal or project-based work, retaliation claims after safety complaints or discrimination reports, and in some cases, wage and hour disputes. Without EPLI, contractors are exposed to defense costs, settlements, and judgments that can quickly surpass profit margins.
Maria, an electrician on a multi-employer jobsite, faced daily harassment from workers employed by several contractors. When her complaints were dismissed, she filed a lawsuit that ultimately settled for $485,000, divided among multiple companies.
James, a 58-year-old carpenter, was screened out of a hiring process by biased AI software. His case settled for $125,000 and required the company to overhaul its hiring systems.
Sarah, a project manager, was laid off two weeks after announcing her pregnancy. She won a $275,000 settlement and was reinstated.
A concrete contractor misclassified employees as independent contractors to cut costs. The resulting penalties exceeded $800,000, forcing the business into bankruptcy.
California’s Fair Employment and Housing Act applies to companies with as few as five employees, covers more protected classes than federal law, and allows unlimited emotional distress damages in certain cases. Contractors must also navigate some of the strictest labor requirements in the country, including meal and rest break rules, daily overtime pay, and immediate final pay upon termination.
In 2025, the state introduced even tighter rules for independent contractor classification, expanded pay transparency requirements, and retained the ability for employees to pursue costly claims through the Private Attorneys General Act. Each of these elements creates additional opportunities for disputes that can lead to significant liability.
Successful prevention starts with visible leadership commitment to fair treatment and compliance, supported by real investment in training, resources, and oversight. Standards must be enforced consistently for employees and subcontractors alike, and clear, accessible policies should be communicated in the languages most relevant to the workforce.
Workers should have multiple safe ways to raise concerns, without fear of retaliation, and these systems must be trusted and easy to use. Training should be regular, interactive, and tailored to jobsite realities, addressing not just what the rules are but how to apply them in daily work situations.
Some contractors choose a stand-alone EPLI policy for its broad coverage and specialized claims handling. Others opt for endorsement coverage, adding EPLI to an existing policy at a lower cost but with narrower protection. A management liability package can combine EPLI with directors and officers coverage and fiduciary liability, creating an integrated, cost-efficient program.
When selecting coverage, it’s important to evaluate policy limits, particularly given California’s unlimited damages provision, decide on deductibles or self-insured retention based on cash flow and risk tolerance, and understand whether defense costs are paid in addition to limits or counted against them.
Premiums are influenced by factors such as the number of employees, claims history, and the higher inherent risks of the construction industry in California. While national averages put small business EPLI at around $222 per month, construction companies in California often pay more.
Controlling costs requires a focus on prevention. Maintaining strong HR documentation, providing regular compliance training, keeping a clean claims record, and bundling EPLI with other coverages can help manage premiums without sacrificing protection.
Begin by reviewing current policies and identifying compliance gaps. Update employment practices to align with California requirements, then secure quotes from multiple insurers. Once coverage is in place, roll out supervisor and employee training across all job sites, coordinate with subcontractors to ensure consistent compliance, and establish reliable systems for reporting and recordkeeping. Finally, commit to annual reviews, policy updates, and training refreshers to stay ahead of changing laws and evolving risks.
You now have a clear understanding of how EPLI works, the unique risks faced by California contractors, and the strategies needed to protect both your team and your bottom line. Without these safeguards, one claim could erase years of effort and investment.
The next step is to examine your current coverage and policies in light of California’s strict employment laws and take action to close any gaps before a problem arises. Protecting your business isn’t just about avoiding lawsuits—it’s about ensuring you can keep building a future with confidence.