Why EPLI Risk Is Climbing in 2026 and What It Means for PEOs

Employment practices liability has moved from a back-office insurance line to a board-level risk, and the data behind that shift is now impossible to ignore. 

The EEOC received 88,531 new discrimination charges in fiscal year 2024, a 9.2% increase over the prior year and the third consecutive year of growth. Retaliation charges remain in the single most common category filed with the agency, a position they have now held for seventeen consecutive years, accounting for nearly half of all filings. And in fiscal year 2024, the EEOC secured close to $700 million for more than 21,000 individuals, the largest annual recovery in the agency's recent history. 

For PEOs, these numbers are not an abstract national statistic. As co-employers, PEOs sit directly in the path of these rising claims environment across every client company in their portfolio. 

What is driving the increase? 

Several forces are converging at once, and each one carries specific relevance for PEO operators. 

The first is structural. Disability discrimination charges rose more than 47% between 2021 and 2024 and now account for 38% of total charges filed with the EEOC. Age, color, and race discrimination claims have also increased. A significant driver behind the broader rise in EEOC charges has been an increase in layoffs and reductions in force, historically the source of most EPLI claims across the economy. 

The second is artificial intelligence. AI-driven recruiting and workforce management tools are now standard in many client companies' hiring processes, screening resumes, ranking applicants, and in some cases assisting with promotion or termination decisions. The efficiency gains are real, but so is the liability. Carriers have already identified specific cases where AI screening tools automatically filtered out applicants over a certain age, leading directly to discrimination against the employer. A QBE survey of legal and HR professionals at mid-to-large organizations found that 69% had experienced employee claims alleging discrimination, harassment, retaliation, or related issues in the past year, and 42% expect the frequency of these claims to increase further. 

The third is regulatory uncertainty. The EEOC's 2026 decision to rescind prior to harassment guidance has introduced fresh ambiguity into workplace compliance efforts at precisely the moment claims activity is accelerating. At the state level, the picture is also shifting quickly — 16 states and Washington, D.C. now have pay transparency laws in effect, and states including California, Colorado, and Illinois have introduced specific transparency requirements around AI-influenced employment decisions. 

The fourth is the workplace itself. Hybrid and remote arrangements have introduced new categories of dispute that did not exist at this scale five years ago; proximity bias claims from remote employees who allege they were passed over for promotions, digital harassment occurring in Slack channels and Zoom chats, and wage-and-hour disputes tied to off-the-clock digital communication. Many older EPLI policies were not written with these scenarios in mind. 

Why this matters specifically for PEOs?

PEOs occupy a distinctive position in this landscape. As the co-employer of record for thousands of worksite employees across hundreds of client companies, a PEO's EPLI exposure is not the exposure of a single employer. It is the aggregated exposure of every client company's hiring practice, HR technology stack, workplace culture, and management decisions. 

This creates two specific risk management priorities. 

The first is policy currency. Many EPLI policies in force today were written before AI-assisted hiring tools became standard practice, before proximity bias claims existed as a recognized category, and before current state-level AI transparency requirements took effect. A policy that does not specifically contemplate AI-driven employment decisions may not respond to the way a PEO and its client companies expect when a claim involving an AI hiring tool arises. 

The second is governance across the client portfolio. PEOs are in a position to help client companies establish clear policies directing how AI is used in hiring and performance management, ensure employees are trained on appropriate use of these tools, and maintain documentation showing that human review remains part of every consequential employment decision. The average cost to defend a discrimination or disability claim now exceeds $125,000 even when the employer prevails, and that figure does not include the operational and reputational cost of the dispute itself. 

The Bottom Line

EPLI claims are not slowing down, and the forces driving the increase are not temporary disruptions. They reflect a genuine recalibration of how employees, regulators, and courts are approaching workplace accountability, playing out against a backdrop of AI adoption that is moving faster than the legal frameworks built to govern it. 

For PEOs, the practical response is the same discipline that applies across every line of co-employment risk: understand where the exposure actually sits across the client portfolio, ensure coverage reflects how client companies are actually operating today, and build the governance structures that keep human judgment firmly in the loop.