If you own a business, with even just one employee, you need Employment Practices Liability Insurance (EPLI). As part of a series of articles addressing restaurant insurance, we are going to discuss this coverage from the stand point of the restaurant owner. However, the information applies to any California business owner.
WHAT IS EMPLOYMENT PRACTICES LIABILITY INSURANCE?
Employment Practices Liability Insurance (EPLI) provides protection for an employer against claims made by an employee, former employee, or potential employees relating to many types of employee related lawsuits including claims of:
- Sexual Harassment
- Age, Race, Gender, Religion Discrimination
- Discrimination against employees with disabilities
- Wrongful Termination
- Retaliation claims
- Personal Injury resulting from infliction of emotional distress and humiliation.
- Defamation and invasion of privacy
- 3rd party claims
Restaurants and bars, including mom-and-pop operations, can be at risk for EPLI claims, which could result in total devastation for the small business owner.
IT COULDN’T HAPPEN TO ME?
A single lawsuit can wreak havoc with a restaurant. Consider these claims as reported by the Insurance Journal:
Gender discrimination. A national restaurant chain paid $360,000 to settle a gender discrimination lawsuit brought by men alleging they were denied more lucrative server positions because of their gender. The restaurant was accused of hiring only women servers.
Retaliation. A server is given a "last chance" warning about coming to work late. The disgruntled employee immediately makes a complaint to the health department about alleged unsanitary food-handling practices. Then, upon being terminated for coming in late again, he alleges he was fired in retaliation for making the complaint to the health department. This is a classic set-up by an employee who knows they are about to be disciplined or terminated for poor work performance.
Sexual harassment. A restaurant franchise paid $400,000 to settle a sexual harassment claim by seven teenage workers who alleged the manager groped them, made vulgar comments and made demands for sex. Several girls complained to the assistant manager and the general manager, but remedial action was not taken immediately.
Fair Labor Standards Act. Several assistant managers formerly employed by a mid-sized restaurant chain filed a class action lawsuit against it. The suit alleged that since these employees were required on occasion to perform "non-managerial tasks" -- such as bussing tables, running the cash register or serving customers -- they should not have been classified as salaried employees who were not entitled to overtime pay. The court granted class action status to the group of former employees. At that point, the restaurant chain knew it could face legal fees in excess of $750,000 and an uncertain outcome if there were to be a trial. The restaurant chain decided to settle for business reasons. The matter cost more than $1.3 million to resolve.
Third-party ADA claim. A customer threatens to file a class action lawsuit alleging that a restaurant is not Americans with Disability Act compliant, claiming that the handicapped parking spaces are too narrow, or the counters are two inches too high, or the doors are too heavy, or display racks block the aisles. The customer and their attorney often settle for a "bargain" of $15,000 to $20,000 (knowing defense costs could reach six figures) before moving on to the next restaurant down the block.
Employment practices liability insurance claims are on the rise. The U.S. Equal Employment Opportunity Commission (EEOC) released its Annual Report on the Federal Work Force for Fiscal Year (FY) 2009. The full text of the report is available on the agency’s web site at www.eeoc.gov. They reported that the total number of claims filed with the EEOC increased by 21% from 2005-2009. Monetary benefits in 2009 totalled $294,200,000.
Some restaurants and bars may consider going without EPLI coverage to save money. Others mistakenly assume they are covered under their general liability policies. However, most general liability policies have a standard exclusion for employment practices liability exposures. Going without EPLI can be a costly decision.
Contact Sutherland-Scherff Insurance Services, Inc. for more information about restaurant insurance and Employment Practices Liability Insurance.
