Why Restaurant Owners Need EPLI Coverage

Imagine you’re the general manager at a restaurant in a busy town. It’s Friday afternoon and you’re reviewing the menu, preparing your employees for the dinner rush.

Your cooks are in early prepping the meats, sauces and vegetables, other staff is stocking the glassware and plates, the host stand just completed the seating chart, your servers are arriving and your bartenders are making sure the simple syrup is just right.

You typically have a staff full of energetic, outgoing multitaskers. These folks usually come in after working another job or taking classes, ready for a shift that lasts from about 5 p.m. to midnight or later. They have to put on their happy face for a bunch of strangers they may never see again, because it’s up to them to make sure these patrons have a great experience and return to your establishment in the future.

As the team assembles in the kitchen to discuss the menu and put on their aprons, Employee A hugs Employee B and gives Employee C a quick peck on the cheek. This is typical for your staff—they’ve been working together for a long time, and they treat each other like family.

But today, Employee C doesn’t appreciate that peck on the cheek. They leave the restaurant angry and file a sexual harassment claim against Employee A, as well as you, the general manager, for allowing this to happen.

Now, the staff is flustered. You not only have a significant distraction on your hands, but you’re also down a server, and the first tables are already being seated.

Sexual harassment is just one of many common issues that arise in the restaurant workplace—and it’s also one of multiple risks covered by an employment practices liability insurance (EPLI) policy.

The Equal Employment Opportunity Commission reports that it fields nearly 90,000 EPLI claims each year, with an average cost of $450,000 per case. Employment issues now make up 30% of all civil litigations in the U.S.—and employers are more likely to have an employment claim than a property or general liability claim.

And according to the Society for Human Resource Management, 67% of all employment cases that litigate result in judgment for the plaintiff, and 41% of all EPLI claims arise against small employers—those with 15 to 100 employees.

There’s no question that EPLI claims can have a serious financial impact on small to midsize companies, including restaurants. I spent eight years working in restaurants and my mother spent more than 40 years in that career, so I’ve witnessed these scenarios firsthand. Restaurants are great work environments full of vibrant, motivated people, but sometimes the tides can take a turn for the worse.

In addition to this example of a third-party sexual harassment situation, EPLI policies cover an array of situations, including:

  • Discrimination in hiring practices
  • Wrongful termination
  • Employment-related emotional distress and invasion of privacy
  • Defamation of character
  • Retaliatory/constructive discharge

EPLI coverage generally includes the cost to defend against the charges, plus any damages you are ordered to pay. However, not all insurance policies are built the same. EPLI is still considered a somewhat new insurance coverage, and many carriers offer their own policy forms, coverages and exclusions.

When working with your restaurant clients, always recommend a standalone EPLI policy.

Kyle Rheiner is lead craft beverage insurance specialist at Craft Brewery Insurance and commercial lines producer at Strickler Insurance in Lebanon, Pennsylvania.