Not many North Carolina or South Carolina restaurant owners purchase EPLI (Employment Practices Liability Insurance). Few even know that this type of insurance policy exists and those that do probably don’t fully understand the risks of going without protection. I want to take a look at some real world claims to help you get a better understanding of the different ways that employment practices can get you into trouble. All of these claims could have been covered with the right EPLI policy.
Let me start by telling you that EPLI looks pretty expensive at first glance. And many restaurant owners will discard the notion of purchasing EPLI just based on the cost. But this high cost is the strongest evidence out there that you should buy this insurance policy. Take a moment to consider what those high rates are indicating. The insurance industry is a very competitive industry with very tight profit margins. Who knows better than the EPLI actuaries what your exposure and estimated loss costs will be? If they have to charge high rates for this protection, then this indicates to me that the risk of loss is very high. Any restaurant owner who willingly chooses to operate without this protection is taking a huge and foolish risk.
Now, this first example is less of a specific real world claim and more of a scam that we see happening over and over again. Knowledge of this trick is being passed around from one restaurant worker to the next. Let’s say you warn one of your servers about arriving late to work. You let her know that this is the final warning and if she is late again she will be fired. This server then files a complaint with the health department alleging unsanitary food handling practices in your restaurant. Of course she is late to work again several weeks later and of course you fire her as promised. But she hires an attorney and files a suit against you for wrongful dismissal, alleging that you fired her in retaliation for her complaint to the health department she made. Now you have to choose to pay and attorney and fight her or to settle and let her win the scam.
Now let’s take a close look at a real world sexual harassment example. Recently a restaurant franchise paid out $400,000 to settle a sexual harassment claim. This claim was made by seven teenage workers who alleged that a manager groped them and made vulgar comments to them. Several plaintiffs had complained to their assistant manager and general manager about this treatment but the restaurant owner was too slow to take action to protect them. You should ask yourself honestly if you know everything that your managers are doing and saying to your employees when you are not around to hear it or see it. What could they cost you? Perhaps your very business.
My third example deals with the Fair Labor Standards Act. In this case, several assistant managers for a mid-sized restaurant chain formed a class action and sued the franchise. They claimed that because they were forced to perform non-manager job duties like bussing tables, running cash registers and serving customers, they should have been classified as non-salaried workers. This would have entitled them to overtime pay. With the restaurant facing legal fees of around $750,000 and an uncertain outcome for the case, they settled out of court for $1,300,000. Have you got that kind of cash laying around ready for when this type of loss happens to you?
And let’s not forget about gender discrimination. This is an area where many restaurants are vulnerable. Recently a national chain paid $360,000 to settle a gender discrimination suit. This was a suit brought by some male employees who claimed that they were discriminated against. Their claim that only females were allowed to have the more lucrative table serving jobs obviously was legitimate.
If you are a restaurant owner, then your business is vulnerable to these types of claims as well as many others. Going without Employment Practices Liability Insurance is just not a sane option. At Clinard Insurance Group we are an independent insurance agency with a niche specialty in NC and SC restaurants. We will be happy to answer your questions and help you with your restaurant insurance issues. Just give us a call, toll free, at 877-687-7557 or visit us on the web at www.TheRestaurantInsuranceStore.com.
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