...lawsuits and, some contend, the accompanying media attention that they generated. These cases created a new consumer awareness of wrongful employment practices that spawned a blaze of claim and litigation activity.
EPL insurance provides coverage for claims made against a business by employees as a result of wrongful employment practices including: wrongful termination; unlawful discrimination by race, gender, or age; sexual harassment; retaliation; employment-related defamation; and personal injury caused by infliction of emotional distress and humiliation, to name several. In addition, employers are subject to a variety of federal, state, and municipal laws that deal with employment situations.
Restaurants are certainly not immune from such claims. Employment related claims against restaurants have involved violations of the Fair Labor Standards Act over wages and hours, sexual harassment of employees, and racial discrimination, among others.
Businesses that can least afford to pay claims out of their own pockets are often the most reluctant to buy EPL coverage. Small to medium-sized restaurants are vulnerable and litigation costs to defend a lawsuit, which larger restaurants or chains may be able to absorb as a business expense, can financially devastate a smaller restaurant. Many restaurant owners may have the mistaken impression that they run a friendly business that is staffed with congenial employees who would never sue their employer. Experience suggests otherwise. Lawsuits by a disgruntled employee for a variety of employment-related reasons can and do happen, and even when the claim is without merit, it still must be defended. It is important to note, too, that coverage for employment-related claims is excluded under general liability insurance. Consequently, a specific endorsement covering this exposure is necessary.
The cost of the coverage depends on the number of employees, the deductible selected, and other risk factors such as loss history, turnover rate, and training. Higher deductibles can reduce the cost of the insurance.
The safe approach for restaurants, small or large, is to discuss their exposure to employment-related claims with their agent, and to compare the cost of this insurance with the potential cost of doing without the coverage.