Why Every Restaurant Group Needs Employment Practices Liability Insurance

In the fast-paced, people-driven world of hospitality, restaurant owners juggle a multitude of responsibilities—ensuring food quality, maintaining excellent customer service, managing labor costs, and complying with complex employment laws. Amid these challenges, one of the most overlooked yet critical protections for restaurant groups is Employment Practices Liability Insurance (EPLI).

At Empowered Hospitality, we firmly believe that all restaurant groups should have EPLI in place. This insurance is not just a safety net—it is a strategic necessity for mitigating risks associated with employee-related claims, protecting financial stability, and fostering a more compliant and professional workplace.

What is EPLI?

Employment Practices Liability Insurance (EPLI) provides coverage for businesses facing claims of wrongful employment practices, such as discrimination, sexual harassment, wrongful termination, retaliation, and in many states, wage and hour disputes. Given the high-turnover nature of the restaurant industry and the increasingly litigious employment landscape, EPLI has become indispensable for restaurant operators.

Why Restaurants Are Particularly Vulnerable

Restaurants are uniquely susceptible to employment-related claims due to several industry-specific factors:

1. High Employee Turnover: The hospitality industry experiences one of the highest turnover rates, leading to frequent hiring and firing decisions that can increase the risk of employment-related disputes.
2. Diverse Workforce: Restaurants employ individuals from various backgrounds, often with different cultural expectations regarding workplace behavior. Misunderstandings and conflicts can easily arise, potentially leading to claims of discrimination or harassment.
3. Fast-Paced Work Environment: The high-pressure nature of restaurant work, particularly in kitchens, can create situations where managers and employees react impulsively, sometimes resulting in complaints of unfair treatment.
4. Reliance on Tipped Employees: The tipping model introduces unique wage and hour compliance challenges. Violations related to tip pooling, minimum wage requirements, or overtime pay can result in costly lawsuits.
5. Regulatory Complexity: Restaurants must navigate a labyrinth of federal, state, and local employment laws. Even with the best intentions, unintentional violations can lead to legal action.

The Real Cost of Employment Claims

Without EPLI, restaurant owners can find themselves facing devastating financial and reputational consequences due to employment-related lawsuits. Consider these statistics:

• The average cost of defending and settling an employment lawsuit exceeds $150,000.
• Even baseless lawsuits that are dismissed before trial can incur costs of $50,000 or more in legal fees.
• The Equal Employment Opportunity Commission (EEOC) reports that over 20% of all employment-related lawsuits involve claims from the hospitality industry.
• Wage and hour lawsuits have tripled in the past two decades, with class-action claims against large restaurant chains frequently resulting in multi-million-dollar settlements.

How EPLI Protects Restaurant Owners

EPLI provides restaurant groups with crucial protection in several key ways:

1. Legal Defense Costs: EPLI covers legal fees and court costs, even if the claim is unfounded. This can prevent a single lawsuit from crippling a restaurant’s finances.
2. Settlements and Judgments: If a restaurant is found liable, EPLI helps cover settlement costs and awarded damages, reducing the financial burden on the business.
3. Third-Party Coverage: Many EPLI policies offer protection against claims made by customers or vendors, which is particularly relevant for restaurants where guest interactions are frequent and can sometimes lead to discrimination or harassment allegations.
4. Peace of Mind for Owners and Operators: Knowing that EPLI is in place allows restaurant owners to focus on running their business rather than constantly worrying about potential lawsuits.

Why Our Clients Have EPLI

We work with restaurant groups that are serious about protecting their business, employees, and reputation. We require our clients to have EPLI in place because:

• We want to ensure long-term stability. Employment-related claims can be financially devastating. By requiring EPLI, we help our clients safeguard their business operations.
• We promote a culture of compliance and professionalism. Having EPLI signals that a restaurant takes employment law seriously and is committed to fostering a fair and respectful workplace.
• We prioritize risk mitigation. Our role is to provide HR expertise, but even the best HR policies cannot eliminate all risks. EPLI provides a critical layer of protection against unpredictable legal claims.
• We work with industry leaders who prioritize their employees. The best restaurant groups understand that investing in protections like EPLI not only benefits ownership but also creates a more secure work environment for their team.

Choosing the Right EPLI Policy

When selecting an EPLI policy, restaurant owners should consider:

1. Coverage Limits – Ensure the policy provides adequate coverage based on the size of your restaurant group and potential risk exposure.
2. Deductible and Premium – Understand the policy’s deductible and premium costs to ensure it aligns with your budget and risk tolerance.
3. Wage and Hour Coverage – Some policies exclude wage and hour claims unless specifically added as an endorsement; the options available may vary by state.
4. Third-Party Coverage – Verify whether the policy extends to claims from customers and vendors.
5. Retaliation and Harassment Protections – Given the high volume of such claims in hospitality, these should be covered comprehensively.

Conclusion: A Non-Negotiable Investment

EPLI is not just a recommended precaution for restaurants—it is an essential component of risk management. The dynamic, high-stakes nature of the hospitality industry makes employment-related claims a constant threat, and restaurant operators must be prepared. By requiring EPLI for our clients, Empowered Hospitality ensures that the businesses we support are equipped to navigate the complexities of employment law while protecting their bottom line.

For restaurant owners who have yet to secure EPLI, now is the time to act. Investing in this coverage can mean the difference between a thriving business and one crippled by legal expenses, even if you did nothing wrong. Protect your employees, your reputation, and your business by being covered.