In order to properly serve the restaurant market, more EPL providers should be guaranteeing wage and hour coverage. (Photo: iStock) In order to properly serve the restaurant market, more EPL providers should be guaranteeing wage and hour coverage. (Photo: iStock)

Employee lawsuits are never easy on the employer. Even facing baseless claims, the average cost for defending and settling employment law cases is $160,000, according to Hiscox.

No business is immune to such cases, including household names such as AT&T, Bank of America, CVS, FedEx and Home Depot, who the legal analytics firm Lex Machina determined to be among the most litigated American companies for EPL cases.

Specifically, for the food-service industry, wage and hour violations can be financially devastating, with thousands of claims filed each year. In 2017, the United States Department of Labor (DOL) received over 7,000 hospitality wage and hour claims that resulted in the recovery of more than $483 million in back wages for employees.

With restaurant and bar spending growing twice as fast as all other retail sectors in the last decade, according to FRED Economic Research, this threat to business owners/operators is only going to become more common and more costly.

Litigious landscape

It doesn’t take much for restaurants to violate wage and hour practices. Employees are assured of their right to sue for something as minor as being a minute off on a lunch break or paying a dollar less than earned in overtime pay.

Employment Practices Liability (EPL) insurance is supposed to protect against claims such as these; however, wage and hour protection is often not included in standard coverage packages. This represents a massive gap in coverage for restaurants. Restaurant owners are often completely unaware that their standard insurance falls short.

In order to properly serve the restaurant market, more EPL providers should be guaranteeing wage and hour coverage, and better educating their customers on what their policy actually includes.

Aside from pay violations, wrongful termination or discipline, where employees allege that they were disciplined or fired for an infraction that did not occur — or that they received excessive discipline for an infraction they committed — is another important area of coverage that may be overlooked.

These lawsuits are extremely complex and equally costly in a busy restaurant environment. With an industry turnover rate of over 74% as of 2018, every dismissal presents a potential risk. For this reason alone, wrongful termination or discipline protection can be as vital as any other coverage for restaurant owners/operators.

Similar to wage and hour claims, anyone with a lawyer can file suit, even if the employer is objectively in the right. Without the proper proof to justify termination, a restaurant leaves itself wide open to potential litigation.

All of this adds up to just the tip of a very large EPL iceberg, from breach of employment contract to negligent evaluation, and the plethora of risks for restaurants will continue to grow.

As we embark on a new decade, it’s on owner/operators to make sure they are properly aware of what their protections are, and it’s on insurers to make sure they sufficiently protect them.

Crystal Jacobs ([email protected]) is the Restaurant Guard vice president and program director at U.S. Risk. Headquartered in Dallas, Texas, Restaurant Guard Insurance is a division of the U.S. Risk Insurance Group, a specialty lines underwriting manager and wholesale broker with 16 domestic and international branches.

These opinions are the author’s own.

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