It’s been a long week at work, and everyone is enjoying cocktails and dinner at your restaurant. Henry Smith, a patron, has had too much to drink. Henry has always like waitress, Cindy, and usually comments on her looks. Tonight he says, “I like your short skirt. Do you have any shorter ones you can model for me back to my place after your shift is over?” Cindy has had enough and brings the problem to her supervisor, because she can’t take it anymore.
The names above are fictional, but, I bet many if not everyone reading this article has a Henry Smitt at their restaurant. I would imagine that you even know of restaurants that have been sued because of sexual harassment.
An employee, Tanya Coles just filled a lawsuit against The Firebird Saloon in Philadelphia on December, 11, 2015 for sexual harassment and discrimination. She is asking in excess of $150,000 for sexual harassment, in excess of $150,000 for discrimination, attorney fees, and court costs.
The dangers of harassment at a restaurant are high. Restaurants have a triple threat because an employee, management, or patrons can harass another employee.
Millions of sexual harassment cases are filed every year, and the cost to defend can climb to six figures quickly. For this reason, many cases are settled. The danger of settling a case is, other employees see this, might want to get rich quickly, and also file a suit whether it is a valid or frivolous
How can a restaurant protect against these allegations and/or situations?
A restaurant can transfer the risk to an insurance company by purchasing employment practices liability (EPLI), and put preventative measures in place to minimize the risk.
- Have a written procedure that employees can access in the employee handbook.
- Review policies with all new hires and have them sign off on the training.
- Have an annual meeting with all employees to review the procedures. These procedures may be different based on who the harasser is (supervisor, member or another employee).
- Train supervisors on what behaviors are not permissible and the importance of following procedures.
Insurance companies write unilateral contracts and will exclude sexual harassment or provide you with a low limit of coverage. Make sure you transfer as much risk as you can afford.
EPLI provides protection against many kinds of employee lawsuits not just sexual harassment.
Other coverages include:
- Wrongful termination
- Breach of employment contract
- Negligent evaluation
- Failure to employ or promote
- Wrongful discipline
- Deprivation of career opportunity
- Wrongful infliction of emotional distress
- Mismanagement of employee benefit plans
The cost of EPLI coverage depends on the number of employees you have and various risk factors, such as whether your restaurant has been sued over employment practices in the past. The policy will reimburse your restaurant against the cost of defending lawsuits in court and for judgments and settlements. The policy covers legal costs, whether your restaurant wins or loses the suit.
If an employee does bring a harassment case to management make sure you document everything that occurs and the steps your company is taking to prevent and solve the employee dispute. If the dispute is not resolved and you are dragged into court, then the importance of documenting can save the restaurant a lot of money.
Don’t be surprised, when the restaurant is sued, they name the restaurant, the manager and all board members for not resolving the dispute properly. Without the right insurance coverage in place, the board members personal assets and money could become a part of that lawsuit.
To learn more about our dynamic hospitality insurance protection program, give us a call at 800-890-5606 for a consultation.