Employment Practices Liability Insurance (EPLI) is one of the most important and misunderstood coverages for restaurant owners. At Anchor Insurance, we help restaurants understand exactly what EPLI covers, why it matters in the high-turnover, high-interaction environment of food service, and how to choose the right policy from multiple carriers.
This guide breaks down the three core areas EPLI protects: harassment, discrimination, and wrongful termination claims - and explains how these risks show up specifically in restaurant operations.
What is Employment Practices Liability Insurance (EPLI)?
Employment Practices Liability Insurance (EPLI) covers legal claims made by employees (or former employees, or job applicants) alleging violations of their employment rights. Unlike Workers' Compensation, which covers physical injuries on the job, EPLI covers claims related to how employees are hired, managed, and terminated.
For restaurants, where the workforce is often young, hourly, diverse, and subject to high stress and tight margins, EPLI is a critical safety net. Even when you've done nothing wrong, defending against an employment claim can cost tens of thousands of dollars in legal fees alone.
What EPLI Covers: The Core Protection Areas
EPLI policies typically cover three main categories of claims:
1. Harassment (Sexual and Otherwise)
What it means: Claims that an employee was subjected to unwelcome conduct based on a protected characteristic (sex, race, religion, age, disability, etc.) that created a hostile work environment or resulted in a tangible employment action.
How it shows up in restaurants:
- Front-of-house staff alleging inappropriate comments or behavior from managers, kitchen staff, or customers
- Back-of-house claims of hazing, ethnic slurs, or hostile behavior based on language or national origin
- Manager-on-employee or peer-to-peer harassment during high-stress shifts
- Failure to address reported harassment, or retaliation against the person who reported it
What EPLI covers: Defense costs, settlements, and judgments if a claim is made alleging harassment. This includes claims made under federal law (Title VII), state law, or local ordinances.
2. Discrimination
What it means: Claims that an employee was treated unfairly in hiring, pay, promotions, scheduling, discipline, or termination based on a protected characteristic such as race, sex, age, religion, disability, pregnancy, or other legally protected status.
How it shows up in restaurants:
- Allegations that a server was denied better shifts or sections due to age, race, or appearance
- Claims that a pregnant employee was demoted, reassigned, or pressured to quit
- Accusations that hiring or promotion decisions favored certain demographics over others
- Disability discrimination claims, such as failure to accommodate an employee's medical restrictions
- Religious discrimination, such as refusing to accommodate scheduling requests for religious observances
What EPLI covers: Legal defense and damages for claims alleging discriminatory treatment in any aspect of employment. Even if the claim is baseless, you still need to defend it - and EPLI pays for that defense.
3. Wrongful Termination
What it means: Claims that an employee was fired (or constructively discharged) for an illegal reason, in violation of public policy, or in breach of an implied or written employment contract.
How it shows up in restaurants:
- An employee claims they were fired in retaliation for reporting wage theft, health code violations, or harassment
- A terminated employee alleges they were let go because of their age, race, disability, or pregnancy rather than performance
- Claims that an employee was constructively discharged (forced to quit due to intolerable working conditions)
- Breach of contract claims if an employee handbook or offer letter created an implied promise of continued employment
What EPLI covers: Defense costs and damages if a terminated employee sues, alleging the termination was illegal, retaliatory, or discriminatory. This also includes claims related to layoffs, demotions, or forced resignations.
Additional Protections Often Included in EPLI Policies
Beyond the core three, most EPLI policies also cover related claims such as:
- Retaliation: Claims that an employee was punished for reporting discrimination, filing a workers' comp claim, whistleblowing, or exercising a legal right
- Failure to Promote: Allegations that an employee was unfairly passed over for advancement
- Wage and Hour Violations: Some EPLI policies now offer limited coverage for defense costs related to wage and hour claims (unpaid overtime, tip violations, etc.) - though this is often capped or excluded in baseline policies
- Defamation: Claims that a manager or owner made false, damaging statements about an employee
- Invasion of Privacy: Claims related to improper background checks, surveillance, or disclosure of private employee information
- Negligent Hiring or Supervision: Claims that you failed to properly screen, train, or supervise employees, leading to harm
At Anchor, we review the specific coverage grants and exclusions across carriers so you understand exactly what you're buying.
What EPLI Typically Does Not Cover
It's just as important to know what EPLI doesn't cover. Common exclusions include:
- Bodily injury or property damage: Those are covered under General Liability or Workers' Compensation
- Intentional or criminal acts: Assault, theft, fraud, or other intentional wrongdoing by owners or managers
- Contractual obligations: Claims based purely on breach of an employment contract (unless wrongful termination coverage applies)
- NLRA or union-related claims: Claims under the National Labor Relations Act or collective bargaining disputes
- ERISA or benefits administration: Claims related to employee benefit plans, pensions, or health insurance (those require separate Fiduciary Liability coverage)
- Known or prior acts: Claims that arose from events you knew about before the policy started (though some policies offer limited prior acts coverage if you meet certain conditions)
Understanding these exclusions is critical. We make sure you know where EPLI ends and other coverages (like Crime, Cyber, or Fiduciary Liability) begin.
Why EPLI is Especially Important for Restaurants
Restaurants face unique employment risks that make EPLI essential:
- High turnover: More hires and terminations = more opportunities for wrongful termination claims
- Tipped employees: Disputes over tip pooling, credit card fees, and wage calculations are common triggers
- Scheduling conflicts: Last-minute changes, inconsistent hours, and perceived favoritism can lead to discrimination claims
- Diverse workforce: Language barriers, cultural differences, and varying immigration statuses require careful management
- High-stress, close-quarters environment: Long shifts, hot kitchens, and intense customer interactions can create conditions ripe for harassment claims
- Manager training gaps: Many restaurant managers are promoted from within without formal HR training, increasing the risk of missteps
Even if you run a tight ship, the cost to defend a single employment claim can exceed $50,000. EPLI gives you the financial protection and legal support to handle claims without derailing your business.
Frequently Asked Questions
Does EPLI cover wage and hour violations?
It depends on the policy. Traditional EPLI policies often exclude wage and hour claims entirely. However, many modern EPLI policies now offer limited defense cost coverage for wage and hour claims, typically with a sublimit (for example, $100,000 in defense costs). Some carriers offer broader wage and hour coverage as an optional endorsement. At Anchor, we compare how different carriers handle wage and hour exposure and help you decide if you need a standalone Employment Practices Liability and Wage & Hour policy.
Is EPLI required by law?
No. EPLI is not legally required in any state. However, it is increasingly considered a business essential, especially for employers with five or more employees. Some lenders or landlords may require it as part of your insurance package, and many attorneys recommend it as a baseline protection for any employer.
Does EPLI cover claims from independent contractors or job applicants?
Most EPLI policies cover claims from current employees, former employees, and job applicants. Coverage for independent contractors is less common and may require a specific endorsement or broader policy language. If your restaurant uses a mix of W-2 employees and 1099 contractors (for example, delivery drivers or event staff), make sure your EPLI policy addresses this. We'll review your workforce structure and confirm coverage applies where it needs to.