Restaurant Owners Brace for Potential Legal Threats as they Begin To Open Doors

As in-person dining begins to return at restaurants across the country, owner/operators now face a whole new host of potential legal and reputational exposures, according to Restaurant Guard Insurance Vice President and Program Director Crystal Jacobs, who today urged restaurant owners to check their policies carefully to see what coverages they have or, more importantly, don’t have..

“When a restaurant owner/operator is given the green light to re-open, they are faced with a critical choice,” Jacobs said today. “They can choose to go ahead and reopen or continue to stay closed. By choosing to open their doors to a COVID world, restaurant owner/operators risk facing a laundry list of new liability and employment practices claims, along with significant harm to their reputation.” 


For Jacobs, all COVID-related liability exposures begin with one central question: what happens when a restaurant reopens, reports a positive case and has to shut down again? The answer is, in fact, very similar to when a foodborne illness outbreak closes restaurant doors. When an employee tests positive for Hepatitis, for example, a notification has to go out to the public and the establishment could face shut down. The same is being done for coronavirus. 

Last month two restaurants in San Marcos, Texas announced temporary closures after employees tested positive for COVID-19. Now those two establishments, and others like them, may have to navigate customers trying to correlate their own COVID diagnosis with patronizing a recently closed restaurant. “While at this point it would be very difficult for someone to prove that they specifically contracted coronavirus at a restaurant, at the same time, that doesn’t stop the lawsuits from coming in. The claims still need to be dealt with,” Jacobs asserted. 

Claims may also be filed by COVID-positive employees, claiming workplace injury. The validity of such claims depend on the particular state in which the claim was filed. In California, for instance, Governor Gavin Newsome signed an executive order requiring worker’s compensation to apply to all workers who test positive for COVID-19 and who are not exclusively working from home. So, if an owner/operator were to not provide said benefits to a restaurant employee, they could be in significant legal trouble. 

Alaska has passed similar legislation, but required compensation is limited to first responders and health care workers. In states like that or others that haven’t enacted any legislation, employees would actually have to prove that they contracted the virus at work — which is almost impossible. However, Jacobs reminds us, as with customer claims, they don’t have to be valid to be filed. 

“With restaurants, and really any industry, fraudulent claims are still claims,” Jacobs noted. “You still must do something with them. You can’t just ignore them, because then you may have a default judgement” (a ruling granted by a court or judge resulting from one party failing to perform a court-ordered action). 

Employment Practices 

Jacobs also believes that owner/operators have to be cognizant of which employees they retain for the re-open. To cut costs, they could decide to only bring back half of their workforce, but if a vast majority of returnees happen to be white males, they’re opening themselves up to a potential employment practices liability lawsuit — whether intentional or not. 

“Furloughing or laying off employees as a result of COVID is not a retaliatory action. But if an employee before the pandemic complained of sexual harassment and they aren’t brought back, they still have that complaint and there’s still an exposure with that person,” Jacobs said. 

Reputational Damage

More secondarily, owner/operators must also consider what a COVID shutdown would do from a reputational standpoint. Since the reopening began, elected officials, media outlets and citizens have been divided on whether or not the economy is opening to soon. Knowing this, Jacobs warns that a restaurant shutting down post-reopen, could validate the concerns of many potential customers. 

“If an owner/operator decides to open up and an employee subsequently tests positive, the media coverage will not be far behind,” Jacobs emphasized. “Then that whole group of Americans that didn’t think they should open up in the first place now have a bad taste in their mouths regarding that restaurant. In their minds, that restaurant made a poor decision that wasn’t in the best interest of their customers.”

Jacobs concluded by urging owner/operators to mitigate against these risks as best they can by following recommended safety protocols, “There are absolutely some things that owner/operators can do to lower their risk. Temperature screenings, enhanced sanitization practices, extensive testing if they have access to it, only seating customers outside and disposable or virtual menus are all practices to consider. But, at the end of the day, restaurants reopening carries significant legal risks and it’s the responsibility of owner/operators to assess them and determine a plan of action.”