Wage Transparency Laws: What Restaurant Owners Need to Know

More states are now requiring employers to include salary ranges and, in some cases, benefits information in job postings. For restaurants, where hiring is constant and often seasonal, these requirements can add a new layer of compliance risk and the penalties for getting it wrong can be costly.

For Example, in Washington, Potbelly Sandwich Works agreed to pay up to $2.71 million to settle a class action lawsuit that claimed the company's job postings did not meet wage transparency requirements. This is not just a problem for national chains. A single-location restaurant could face similar claims if a job posting does not meet transparency law requirements.

How Wage Transparency Laws Affect Restaurants

Restaurant owners face unique hiring challenges that make wage transparency laws especially relevant:

• High turnover rates mean job postings go up frequently, increasing the chance of a mistake.
• Seasonal staffing for holidays or summer creates multiple posting cycles each year with different benefits than an annual job posting.
• Franchise and multi-unit operations often share job posting templates, so one noncompliant template could affect dozens of openings.

In some states, the law applies to employers with as few as five employees. In others states the threshold is higher. It is important to understand the different laws for the different locations you operate in.

Insurance Considerations for Restaurant Owners

Employment Practices Liability Insurance (EPLI) is the primary coverage that might respond to wage transparency claims. It is designed to protect businesses from certain employee-related claims, but coverage for wage transparency violations depends on the policy language.

• Fines and penalties. Most EPLI policies will not pay government-issued fines or penalties.
• Defense costs. Some policies will cover legal defense if a government agency investigates or if you are sued. This may be included or may require a specific endorsement.
• Defense-only coverage. Some insurers now offer endorsements that provide defense-only coverage for wage transparency claims, often with a lower limit such as $100,000.

Directors & Officers (D&O) Insurance may also respond in certain situations. Many policies provide broader coverage for management decisions, but exclusions often apply, especially if the claim is brought by an employee. Review your policy careful and talk to your agent.

Risk Management Steps for Restaurants

• Audit your job postings: Review every posting to confirm salary ranges, benefits, and bonus details meet local requirements.
• Standardize templates: Create compliant templates for each position and location so managers cannot accidentally post incomplete information.
• Train hiring managers and franchise operators: Make sure anyone who posts a job understands the state's requirements and uses approved templates.
• Review your insurance coverage: Ask your agent:
  • Does my EPLI cover wage transparency claims?
  • Are fines and statutory penalties excluded?
  • Is defense-only coverage available? If so, what is the limit?
  • Could my D&O policy apply if an employee brings the claim?

Wage transparency laws are expanding, and the hospitality industry's high hiring volume makes restaurants especially vulnerable to mistakes. The cost of a single noncompliant job posting can be far more than the cost of prevention. By combining clear hiring practices with the right insurance coverage, restaurant owners can reduce the risk of costly claims and protect their business.