Restaurants, like other businesses, are generally operated through a corporation or limited liability company, which owns all the assets of the business, including the restaurant’s liquor license. The shareholders or members of the corporate entity sometimes participate on the management of the restaurant’s business, but often times such management is delegated to an employee manager. It is the well-established law in Massachusetts that when a manager sexually harasses one of the other employees, such as a waitress, that manager will render the corporate entity “strictly liable” under the theory of “vicarious liability,” even though the owners had no knowledge of the claimed misconduct.
Restaurant owners, therefore, will generally only hire managers whom they can trust to act in the best interests of the business and who have proven their reliability in the business. Managers, however, often hire their own “assistant managers” who will perform such discrete tasks as scheduling shifts for the other employees, ordering deliveries, counting receipts or even filling in for the manager when he or she has an off day or goes on vacation. “Assistant Managers” can also be associated with such positions as “head chefs” or the “head bartenders,” where that employee supervises the other people in the kitchen or bar area.
It is a hot issue in Massachusetts’ employment law whether an alleged “assistant manager” claimed to have committed sexual harassment can render the corporate entity that owns the business “strictly liable” under the theory of “vicarious liability,” even if the restaurant’s manager and owners had no knowledge or participation in the claimed harassment. Depending on the severity of the claim, sexual harassment claims can cost a restaurant its entire business, as such claims can generate hundreds of thousands of dollars in emotional distress damages, punitive damages and the automatic award of attorney’s fees to a prevailing claimant. Indeed, although most restaurants have general liability insurance coverage, such claims are not ordinarily covered under such general policies, and most restaurants fail to obtain the special employment practices policy coverage required to protect against sexual harassment claims.