Does Your Business Have the Right to Refuse Service to Customers? | Insureon (2024)

You’ve probably seen a sign in a store or restaurant that read, “We reserve the right to refuse service,” or “No shoes, no shirt, no service.”

Some upscale restaurants and night clubs also reserve the right to refuse entry by enforcing dress codes, such as no jeans or tennis shoes. As long as businesses can offer legitimate reasons for refusing service, and they’re applied equally to everyone, there likely won’t be a problem.

As a small business owner, you have the right to refuse service to customers for certain reasons: for example, if people are being disruptive or intoxicated. However, there are limits on when a business can refuse to provide a service.

Let's look at when the law allows you to reject a customer, and when refusing to sell to a customer could lead to a lawsuit.

When refusing a customer is illegal

There are many anti-discrimination laws at the federal, state, and local level. Chief among these is the Civil Rights Act of 1964, which forbids discrimination on the basis of race, color, religion, sex, or national origin in public accommodations.

Under Title VII of that federal law, no business is allowed to turn away a customer based on their status as a member of one of these protected classes. Based on recent court rulings, sexual orientation and gender identity are now also federally protected classes.

State laws and local governments may further extend protection to people based on their genetic information or political affiliation.

A well-known example is the case of a Colorado baker whom, based on his religious beliefs, refused to bake a wedding cake for a gay couple. At the time, the federal Civil Rights Act didn’t protect people on the basis of sexual orientation, though Colorado’s anti-discrimination laws did.

In 2018, the Supreme Court narrowly ruled for the baker, but that decision did not prevent courts from ruling in favor of legal protections for gay people in the future. In 2020, the Supreme Court did provide extended Title VII protections to the LGBTQ community.

Federal law offers additional protection against discrimination through the Americans with Disabilities Act. That law prohibits discrimination against people with disabilities when it comes to employment, transportation, and public accommodations. Places of public accommodation include stores, theaters, restaurants, hotels, daycare centers, gas stations, and doctors' offices.

Bottom line: when a business owner denies service to a customer simply because they belong to a specific group or category, it may violate the law.

Discrimination laws can vary widely at the city and state level, making it difficult for business owners to know where they stand. Before you refuse to sell to a customer, even if it’s due to their behavior, ask yourself if your actions could be misconstrued as a breach of discrimination laws.

Why refusing a customer could spell trouble

Discriminating against a protected class can get you in legal hot water. But refusing to serve a customer for perfectly legal reasons can also mean trouble for your business.

Just because you’re within your rights to refuse to serve someone, that doesn’t mean they won’t sue. Lawsuits can cost you time and money that you can’t afford to lose.

Even if you aren’t sued, a refusal of service can hurt your reputation. You could still be falsely accused of discriminatory behavior, and negative social media posts and online reviews can do real damage to your business.

That’s why you should think long and hard before you deny a customer service – and be sure you’re legally entitled to do so.

When refusing service is within your rights

Perhaps you've never turned anyone away from your place of business, but you may have thought about it. The fact is, you could end up in court for refusing service to the wrong person – but you’re also within your rights as a business owner to turn a potential customer away.

Legitimate reasons for refusing to serve a customer include:

• Customers who arrive before, or refuse to leave after, business hours
• Rowdy or disruptive behavior
• Lack of hygiene or cleanliness
• Violating set rules such as a dress code
• Threats to the health and safety of workers or customers

Any time a customer’s actions create an unsafe or hostile environment, you’re within your rights as a business owner to refuse to serve them. However, that doesn’t mean you won’t face a lawsuit down the line.

So how do you protect your customers, your employees, and your reputation? You may want to consult with a lawyer about best practices regarding customer discrimination, state and local laws, and specific issues for your particular line of business.

You may also want to speak with an insurance agent to learn how small business insurance could protect you as well.

For example, some insurers offer endorsem*nts onemployment practices liability insurance(EPLI) to cover third party claims. While EPLI insurance was originally created to protect employers from employee lawsuits over sexual harassment, discrimination, wrongful termination and breach of employment contract, these endorsem*nts can extend coverage to customer claims.

Best practices for avoiding legal trouble include establishing clear rules for what’s expected at your business, and enforcing them consistently for all customers.

Should a customer violate those rules or pose a threat to the well-being of others, politely explain why you won’t serve them, and ask them to leave. If they refuse, report the incident to law enforcement and let them handle it. Be sure to document the details of what happened.

Installing video cameras and retaining video of incidents can provide valuable evidence that your actions were justified.

Any time you refuse to serve a customer, however, you’re at risk of a lawsuit. A good rule of thumb is to only deny service as a last resort, and only when there is a potential threat to the health and safety of your employees and customers.

Can I deny customers who won’t wear a mask or social distance?

During the coronavirus pandemic, federal, state, and local authorities established guidelines for social distancing and required face masks in certain circ*mstances. Businesses could face fines or the loss of a license if they failed to comply.

Even without such restrictions in place, you can still require social distancing and mask wearing within your place of business in the interest of health and safety, as long as those restrictions are applied to all of your customers.

If you do refuse to sell to a customer and wind up in court, you’ll have a strong argument that mask-less customers or failure to maintain a distance from others during the pandemic pose a legitimate threat to the health of your workers or customers.

Can I require employees or customers to be vaccinated against COVID-19?

The Equal Employment Opportunity Commission says employers have the right to require their employees to get vaccinated in order to work on site, although the issue is a bit murky when it comes to vaccine requirements for customers.

While the federal government currently has no plans to implement a national vaccine passport, proof of vaccination or a recent negative test resultmay be required to visit certain countries, use public transportation, or enter some places of business.

Several airlines have required proof of vaccination against COVID-19, while some professional sports leagues, teams, and arenas have also required proof of vaccination for anyone who wants to visit their facilities.

While governors in a few states have banned the use of vaccine passports, legal experts say private businesses have the right to require proof of vaccination for customers, although there could be religious and medical exemptions.

Of course, requiring or not requiring proof of vaccination could bring a public backlash either way. Take time to research how other businesses in your area and industry deal with this challenge, and balance safety concerns with the impact on your customer relationships and bottom line.

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