Right to Refuse Service: What Every Business Owner Needs to Know

“We reserve the right to refuse service to anyone.”

You’ve seen the sign. Perhaps you’ve even posted one in your own establishment. But can a business refuse service legally? And more importantly—should they?

Jack Phillips, owner of Masterpiece Cakeshop in Colorado, learned the hard way that refusing service can trigger a legal battle that goes all the way to the Supreme Court. What began as a single declined wedding cake order ended in a years-long legal saga that cost hundreds of thousands in legal fees and created lasting controversy around his business.

His story isn’t unique. Every year, thousands of businesses face complaints, lawsuits, and social media firestorms after refusing service—even when they believe they’re standing on solid legal ground.

The Truth About Your Right to Refuse Service

Let’s cut through the confusion: Yes, businesses can refuse service—but that right is far more limited than most owners realize.

The “right to refuse service” isn’t a blank check to turn away anyone you please. It’s a conditional right, heavily regulated by a complex web of federal, state, and local anti-discrimination laws that are constantly evolving through court decisions and legislative changes.

As a business owner, understanding these boundaries isn’t just important—it’s essential for your survival.

When Can a Business Refuse Service? The Legal Landscape

Legitimate Reasons to Say “No”

You’re on solid legal ground when refusing service for these behavior-based reasons:

• Disruptive conduct: The intoxicated patron shouting obscenities at your staff
• Safety threats: The customer making threatening gestures toward others
• Capacity limitations: When you’ve reached fire code occupancy
• Hygiene concerns: Someone whose condition poses a genuine health risk
• Dress code violations: Non-compliance with clearly posted requirements
• Business hours: Customers demanding service after closing time

Take the case of Sacramento restaurant owner Maria Chen. When a visibly intoxicated customer began harassing her staff last year, she politely but firmly refused service and asked him to leave. When he later sued claiming discrimination, security footage showing his behavior resulted in the case being dismissed—but not before Maria spent $12,000 in legal fees.

When Refusing Service Crosses the Legal Line

Business discrimination laws are clear: you cannot refuse service based on protected characteristics, including:

• Race, color, or national origin
• Religion
• Sex (including pregnancy)
• Sexual orientation and gender identity (following the 2020 Bostock decision)
• Disability
• Age (in applicable contexts)

Remember the Masterpiece Cakeshop case? While the Supreme Court ruled in Phillips’ favor in 2018, it did so on narrow grounds that the Colorado Civil Rights Commission had shown hostility toward his religious beliefs. The ruling did not establish a general right for businesses to refuse service based on religious objections.

Two years later, in Bostock v. Clayton County, the Court ruled that Title VII of the Civil Rights Act protects employees from discrimination based on sexual orientation and gender identity. Though this ruling directly applied to employment, many legal experts believe it signals how future cases involving customer service refusals might be decided.

Beyond Federal Law: State Protections That Expand Your Legal Risk

Federal protections are just the beginning. State and local laws often create additional protected classes:

• California’s Unruh Act prohibits discrimination based on medical condition, genetic information, marital status, and many other personal characteristics
• New York State adds protection for domestic violence victims and arrest/conviction records
• Washington State includes breastfeeding in public accommodations
• Colorado explicitly protects individuals based on sexual orientation and gender identity

A Minneapolis retailer discovered these differences the hard way in 2022 when they refused service to a customer with a service animal, citing their “no pets” policy. While they might have prevailed under more limited federal rules, Minnesota’s expansive state protections resulted in a $25,000 settlement.

The Real-World Costs of Refusing Service

Even when you’re legally justified, refusing service carries substantial risks:

1. Legal Battles That Drain Your Resources

The legal risks of refusing service extend far beyond the final judgment:

• Discrimination lawsuit defense costs: $10,000-$100,000 if settled early, potentially $50,000-$250,000 if proceeding to trial
• Typical duration: 6-36 months of stress and distraction, depending on complexity
• Settlement amounts: Typically $5,000-$75,000 for small businesses, though high-profile cases can reach six figures

2. The Social Media Execution

When Portland bakery owner Sophia Williams refused service to an intoxicated customer making racist comments toward staff, she thought she was clearly in the right. The customer had other ideas, posting a selectively edited video claiming discrimination. The result? One week, 300,000 views, and a 70% drop in business that took months to recover from.

3. Review Site Devastation

One determined customer can generate dozens of negative reviews across Google, Yelp, and Facebook. Studies show that just three negative reviews can deter 59% of potential customers from choosing your business.

4. The Hidden Cost: Employee Morale

After weathering a public controversy over refused service, The Wooden Spoon restaurant in Chicago experienced 40% staff turnover within two months—an often-overlooked consequence of such incidents.

Protecting Your Business: A Strategic Approach to Refusal

Create Crystal-Clear Service Policies

Don’t just claim the right to refuse service—define exactly what that means:

• Document specific behavioral criteria that warrant refusal
• Make policies visible to customers (signage, websites, receipts)
• Ensure policies apply equally to everyone
• Review with legal counsel to ensure compliance with current laws

Train Your Team for High-Risk Situations

Your employees are your first line of defense:

• Conduct quarterly role-playing exercises for refusal scenarios
• Teach the “3-D” approach: De-escalate, Document, Defer to management
• Establish clear chains of command for refusal decisions
• Create scripts for common situations that maintain dignity for all parties

Document Everything—Then Document More

If you must refuse service:

• Record immediate, detailed notes with times, quotes, and specifics
• Gather witness statements while memories are fresh
• Preserve security footage (implement a minimum 90-day retention policy)
• Save any relevant communications from the customer

The owner of Riverfront Café in St. Louis credits her meticulous documentation with saving her business when a refused customer claimed racial discrimination. Her detailed incident report, combined with statements from five witnesses collected the same day, led to the immediate dismissal of the complaint.

Insurance: Why Your Current Coverage Isn’t Enough

Standard general liability policies typically exclude discrimination claims—leaving you potentially exposed to the legal risks of refusing service.

What you need to consider is Employment Practices Liability Insurance (EPLI) with a specific third-party discrimination endorsement:

• Important note: Standard EPLI policies often cover only employee-related claims—you must specifically request third-party coverage for customer discrimination claims
• With proper endorsements, covers defense costs for discrimination claims from non-employees
• Typically costs $1,000-$3,000 annually for small businesses
• Can include pre-claim consultation services
• May cover PR crisis management expenses

“My EPLI policy with third-party coverage was the difference between staying open and closing forever,” says Frank DiMartino, owner of an Atlanta boutique that faced a $75,000 discrimination lawsuit after refusing service to a customer violating store policies. “The $2,200 annual premium covered $68,000 in legal defense costs.”

The Smart Approach: When—and How—to Refuse Service

Can a business refuse service? Yes—but the wiser question is: Should you?

Before turning anyone away:

1. Assess the immediate risk posed by the customer
2. Consider alternatives to outright refusal
3. Consult your policies to ensure consistent application
4. Document the specific behaviors warranting refusal
5. Remain professional throughout the interaction

Remember: Each refusal of service is a potential legal and PR crisis. Save it for situations where there’s a genuine threat to safety, not merely an annoyance or disagreement.

Take Action Now to Protect Your Business

The right to refuse service is a necessary but dangerous tool. Wielding it requires preparation, precision, and professional judgment.

Don’t wait for a crisis to develop your approach. Take these three steps today:

1. Consult a business attorney who specializes in discrimination law to review your current policies
2. Call your insurance agent to discuss adding EPLI coverage with third-party discrimination protection
3. Schedule staff training on proper refusal procedures

Your business has survived too much to be derailed by a service refusal gone wrong. Protect what you’ve built by understanding not just if you can refuse service—but when, why, and how to do it safely.

Want to learn more or discuss your business insurance coverage, contact us. Or, start your quote online to get the conversation started.

DISCLAIMER: This article provides general information, not legal advice. Business discrimination laws change frequently through court decisions and legislative action. Always consult qualified legal counsel about your specific situation.