While New Jersey is the first state to enact such a law, which will go into effect in January 2020, it follows a growing trend in cities throughout the country – particularly in Chicago, Miami, Sacramento, and Seattle – that have seen the passage of ordinances requiring panic devices for certain hotel employees, among other protections. Other cities, such as Las Vegas and New York City, have seen the introduction of panic devices in the wake of union negotiations. The introduction of panic devices will likely go beyond major metropolitan areas, however, as executives at some of the largest hotels have reportedly revealed their plans to provide panic buttons to their employees across the country by 2020.
If you have operations in New Jersey, you need to immediately familiarize yourself with this new law and take compliance steps. And if you don’t have operations in the state or one of the other areas with such a law, you should still be aware of this trend, as it not only presents some concepts for best practices in a hotel setting, but may soon arrive in your own area.
Coverage And Scope
The New Jersey Panic Device Law defines hotel to include not just hotels, but also inns, boarding houses, motels, and other similar establishments that offer and accept payment in exchange for rooms, sleeping accommodations, or board and lodging and that retain rights of access and control over their premises. Regardless of the type of “hotel,” the establishment must also have at least 100 guest rooms in order to be subject to the Panic Device Law. If your business has fewer than 100 guest rooms, compliance with the Panic Device Law is unnecessary.
The Panic Device Law defines an employee as one who performs housekeeping and room service functions on a full or part-time basis at a hotel for, or under the direction of, a hotel employer or any subcontractor of the hotel employer. The law therefore covers and protects hotel employees, contractors, and subcontractors, sweeping them together under an expansive definition of an employee.
The definition of an employer is as broad or broader and includes any person, including corporate officers and executives, who directly, through an agent, or another person (e.g., a staffing agency) employs or exercises control over a hotel employee’s wages, hours, or working conditions. Awareness of and compliance with the Panic Device Law is thus essential by directors, managers, supervisors, and anyone else who may exercise sufficient control over hotel employees.
Provision And Use Of Panic Devices
Employers of covered hotels must provide employees that work in a guest room by themselves with a panic device. Employers are prohibited from charging employees for the panic device and must purchase and furnish them at their expense. The Panic Device Law defines a panic device as a two-way radio or other electronic device that can be used by the employee to call for immediate assistance from a security officer, manager, supervisor, or other appropriate person.
Employees are permitted to use their panic device whenever they believe there is ongoing crime, an immediate threat of assault or harassment, or some other emergency in their presence warranting the use of their panic device. Once used, employees may stop their work and leave the area for safety and assistance.
Employers’ Duties When A Panic Device Is Used
Employers are forbidden from taking adverse action against an employee for using a panic device. After a panic device is used, aside from promptly responding to the call, employers must also:
Note an accusation against a guest to for “violence” – which is broadly defined to include sexual assault, sexual harassment, and other inappropriate conduct – toward an employee and put the guest’s name on a list and retain it for five years from the date of the reported incident, along with details of the accusation.
Report any alleged crime by a guest or other person to law enforcement and cooperate in any investigation by law enforcement.
Reassign the employee who activated the panic device to a different work area away from the accused guest’s room for the duration of the accused guest’s stay.
Notify employees assigned to a guest room where a reported incident has occurred of the presence and location of the accused guest named on the hotel’s list and provide them with the option of servicing the accused guest’s room with a partner or declining to serve the accused guest’s room for the duration of the accused guest’s stay.
If an employer later learns that the accused guest is convicted of a crime as a result of the activation of a panic button, the employer may prohibit the guest from staying at the hotel.
Programs For Employees
Employers must develop and maintain programs to educate employees about the use of panic devices and their rights in the event they use their panic devices. The programs should also encourage employees to use their panic devices. Written information may supplement, but not substitute, training programs for employees.
Information For Guests
Covered hotels must also inform their guests about panic devices in one of two ways. They may either require guests to acknowledge a panic device policy as part of the terms and conditions of checking into a hotel, or they may prominently place a sign on the interior side of guest room doors, in large font, detailing their panic device policy and the rights of their employees.
Collective Bargaining Agreements
The Panic Device Law provides a carveout for collective bargaining agreements. If a collective bargaining agreement addresses the issuance of panic devices to hotel employees or addresses employee safety in guest rooms and the procedures for reporting questionable conduct, the collective bargaining agreement controls and hotel employers are not required to provide panic devices to employees.
Penalties For Noncompliance
Hotel employers who fail to provide panic devices or respond as required when a panic device is activated are subject to fines of $5,000 for the first violation and $10,000 for each subsequent violation. The fines are recoverable by the Commissioner of the New Jersey Department of Labor and Workforce Development.
Next Steps For Employers
Covered hotel employers in New Jersey that are not governed by a collective bargaining agreement should begin taking steps to comply with the Panic Device Law and watch for regulations promulgated by the Commissioner, particularly since the Panic Device Law grants the Commissioner with the authority to develop regulations to facilitate its implementation.
Covered hotel employers should budget for panic devices and obtain a sufficient number of them, develop employee training programs, and update your terms and conditions or create signs for guest rooms regarding their panic device policies. Covered hotel employers should likewise review their handbooks and other policies to ensure cohesion with the Panic Device Law.
Hotel employers outside of New Jersey and cities with similar ordinances should be on the lookout for the adoption of similar panic device measures in their localities—or for their inclusion in collective bargaining agreements, if they are not there already. The more widespread introduction of panic devices seems all the more probable in the #MeToo era.
]]>What Are Predictive Scheduling Laws?
Predictive scheduling laws are generally straightforward. In short, they require employers to post employee work schedules a set number of days in advance of when the work is to be performed. Once posted, however, employers are penalized for making any scheduling changes.
In theory, these laws seek to balance respective interests between employers and employees—a balance that was recently addressed in the landmark California decision, Ward v. Tilly’s. In that case, the court assumed the role of the employee’s champion and explained that schedule predictability was an absolute necessity that allowed employees to plan around second jobs, make child-care arrangements, coordinate school schedules, or commit to social plans, among other things. Glaringly absent from this analysis, however, was the employer’s perspective and concurrent recognition that scheduling changes and fluctuating staffing needs are often caused by unforeseeable market realities such as inclement weather, employee call-outs, and unposted community events.
In practice, unfortunately, legislators have expressed wide disagreement over how to address this problem, causing many jurisdictions to take wildly different approaches. For example, in New York City, certain employers are only required to post schedules 72 hours in advance, with changes thereafter being completely prohibited. In contrast, San Francisco requires employers to post schedules not less than two weeks in advance. Once posted, however, any changes require the employer to pay the affected employee anywhere between one and four hours of additional “Predictability Pay,” depending on how last-minute the change actually was. As these examples demonstrate, legislators have yet to agree on any centralized model for predictive scheduling laws, creating a potential minefield for those employers that attempt to apply consistent scheduling practices throughout multiple jurisdictions.
What Industries And Jurisdictions Have Been Most Affected?
Since the first predictive scheduling law arose in San Francisco several years ago, other states and major U.S. cities have contributed to a precipitous rise in these laws. Places like Oregon, New York City, Chicago, Seattle, and Philadelphia have all since participated in this rising regulatory experiment by respectively proposing and implementing their own unique frameworks.
Simultaneously, other states have actively sought to combat the rise of these practices. In the wake of San Francisco’s law, states like Georgia and Tennessee quickly implemented legislation that prohibited their own major cities from enacting similar predictive scheduling laws at the local level, seeking to stifle an already-emerging trend.
To date, however, the retail and hospitality industries have taken the brunt of the regulatory force, with the vast majority of predictive scheduling laws targeting these industries exclusively. As justification for this disparate treatment, legislators have pointed to the disproportionate number of low-wage workers present in these industries who they believe warrant greater protection. For these employees, securing a reliable schedule through traditional means, such as direct negotiation, is far less likely. Accordingly, in these industries, the employer-employee tension between scheduling flexibility and predictably is at its zenith.
So What Should You Do Now?
Unfortunately, compliance with predictive scheduling laws is far from easy. Larger employers with locations throughout multiple jurisdictions tend to be the most affected, although even smaller employers can find themselves in a position that requires a full overhaul of their current staffing model. Accordingly, it’s important to keep a few points in mind.
First, you should audit your locations. The piecemeal framework of predictive scheduling laws means that you may have multiple locations subject to different predictive scheduling requirements. As a result, a centralized staffing model can quickly become outdated, or even worse, a liability. Location-specific policy changes may need to be made, and managers may require retraining on how to handle staffing shortages.
Second, avoid the related pitfalls. No employment law exists in a vacuum, and predictive scheduling laws are no exception. Implementing predictive scheduling models will often impact other aspects of your business and, in some cases, could create unforeseen liability traps. For example, in San Francisco, forgetting to tell your payroll company to separately delineate the “Predictability Pay” scheduling change penalty on your employees’ wage statements could saddle you with a host of unexpected labor code violations and class action demand letters—all for a simple oversight.
Third, consider novel and creative approaches. To address the rise of these laws, some large companies have implemented the use of scheduling apps. In addition to viewing pre-posted schedules, employees can use the apps to swap shifts with coworkers or sign up for unfilled shifts in upcoming weeks. Although, even without apps, voluntary schedule swapping and sign-up policies are both phenomenal ways to reduce, and even eliminate, the need for last-minute scheduling changes—all while boosting employee morale.
Conclusion
Ultimately, when it comes to employment policies, there is rarely a “one size fits all” approach. What’s right for one company may not be right for another. As a result, it’s important to keep up to date on the newest changes in both law and compliance strategies. In the modern day, employment laws are changing at an ever-increasing pace; if the recent rise in predictive scheduling laws hasn’t hit your state or city just yet, it soon may.
For more information, contact the authors at CCook@fisherphillips.com (415.490.9032) or AGuzman@fisherphillips.com (415.490.9028).
]]>The group saw the need for common financial language and to be able to compare statistics. It would also evolve that it would help in valuing hotels which at that time was done primarily by CPA firms. The common statistical formulas such as Revenues and Costs per Available Room and per Occupied Room, what denominator a re used for calculating various percentages evolved to be critical benchmarks for owners and managers even today.
In 1961 the American Hotel & Lodging Association (AH&LA) published a separate edition for small hotels. That format, which was very similar to the larger hotel edition, was updated twice until 1996 when the two systems were combined. Until last year the copyright for the USALI was still owned by the HANYC but it recently sold the copyright to the Hotel Financial and Technology Professionals Association (HFTP) which is the successor to the original Accountant’s Committee.
Periodic revisions of the USALI, which are prepared every four to seven years, are written by the Financial Management Committee of the AH&LA. It is comprised primarily of representatives of hotel ownership and management but also includes representation from accounting, franchising, CBRE/PKF Research and Smith Travel Research.
The USALI is referenced in numerous types of agreements relating to the hotel industry such as mortgages, management agreements, franchise agreements, leases, and other documents. Important provisions in these agreements are tied to the USALI and impact base fees, termination, incentive fees, and other triggers or thresholds for both parties. Usually it is prefaced with the words, “the latest edition” in order to require the parties to keep current with latest standards. The latest edition is the 11 the Edition published in 2014. As in the past, it is consistent with US GAAP. Future editions are expected to become consistent with the International Financial Reporting Standards (IFRS).
Why are there successive editions? Because the hotel industry, its investors, the market and technology keep evolving. Think of things like market segmentation, distribution channels, telephone technology, guest room technology, etc. Also think of changes to payroll for instance, hotels don’t have Seamstresses anymore but we do have Social Media Managers.
This article is part of our Conference Materials Library and has a PowerPoint counterpart that can be accessed in the Resource Libary.
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]]>The increased costs of operating a restaurant can be attributed to minimum wage increases, healthcare, paid sick leave, restrictive scheduling, cost of food and supplies and increase pay equity between traditionally tipped employees and heart of the house employees. As such, these surcharges need to be analyzed for taxation purposes and legality as to how they are implemented.
A. Tax and Wage Implications
First let us think about how surcharges affect a company from a tax and reporting perspective. Starting in 1994, many restaurants have benefited from being allowed to apply a general business credit toward a portion of the employer’s Social Security and Medicare taxes paid with respect to their employees’ cash tip earnings (IRC 45 B). However, the policy set forth in Rev. Rule 2012-18 means that the credit would not apply with respect to surcharges, because these mandatory charges do not qualify as tips.
Surcharges like a service charge are a taxable event. The sales tax is imposed upon the retailer for the privilege of selling tangible personal property. “Gross receipts” provides that the taxable gross receipts include all amounts received with respect to the sale, with no deduction for the cost of the property sold, materials used, labor or service cost, or any other expense of the retailer passed on to the customer. Any expense of a restaurant passed on to customers in the form of a surcharge must be included in taxable gross receipts. Since there are no specific sales and use tax exemptions for a surcharge imposed, retailers may not claim the cost of the surcharge as a deduction on their Sales and Use Tax return. Therefore, a separate surcharge on customer bills must include the surcharge amount in the calculation of tax.
To the extent, a company elects to distribute a surcharge to its employees, the surcharge will be treated and must be reported as Salaries and Wages on the business tax return. Another issue to consider is that an employer who pays out a portion of the surcharges to employees may have to recalculate its employees’ overtime rates (if the employees work more than 40 hours in a week or 8 hours a day for businesses in California). As any distributed surcharges are wages, that money would count toward an employee’s regular rate of pay and therefore must be factored into the overtime rate calculation.
B. Claims Asserted
Starting in 2017 comments by several City Attorneys, as well as some letters, have raised issues concerning surcharges. Specifically, some City Attorneys have raised the manner under which surcharges are communicated to customers. Also in 2017, there were 16 cases filed in San Diego, California asserting the illegality of the surcharges and the manner of disclosure generally. These lawsuits claimed these restaurants were in violation of consumer protection laws including false advertising, unfair competition and misrepresenting the prices on their menus. It was further claimed that a failure to clearly and conspicuously communicate a surcharge might render the stated price of a food item untrue and misleading under California law. The San Diego City Attorney has made some statements that such charges are being investigated and may result in prosecution under the guise of consumer protection for false advertising. These lawsuits sought restitution, injunctive relief, civil penalties, punitive damages and attorneys’ fees.
In a ruling on November 16, 2018, a San Diego Superior Court Judge ruled in granting judgment for the restaurant at issue that the “undisputed evidence establishes that the surcharge is not unlawful as a matter of law.” Further, the Court concluded the restaurant “made adequate and non-misleading disclosures about the surcharge.” Subsequent judgments were entered in favor of other restaurants by the same judge in December 2018 and January 2019 based on the November 2018 ruling; whereby the ruling of the Court was adopted as to the legality of the use of surcharges by restaurants. In February 2019, a federal judge also granted summary judgment concerning identical allegations concerning the use of a surcharge.
C. Prevention Tips
As a result, even though surcharges are a legal and allowable option to help defray the recent increases in costs, there are some approaches that should be considered to avoid potential litigation. There are no regulations or laws that state how a restaurant should specifically and clearly disclose the existence of a surcharge. However, to try and prevent the filing of an adverse claim, it would be prudent that a company discloses up front that the items for example a meal (food and drink item(s)) is subject to a surcharge and state the percentage of the surcharge on the menu, in a prominent sign or posting, on web pages, as well as on advertising materials either electronic or paper. Also even though not specifically required, it would be prudent that the disclosure stand alone and not be contained in a statement about other aspects of the business. Some companies have elected to highlight the disclosure in a different or larger font or color as a means to try and alleviate concerns raised by governmental entities. That said, there is no mandatory way that a surcharge should be disclosed to a customer. In summary, there is no legislative or statutory guidance as to how a surcharge should be disclosed.
There is no requirement that a sign be used to disclose a surcharge but having a surcharge disclosure sign is another means of avoiding a consumer claim. If a restaurant elects to use signage, there is also no requirement about the size of font on any sign posted in a restaurant about a surcharge. Hospitality companies who elect to use a sign should consider a sign about a surcharge and percentage where patrons are likely to see it as they enter the restaurant. A sign no smaller than 10 inches wide by 10 inches high or a horizontal strip marker no smaller than 10 ½ inches wide by 1 ¼ inches high bearing the surcharge information in at least a 36-point font would arguably comply with the “conspicuous” requirements. Also, if a fair amount of the business is take-out or occurs at a register, the placing of a disclosure sign at the register would likewise be another preventive step for notice purposes.
As to menus, any statement as to surcharges should be separate from other information. Some restaurants have elected to use bold font, a different color or italics. However, none of this is required. It is merely one option. In addition, the font as to the disclosure should not be smaller than other items printed on menus or electronic media and certainly at least the size of the menu items and the prices. These steps should help defray any claims that the restaurant did not clearly and conspicuously disclose the existence of a surcharge.
Many San Francisco restaurants implemented a surcharge (i.e., an extra fee or cost) on the goods or services they sell to customers to cover, in whole or in part, the expense of complying with the Health Care Security Ordinance passed in 2008. This surcharge was specifically designated to defray the costs of the local healthcare ordinance. Some restaurants faced litigation and penalties when these surcharges were not utilized to pay for the cost of health care. There is now a requirement in San Francisco that the business on an annual basis disclose: 1) the amount collected from the surcharge for covered employee health care and 2) the amount spent on covered employee health care. Therefore, based on these lessons learned, if a company elects to impose a surcharge, it should consider disclosing it in a broad manner rather than designating it for a particular cost item. A more specific designation could subject the retailer to show that the surcharge collected must be only used for that item e.g., the cost of health care to employees. As a result, a broad designation of the surcharge would be a good preventive measure. The broader the language, the more flexibility the company has in how to utilize the money collected from the surcharge.
D. Summary Recommendations
Overall, surcharges are legal as supported by the recent court ruling. However, hospitality should implement surcharges with an eye toward prevention of any claims for consumer fraud, false advertising, unfair business practices or improper utilization of the surcharge. A company has wide discretion as to how it discloses and communicates the use of a surcharge but the disclosure should be sufficiently conspicuous to a reasonable consumer.
If a company elects to implement a surcharge, at a minimum the fact that there is a surcharge must be disclosed on the receipt as “SURCHARGE” and sales tax must be charged on all service charges and any separate surcharge line item, regardless of any amount that might be paid to the employees.
Herein is a summary of steps that a company should consider implementing, even though not currently required or mandated, as a means to prevent a legal claim:
Also, it is important to consult with your tax advisor or tax attorney to determine the proper method of taxing surcharges and paying your employees if a portion of the surcharge is distributed to the employees. It is also highly recommended to consult with qualified legal counsel concerning any questions about surcharges and how to disclose them to customers.
This article is part of our Conference Materials Library and has a PowerPoint counterpart that can be accessed in the Resource Libary.
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]]>The fundamentals have not changed much over the past couple of years. Continued industry fragmentation (the top brands only account for approximately one third of hotel rooms globally) coupled with low RevPAR growth environment (2.9% in 2018) – limiting organic growth – and the need to create value has made hotel brands and operators seek for consolidation opportunities. For hotel brand operators, a merger with/acquisition of another brand represents the prospect of a larger distribution platform, broader customer base and offering, expanded loyalty programs, integration synergies (i.e., cost reduction) and further expansion of their asset- light strategy through the leverage of scale. On the same note, hotel owners generally realize the benefits of such transactions too, whether in the form of lower distribution costs (i.e., increase production from brand channels vs. OTAs) or improved pricing from suppliers through the procurement of more favorable terms, to name a few. The aforementioned is clearly not without its challenges as a higher number of competing hotels from the same brand family clutter local markets and radius restrictions become a hot topic of HMA (Hotel Management Agreement) negotiations.
For third-party management companies, strategic acquisitions of smaller industry players trigger a somewhat different set of value drivers (addressed below). Unlike hotel brand operators, third-party managers do not sell franchises, or offer access to loyalty programs or a vast distribution platform. Further, third-party hotel management services have become increasingly competitive which challenges organic growth. Hence, beyond financial performance, a stronger focus is placed on ownership mix, length of HMA term, contract churn, retention and re-link.
The high-levels of M&A activity are expected to continue well into 2019 but rather than attempting to become bigger, hotel brands and third-party management companies will seek transactions that provide a strategic edge whether to fill a segment void or improve geographic presence. As such, during the first three months of the year we already saw companies such as Best Western entering the upper upscale and luxury segments through its acquisition of WorldHotels and InterContinental Hotels venturing into wellness after it acquired Six Senses Hotels, Resorts & Spas. This is much similar to Hyatt’s expansion of its luxury offering via its acquisition of Alila (which is primarily present in Asia) or the independent/lifestyle segment via Joie de Vivre, both through the acquisition of Two Roads Hospitality.
Capital players such as PE firms and sovereign wealth funds continue to seek for acquisition opportunities that extend beyond single asset purchases and into operating platform. Interestingly, this comes as no surprise given the healthy exit multiples that these buyers may be able to realize once the performance of the individual hotels has been improved and the target has realized the identified synergies – which in our experience have the potential of increasing EBITDA by 2x – allowing the owners to spin off the OpCo and create yet another valuable asset to be sold.
This article is part of our Conference Materials Library and has a PowerPoint counterpart that can be accessed in the Resource Libary.
HospitalityLawyer.com® provides numerous resources to all sponsors and attendees of The Hospitality Law Conference: Series 2.0 (Houston and Washington D.C.). If you have attended one of our conferences in the last 12 months you can access our Travel Risk Library, Conference Materials Library, ADA Risk Library, Electronic Journal, Rooms Chronicle and more, by creating an account. Our libraries are filled with white papers and presentations by industry leaders, hotel and restaurant experts, and hotel and restaurant lawyers. Click here to create an account or, if you already have an account, click here to login.
]]>The capitalization rate, which is a factor that represents both the risk and the desired return associated with a given asset, is in actuality difficult to influence. Firstly, returns are market driven, which means that the capitalization rate is determined by market forces, not the will of owners. Secondly, it is the buyer’s perception of risk that influences the capitalization rate, meaning that external factors are again the determining factor. As such, the only meaningful way of putting any kind of downward pressure on the capitalization rate is to keep the property well maintained and regularly updated with properly kept maintenance records, thereby providing a buyer with a greater degree of certainty about what they are buying. This decreases some of the risk that is baked into the implied capitalization rate; however, the most benefit this can yield is that the resulting capitalization rate is as low as market forces will allow. In other words, proper maintenance is more a means of keeping the capitalization rate from increasing than a way of actually lowering the capitalization rate.
Given the intractability of capitalization rates, net income is the only viable lever that a hotel owner or manager can use to drive a significant increase in value. There are two mechanisms that an operator can employ to increase a hotel’s net income: increase revenues and decrease costs.
Revenue
At a root level, a hotel’s revenues depend on accommodated demand and rates charged (occupancy and ADR). Today, however, computerization and data analysis are creating efficiencies that were undreamed of even a decade ago. With yield-management programs, a skilled revenue manager is now able to assess a hotel’s optimal pricing structure on virtually an hourly basis. To drive value, an operator does not need to know all the intricacies of how these programs work; once installed, the tools for maximizing a hotel’s revenue are in place. Regular discussion and review of the strategy with management should serve to keep everyone’s eye on the ball.
The same yield-management discipline can be used in the food and beverage department and in other operating departments. Is the menu meeting the needs of guests? Can the market pantry or the gift shop provide items that will not only enhance the guest experience but also drive additional revenue? Are there spaces in the building that might be leased out that could generate revenue and provide additional services to guests? When it comes to maximizing yield, small changes can produce powerful results, and creativity can be rewarded.
Departmental Expenses
Labour accounts for a large component of departmental costs, so a savvy hotelier is always on the lookout for ways to efficiently manage the labour cost of the operation. Efficiencies can often be found in the staffing of the front desk and housekeeping departments—staffing levels should be tied to hotel occupancy. Efficiency gains can also be realized by cross-training staff between departments. For example, training the same staff in front desk and food and beverage or laundry operations can create a more flexible, streamlined workforce, allowing the management to shift some front desk staff to other functions during slow periods, instead of having an over-staffed front desk and bringing additional staff in to complete other hotel functions.
The supplies in the hotel should also be given careful consideration. Do the guestroom amenities add to the guest experience, or are they just an incremental cost to the daily operation? Anything that costs money but which does not add meaningful value to the guest experience should be excised.
The laundry department also represents an opportunity for reducing costs. An operational review will ensure that the proper equipment is in place to efficiently handle the volume of laundry. Alternatively, the laundry contract should be reviewed to ensure that the most cost-effective rates are still being achieved since the time of tender.
On the food and beverage side of the business, it is important that food costs are closely monitored and effectively controlled. Tweaking the hours of the establishment to better mirror guest demand is one way of limiting the cost of labour associated with operating this department.
These are just a few areas to consider when looking at reducing departmental costs. A closer look at any of them could reveal other opportunities to drive value.
Undistributed Operating Expenses
Administrative and general expense has a large component of the management and accounting staff, so looking at the payroll in this category is important. Are the functions and procedures that take place in the accounting department necessary for smooth operations, or are there redundancies or inefficiencies that can be eliminated to reduce labour costs? It is also a good idea to examine management incentives/bonuses—they should be effectively tied to the hotel’s income performance so that the GM’s compensation is aligned with the goal of driving asset value.
Marketing is also a major expense where there are opportunities to institute controls. Marketing initiatives should be carefully monitored to ensure that marketing dollars are generating a good return on investment. In this era of digital marketing, fairly modest spending on marketing can often translate into big returns. PR strategies can also be implemented to broaden the reach for the hotel with very little incremental cost.
Property operations and maintenance is a key area of the hotel that a sophisticated buyer will pay particular attention to during their due diligence process, so the maintenance team needs to be involved as a key part of any strategy to increase the value of a hotel. For many buyers, deferred maintenance is a red flag signalling a risky purchase, which reduces the number of offers that might be made. To get the highest possible offer for an asset, it is essential to keep good maintenance records and a tidy maintenance shop, in addition to well-cared-for public spaces and guestrooms.
The final undistributed operating expense to consider for improvement is utilities. Technological innovation is constantly creating new ways to substantially reduce the energy costs associated with hotel operations. An energy audit can identify areas where key savings can be made—this is essential for hotels with energy-consumption costs that are above industry norms.
Fixed Expenses
By their nature, fixed expenses offer little opportunity for adjustment, but the few channels that are available for intervention can yield considerable gains. A tax professional can determine if there is an opportunity to appeal an asset’s property assessment, which can be highly lucrative. The insurance coverage also deserves a proper review to not only assess any potential savings but also confirm that appropriate insurance is in place to mitigate risk to the operation.
Conclusion
Although it may seem that a hotel’s value is fixed and determined solely by external forces, in actuality there are hundreds of opportunities to make adjustments that increase the profit margin, resulting in an exponential improvement in value.
The Centers for Disease Control and Prevention estimates that 48 million people or 1 in 6 Americans experience a foodborne illness every year as a result of consuming contaminated food or drink and roughly 128,000 people in the US are hospitalized due to foodborne illness. There are many different pathogens or disease causing microbes that can cause illness. Currently, there are 250 known pathogens that are responsible for 20% of the reported foodborne cases and the root cause of the remaining 80% of all cases are many unknown pathogens. Additionally, chemical contaminates such as pesticides can cause foodborne illness. In the US, the top five pathogens that cause foodborne illnesses are norovirus (58%), salmonella (10%), Clostridium perfringes (10%), and campylobacter (9%). However, salmonella infections are responsible for the most hospitalizations and for the most deaths out of any of the foodborne pathogens.
What is a Pathogen?
Foodborne pathogens can cause several different types of illness. Salmonella and noroviruses can cause illness by consumption of live pathogens that replicate and grow in the intestinal tracks which is called a foodborne infection. An organism like Bacillus cereus (a pathogen found in rice and grains) can cause illness through foodborne intoxication through the production of toxins and the live bacteria does not need to be consumed. These microorganisms typically do not make the food look, taste or smell bad so it impossible to determine if the food is contaminated.
For a pathogen to grow and proliferate, certain conditions must be met. The first one condition is that the pathogen or its toxin must be in the food. Many raw foods have naturally occurring background levels of pathogen contamination. These pathogens can thrive when the temperature and the nutrients are suitable for the pathogenic growth. Foods that are high in protein such as eggs, meat, fish, and milk can provide appropriate nutrient levels for pathogens. Additionally, foods that are slightly acidic (pH levels 4.6-7.6) also support microbiological growth. Additionally, foodborne pathogens grow best in foods that have a temperature of 70-104° F. It is essential that hot foods must be kept hot and cold foods must be kept cold to prevent growth. Common food service foods that have a higher risk of foodborne illness are rice, cooked or raw animal products, cooked or raw vegetables, raw seed sprouts, raw shell eggs or water cooled hard boiled eggs, cut melons, and garlic and oil mixtures.
Once a pathogen has been allowed to proliferate in a food, foodborne illness can set in following consumption of the contaminated food. Most foodborne illnesses can occur with 2-24 hours following consumption of the contaminated food but symptoms have been reported as far out as 30 days post-contaminated food consumption. The time of onset of foodborne illness symptoms can be pathogen dependent. The most common symptom is diarrhea but symptoms can include vomiting, cramping, fever, and flu like symptoms.
Prevent the problem before it happens
To avoid potential problems in foods, it is very important to control or eliminate pathogens in food products. HACCPS or hazard analysis and critical control points are your quality assurance and risk assessment steps. They include coming up with preventative measures; evaluating critical control points and preventing, eliminating or reducing risk; evaluating and establishing critical limits such as cooking temperatures; monitoring CCP’s with temperature measurements; corrective action; record keeping systems; and verification.
SOPs and employee education are essential in preventing foodborne illnesses. The SOPs should address everything from where the product can be ordered from to how it is received, how it is stored, how long it is stored, how it is prepared, where it is prepared, by whom it is prepared, how it is transported and how it is served. Comprehensive SOPs go a long way to not only preventing foodborne illness, but also defending claims. However, that is only if they are adhered to. Employee training should be conducted on a continuous basis and management should continually verify SOPs are being followed. There are also several training certifications in food handling such as those offered through ServSafe and Learn2Serve. These can be done online and provide management with valuable education in developing safe food handling protocols.
Summary
While a foodborne illness outbreak can be devastating to a restaurant there is no restaurant that in a single night can serve as many individuals as a hotel during a large conference banquet or buffet. Many foodborne illness claims originate from that exact setting. Often times there are numerous individuals who become ill. The assumption is that there must have been some adulterated food item they all consumed that made them sick. It could not possibly be a coincidence… but it could be something other than a foodborne illness! Reaction time and record keeping is crucial in defending these claims.
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Authors
Allison Stock – Principal Consultant/Toxicologist & Epidemiologist, Rimkus Consulting Group
astock@rimkus.com
504-832-8999
Dr. Allison Stock is an internationally known toxicologist and epidemiologist with 25 years of toxicological, epidemiological, regulatory, and environmental experience. Her background is supported by experience in the federal and state government and industry (small and Fortune 500 companies).
Dr. Stock specializes in human health risk assessments combing both toxicological and epidemiological data. She has expertise in petrochemicals, oil and gas, environmental permitting, property transfer, environmental, social, and health impact assessments, inhalation toxicology, renal toxicology, toxicological and epidemiological risk assessment, communicable and foodborne illnesses such as Legionellosis, E. coli infections, and Salmonellosis, rapid needs assessments, emergency response, ambient and indoor air exposure assessments including mold, particulate matter, and asbestos, occupational health and safety plans, drug and alcohol intoxications, and stakeholder communications.
Kari Jacobson – Shareholder, La Cava & Jacobson
kjacobson@lacavajacobson.com
(813) 209-9611
Kari Katzman Jacobson is a shareholder of La Cava & Jacobson, P.A. Born in Miami, Florida in 1967 she graduated from the University of Florida with a B.A. in 1989 and from the University of Miami School of Law with a J.D. in 1992. Ms. Jacobson began her career as a prosecutor, and then went on to defend self-insured companies, insurance companies and those whom they insure.
Ms. Jacobson was admitted to The Florida Bar in 1992 and has been admitted to the U.S. District Court, Middle District of Florida since 1994. She is a member of The Florida Bar Association; American Bar Association, Hillsborough County Bar Association, Collier County Bar Association and the Claims and Litigation Management Alliance. She is also a member of The Federation of Defense & Corporate Counsel. She is A.V. Peer Review Rated by Martindale-Hubbell.
Ms. Jacobson is certified by the Florida Supreme Court as a Circuit Civil Mediator. Her practice is primarily concentrated in the areas of general liability, premises liability, negligent security, construction litigation, professional liability, trucking and commercial freight defense litigation claims.
]]>But not every article of clothing constitutes a “uniform” under the FLSA. The U.S. Department of Labor (USDOL) has long maintained that certain clothing, although required by the employer, is of such a character that it may be reasonably worn outside the context of work and therefore is not a uniform. Shoes are an interesting case-study.
Does The Shoe Fit?
Many hospitality employers often require employees, such as culinary department workers, to wear a certain type of shoe during work hours. Perhaps the most popular variety is the dark-colored, non-slip shoe—widely used both for their appearance and for safety reasons.
Some employers may be surprised to learn that the USDOL takes the position that these shoes do not constitute a uniform under the FLSA. As a result, employers can impose the cost of such shoes even if the cost results in the employee receiving less than the minimum wage after such deduction.
Before The Other Shoe Drops…
A word of caution before hospitality employers rush out to take advantage of this cost transfer. Experience in USDOL investigations teaches us that the agency does not give employers complete freedom regarding shoe deductions, even when it comes to dark-colored, non-slip shoes. For example, if you require employees to order a specific brand of shoe from a certain vendor when a comparable, less-expensive alternative is available, the USDOL may conclude that the shoe is no longer “basic street clothing.” The agency may reach the same conclusion if the employee already owns a pair of shoes but is told that they must order a new pair. Finally, the USDOL will be on the lookout for any ordering mechanism whereby the employer receives a fee or profit anytime an employee orders shoes through a designated vendor.
Many hospitality employers are familiar with Shoes for Crews, a manufacturer of non-slip shoes and other accessories. Shoes for Crews offers a corporate program to businesses which includes a “warranty” in the form of a $5,000 payment if an employee wearing Shoes for Crews slips at work. The USDOL finds this warranty problematic. The agency has been known to take the position in investigations that this warranty constitutes a benefit to the employer that changes the legal characteristic of the shoe such that it becomes a uniform. Thus, according to USDOL, an employer participating in this Shoes for Crews corporate program may not impose the cost of the shoe on an employee if doing so cuts into the minimum wage or overtime wages. The agency has taken this position even when an employer has never asserted a claim for the Shoes for Crews warranty payment.
Conclusion: Putting Yourself In Your Employees’ Shoes
The cost of purchasing (or cleaning) a uniform can be problematic for employers, when the cost (or part of the cost) is borne by the employee. Setting aside whether there is a legal basis for the USDOL’s position on the shoe warranty program, hospitality employers should carefully review their policies as they relate to the cost of required clothing worn by employees.
For non-slip shoes, if you have decided to pass on the cost of these shoes to employees, consider giving the employee the option of purchasing shoes at a retailer of their choice or wearing already-owned shoes which are compliant with safety requirements. This is particularly true for employers that participate in the Shoes for Crews corporate program.
For more information, contact the authors:
Andria Ryan – Partner, Atlanta office
ALureryan@fisherphillips.com
(404.240.4219)
Ted Boehm – Partner, Atlanta office
TBoehm@fisherphillips.com
(404.240.4286)
Property Crimes Still Dominate the Hospitality Sector
The majority of hotel crimes are property related. Burglary and theft are the two most common crimes in hotels and most hospitality-based businesses. Hospitality businesses are expected to provide a safe environment to their clients. Many clients have begun seeking legal action not only against the thieves, but the service providers as well. Evidence suggests that this number is tied to poor security practices and that many property crimes could be avoided.
Security for Your Staff
Harassment and discrimination crimes continue to soar in the hospitality sector. One poll of 300 workers in the hospitality sector showed that 89% had been sexually harassed by guests or fellow employees at some point. Of those, around 56% said that the harassment came from a member of the public or a client. Staff safety and avoidance of bullying for physical and mental health reasons however, is a priority.
Furthermore, legal issues regarding tip pools and Fair Labor Management are expected to become an important topic soon. In countries like America and the UK, prices in the hospitality sector are expected to fluctuate due to recent changes in policy. This means businesses trying to maintain their same wages and practices may soon fail to meet minimum wage laws, overtime laws, and more.
Negligence Maintaining Buildings and Permits Persists
For management, the most common legal issues still involve business maintenance. Laws regarding expiring building permits and health codes are expected to become stricter soon. The rate of legal cases involving tax obligations and trademark issues has remained steady for the time being.
The hospitality sector currently faces several legal issues. Discrimination and harassment are unfortunately considered common in the hospitality sector. Property theft and burglary are the most common legal issues facing guests and clients in the hospitality sector. The most common legal issues for management in the hospitality sector continue to be issues regarding health codes, expiring building permits, and tax or trademark issues that businesses have chosen to ignore.
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