ADA regulations require hotels to make reasonable modifications in their policies and practices when necessary to afford goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities. Because the purpose of a hotel’s website is, in large part, to allow members of the public to review information pertaining to the goods and services available at the hotel and then reserve appropriate guest accommodations, such websites have been found to be subject to the requirements of ADA regulations. According to these regulations, a hotel must identify and describe accessible features in the facilities and guest rooms offered through its reservations service in enough detail to reasonably permit individuals with disabilities to assess independently whether a given facility or guest room meets his or her accessibility needs. Thus, rather than alleging that the website itself is inaccessible to users with disabilities, these “new” website accessibility lawsuits claim that a hotel’s website violates the ADA by failing to sufficiently identify and describe the physical “brick and mortar” accessibility features of the hotel.
The promulgation of these regulations have made it easier than ever for plaintiffs to file lawsuits against hotels. Previously, a even a “drive by” plaintiff had to physically go to a hotel, experience some sort of an ADA violation, and then allege an intent to return to the Hotel in order to establish standing necessary to bring a lawsuit. Now, however, Plaintiffs can sue multiple hotels on the same day from the comfort of their own home. They can file these types of lawsuits simply by claiming that they WANTED to visit a specific hotel (or multiple hotels), but were deterred from doing so and/or making a reservation because the hotel’s website failed to provide enough information for them to determine whether the accessibility features of the hotel meets their needs. Thus, a plaintiff can assert a claim against your hotel without ever visiting, without ever making a reservation, and without contacting you first to notify you of the alleged deficiencies on your website.
The amount of these types of lawsuits is increasing exponentially, with several plaintiffs (represented by the same few plaintiff law firms) filing dozens of these suits each and every day. Accordingly, if your hotel does not already provide a plethora of accessibility-related information regarding your property, it is imperative that you make changes to your website as soon as practicable. In particular, you should provide plenty of information about both the common areas of the hotel as well as the accessible guestrooms.
At a minimum, you should include information regarding the accessibility features of the primary features of your hotel — that is, your parking, main entrance, public restrooms, pool lift, restaurants and bars, fitness centers, and business centers. You should also provide information regarding whether there are accessible routes to get to these highly utilized common areas. It is of course equally important that these areas are actually compliant with the ADA, as providing false, inaccurate, or misleading information could result in liability as well.
Additionally, you need to provide as much accessibility-related information as possible regarding the specific room that will be booked. This includes the bed type (double double, queen, king, etc.), number of beds, type of bathroom and shower (roll-in shower, transfer shower, bathtub with accessible bench, etc.), and whether any visual alarms exist.
Based on the dearth of case law in this relatively new and complex area of the law, it is still a bit of a guessing game as to how much information is “sufficient” under the law. And, although ADA compliance is imperative, you also want to strike a balance between the amount of ADA-related information you are providing and various logistical and aesthetic issues that your website may face so that you do not overwhelm the reader. Just keep in mind that at the end of the day, providing as much accessibility related information as possible on your website will significantly increase your compliance with the ADA, and, as a result, will also decrease the chances that you will be hit with this type of “website drive by” lawsuit that so many hotels are now being forced to defend against.
]]>Tip v. Mandatory Service Charge
In a ruling issued in June 2012 the Internal Revenue Service clarified the difference between a tip and a service charge for tax purposes under the Federal Insurance Contributions Act. The IRS determined that automatic gratuities (a percentage automatically added to a restaurant bill) are service charges, rather than tips for tax purposes. Revenue Ruling 2012-18 also determined that to the extent any portion of a “service charge” is distributed to an employee, it is wages for FICA tax purposes.
Generally, the burden of reporting tips falls on the employee. Employees that receive more than $20 in cash tips (cash, debit/credit cards) per month are required to report the tips to their employers by the 10th day of each month. The employer is then required to withhold FICA taxes, similar to non-tip wages. An employer is not liable for their share of FICA taxes if the employee fails to report tips.
However, effective January 1, 2014, employers are required to treat mandatory gratuities as “service charge wages” instead of tips. This directly affects an employer’s responsibility to report and pay FICA taxes, as well as, overtime calculations.
Under the new guidelines, the IRS stated that the difference between a tip and wage requires a factual determination considering all the circumstances. The IRS will generally categorize a payment as a tip (versus a wage) when: (1) the payment is made free of compulsion; (2) the customer retains the right to determine the amount; (3) payment is not subject to negotiation or employer policy; and, (4) the customer determines who gets payment.
As a result, automatic gratuities or service charges are no longer considered tips. Customers do not have a choice whether or not to leave a gratuity and are forced to leave a specified amount set by the employer. Such mandatory gratuities when distributed to the employee by the business are considered wages. As wages, they are not eligible for the FICA Tip Credit (The 45B Credit). For many years, 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 on tips in excess of the federal minimum wage as of Jan. 1, 2007.
Also, since automatic gratuities and service charges are not tips, they cannot be included in the tip amount that social security and Medicare taxes are paid on, which takes some tax credit off the table for restaurants. This credit is claimed on Form(s) 8846 and 3800.
However, where a restaurant provides a customer a receipt with recommended tipping amounts i.e… 15%, 18% and 20%, the IRS does not classify the amount left as wages because the customer has a choice to determine the amount, is free from compulsion and determines the amount of the gratuity, if any, left. Therefore, this situation would support a finding that this is truly a tip and not considered wages.
Absent choice by the customer, an automatic gratuity when paid by the restaurant to the employee is considered part of the employee’s wages. This means the burden rests on the employer to incorporate automatic gratuities as part of the employee’s wages as opposed to relying on the employee to report their tips. Service charges/automatic gratuities are considered part of the employees’ overall rate of pay. As such, where a member of the staff works over 40 hours in week or 8 hours in a day in some states like California and receives a portion of the automatic gratuities, this amount must be factored into the total wages earned and factored into that day’s or week’s regular rate of pay (i.e. total wages ÷8 or ÷ 40). It is this figure that is used to determine the overtime rate of pay (1 ½ times the regular rate of pay) for any overtime earned.
This means employers now have the additional burden make sure their pay systems calculate automatic gratuities as part of employees’ wages and use them to determine the regular rate of pay for a particular day or week for purposes of correctly calculating overtime. As such, employers must pay close attention to avoid the underpayment of overtime wages.
History of Federal law as to Tip Pooling
Historically, the federal law on tip pooling adopts standards which are protective of employees’ right to tips.
The Fair Labor Standards Act (FLSA) permits employer-mandated tip pools among employees who “customarily and regularly” receive tips, such as waiters, waitresses, bellhops, bussers and service bartenders. The interpretation made clear that employees who did not directly interact with customers such as chefs, cooks, janitors, and dishwashers were not allowed to share in the money contributed to a tip pool. A court in one case has held that hosts and hostesses who greet customers and perform some table attendance duties might be included in a tip pool. However, this holding was not all encompassing so a case-by-case analysis needed to be applied to determine applicability.
The FLSA forbids any arrangement where any part of the tip received becomes the property of the employer. A tip is the sole property of the tipped employee or employees appropriately participating in the tip pool.
The Department of Labor (DOL) also mandates that the pooling arrangement must be “customary and reasonable” and can not require an employee to contribute a greater percentage of their tips other than what is customary and reasonable. Although there is no definition or exact percentage of what the DOL deems “customary and reasonable,” the wage and hour division has found in cases where contributions of 15 percent or less of an employee’s tips to be acceptable. Contributions of greater than 15 percent are not statutorily forbidden but may require the employer to show that such a percentage is “customary and reasonable” for that community.
States also have similar definitions of allowable tip pooling. An issue of much interpretation and debate is whether employers may mandate that tips/gratuities be pooled and distributed among certain employees as a mechanism for ensuring that gratuities are shared by all employees in the “chain” of customer service and the chain of service over time in the restaurant industry has come to include all non-management employees in states where a tip credit is not permitted..
Pooling tips for redistribution is not required, nor is a written agreement or policy required to allow a tip pool.
“Chain of Service” Eligibility
However, the definition of “chain of service” has continued to be refined and evolve with opinions both by federal and state wage and hour divisions and the courts. For example, in 2005, California’s Department of Labor Standards Enforcement issued an opinion regarding tip pools stated that employees eligible to participate in a tip pool included anyone who contributes to the “chain of service bargained for by the patron, pursuant to industry custom.” This opinion letter described the “chain of service” to include bussers, bartenders, hostesses, wine stewards and front-room chefs (e.g., chefs at a sushi bar or who prepare food at the patron’s table). The opinion reaffirmed that no employer or agent with the authority to hire or discharge any employee or supervise, direct, or control the acts of employees may collect, take, or receive any part of the gratuities intended for the employees as their own. In other words, despite any tip pool container as is often seen at coffee shops, the owner(s), manager(s), or supervisor(s) of the business can not participate in the tip pool, even if these individuals provide direct table service to a patron. This is the case even if the guest intended to leave the tip for an owner, manager, supervisor, or agent of the business who actually provided service to the patron. Given the broad definition of the Labor Code, an agent could include a floor manager or shift supervisor if that person has the ability to direct or control the acts of employees.
However, recent court decisions have allowed shift supervisors in certain situations to share in gratuities. This situation was dealt with in lawsuits by Starbucks baristas as to company’s practice of permitting shift supervisors to share tips. At the Starbucks stores, the collective tip box was divided among the entry-level employees and the shift supervisors. A trial court in San Diego, California initially ruled that California law prohibited managers and supervisors from sharing such tips and awarded over $105 million dollars in damages. However, this decision was reversed with the Court of Appeals holding that shift supervisors are eligible to share in the tip pool, reversing the lower court decision. The Court found that shift supervisors performed the same tasks as baristas because their primary duty was to serve food and drinks. Chau v. Starbucks, Corp. 174 Cal App 4th 688 (2009). This case has not been overturned and even other states including New York cited to the Chau case to support allowing shift supervisors to participate in the tip pool based on their duties being more akin to baristas. See, Barenboim v. Starbucks Corp., 2013 N.Y. Slip Op. 04754 (June 26, 2013) wherein New York highest court found given that shift supervisors performed the same duties as baristas that they could share in the tip pool. Therefore, there seems to be consistency among states as to the role of shift supervisors working at Starbucks. However, consistently courts have found assistant store managers should not be included in the tip pool because they have too many managerial duties, including hiring and firing, so as not to be classified as staff…
These cases have also brought up the concept of a customer service team (consisting of one or more entry-level and one or more shift supervisors) who rotated jobs throughout the day and spent most of their time performing the same customer service tasks, thereby supporting the Starbucks tip pooling arrangement. Generally, a customer who places a tip in a collective tip box was found to understand that it would be shared by all service employees and these cases appear to be guiding law.
As to tip pooling, the industry has adopted a standard that distributes the majority of the pooled gratuities to waiters and waitresses, followed by a smaller percentage to bussers, and a still smaller percentage to other categories of employees who provide limited direct table service. There is no specific cap placed on the percentage of tips waiters and waitresses can be compelled to “tip out”. As will be explained below, the current state of the law has clarified who can participate in a mandatory tip pool.
Tip Credit and Tip Pooling subject to Attack
The most recent issue that has arisen involves who can share in the tip pool and whether “back of the house” employees like dishwashers, food scrapers, chefs, and cooks can share in the tip pool. For years especially under the Obama Administration, the Department of Labor (“DOL”) has consistently taken the position that employees who do not provide direct service to the customer are not allowed to participate in a tip pool. This would mean that kitchen staff who do not have direct service contact would not be viewed as being valid participants to share in a tip pooling arrangement.
However, inconsistent interpretations of the FLSA among various appellate courts have created confusion for both employers and courts regarding the applicability of valid tip pools. In early 2010, when the Ninth Circuit Court of Appeals (which covers the states of California, Nevada, Oregon, Washington, Arizona, Alaska, Idaho, Montana and Hawaii) held that an employer could require servers to pool their tips with non-tipped kitchen and other “back of the house staff,” so long as a tip credit was not taken and the servers were paid minimum wage. Cumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010). According to the court, nothing in the text of the FLSA restricted tip pooling arrangements when no tip credit was taken; therefore, because the employer did not take a tip credit to reach the minimum wage, the tip pooling arrangement did not violate the FLSA.
In response, the DOL on April 5, 2011, issued new regulations that directly conflicted with the holding in Woody Woo. In early 2012, the DOL clarified its position on tip pooling by fully rejecting the Ninth Circuit’s decision in Woody Woo. Therefore, employers could no longer require mandatory tip pooling with back of the house employees. In conjunction with this announcement, the DOL issued an advisory memo directing its field offices nationwide, including those within the Ninth Circuit, to enforce its rule prohibiting mandatory tip pools that include such employees who do not customarily and regularly receive tips.
As a result, several restaurant trade groups and Wynn Las Vegas challenged the 2011 rule change in separate cases, seeking to enjoin its enforcement. (The plaintiff employers all required their employees to participate in a tip pool that included both tipped and non-tipped employees, and they did not take a tip credit against the minimum wage.) Both federal district courts concluded that the DOL lacked authority to make the rule change as a result of Woody Woo and, moreover, that the substance of the DOL’s revision contradicted Congress’ clear intent.; therefore upholding Woody Woo and allowing a mandatory tip pool with back of the house employees states where a tip credit was not allowed..
In response, the DOL appealed but set forth language that it would not seek to enforce these 2011 new regulations within states located in the Ninth Circuit area of responsibility that do not allow a tip credit. On February 23, 2016, a sharply divided panel of the Ninth Circuit Court of Appeals (which covers the states of California, Nevada, Oregon, Washington, Arizona, Alaska, Idaho, Montana and Hawaii) ignored its prior precedent issued in 2010 and upheld the 2011 DOL rule change. The majority concluded that the Fair Labor Standards Act’s (FLSA) “clear silence as to employers who do not take a tip credit has left room for the DOL to promulgate the 2011 rule and rejected the notion that the appeals court itself had foreclosed the agency’s ability to do so by virtue of its 2010 decision in Cumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010). This decision meant that even in states where no tip credit exists that employers can no longer mandate a tip pool distribution that includes employees who are not in the chain of service or have direct contact with customers i. e. cooks, dishwashers… Oregon Restaurant and Lodging Association v. Perez, 816 F.3d 1080 (9th Cir. 2016)).
A petition for rehearing en banc before the full panel of Ninth Circuit judges, rather than the usual three, was requested. On September 6, 2016, the Ninth Circuit denied the petition but ten of the judges joined in a sharply worded dissent that laid out a path for an appeal to the U.S. Supreme Court. The Oregon Restaurant decision is directly at odds with the Fourth Circuit Court of Appeals decision in Trejo v. Ryman Hospitality Props., Inc., 795 F.3d 442 (4th Cir. 2015). Due to this “circuit split”, the National Restaurant Association, the National Federation of Independent Business and other hospitality groups filed briefs to join the Wynn’s prior petition for U.S. Supreme Court to decide whether the DOL acted within its statutory authority when it barred restaurants from including kitchen staff in tip pools. This appeal still is pending with the U.S. Supreme Court and a decision as to whether it elects to take this appeal and resolve the split in the federal courts of appeal is still outstanding
New Federal Budget allows Tip Pooling
In response to the DOL rule adopted under President Obama, the Trump DOL proposed a new rule which would allow tips to be shared and pooled between all employees. Even though this would allow some of the lowest paid employees to receive additional monies from sharing in tips, labor groups opposed the proposed new rule claiming this would result in employers’ managers or supervisors taking tips away from employees. The DOL extended the comment period to address these concerns.
On March 22, 2018, a compromise was reached as part of the omnibus budget bill signed by President Trump on March 23, 2018. Under a rider to the bill, now law, the FLSA is amended to allow mandatory tip pooling so long as the workers are paid at least the minimum wage. This is not an issue in California as a tip credit is not allowed and all employees must be paid at least the applicable minimum wage. Also the rider includes a provision reinforcing the rule that already exists in California that do not allow employers to keep “tips received by its employees for any purposes”. As a result, it reinforces the California rule that the agent of the employer i.e. owners, managers, supervisors are not permitted to share in a tip pool.
In summary, the new budget makes it clear that all employees can share in a tip pool and no longer excludes the heart of house employees like dishwashers, cooks and other kitchen staff. This new rule will help close the large wage gap between front of the house and back of the house workers. Finally, the new FLSA rule does not allow, and has never allowed, restaurant owners to keep employees tips. The tips belong to the nonsupervisory employees, even if the employer helps serve meals and interacts with customers
Practical guidelines for compliance
As a result the new FLSA rules, a company that pays all of its employees at least the minimum wage can l impose a tip pool that allows all non-management employees even those who are not directly in the line of service to be a part of a tip pool arrangement. “Back of the house” employees like cooks, kitchen staff and dishwashers can also share in the tip pool. It is unclear if the U.S. Supreme Court will take the pending appeal given this action as the new rule may have made the appeal no longer necessary.
Going forward, employers should take the following steps to limit liability on tip pooling claims:
A mandatory tip pool can include all line employees even those with limited customer contact as the law has evolved to recognize these employees as being a part of the chain of service for the industry.
If a mandatory tip pool is instituted, the employees with the greatest amount of customer interaction should get the largest percentage of the tips. It is important to make sure that the tip pool is distributed to participating employees in a reasonable manner, proportionate with the employees’ direct interaction with the customers.
Rely more on what the employee actually does in his/her job versus a job title. For example, an employee carrying the title of “waitress” whose only job is to prepare food outside the view of patrons or without personal contact with patrons should receive a smaller percentage of the tip pool. Also an employee who has greater contact with the customer should receive a greater percentage of the tip pool than employees who have less direct interaction with the patron.
It is illegal for the employer to share in the tip pool and therefore, do not distribute any portion of a tip pool to any owner, manager or supervisor, even if the owner manager or supervisor provides direct table service and/or the tip was left by the patron specifically for that individual.
Finally, if a tip pool is instituted, please make sure the tip pool is distributed to participating employees in a reasonable manner, proportionate with the employees’ direct interaction with the customers. It is important to review your current tip pooling arrangement, if you have one and revise it as needed to comply with the new rules.
For more specific questions as to prevention and allowable tip pooling policies, it is important to consult competent legal counsel who understands both the hospitality industry and wage and hour issues and can analyze those issues given your specific circumstances and policies.
]]>Room poaching occurs when companies position themselves as an event’s housing bureau in order to entice attendees to unwittingly book rooms outside of the official room block. Fake or out-of-block reservations can result in lost reservation fees for hotels, surprise charges and inconvenient and expensive last minute re-booking at alternative hotels for consumers. Further, trademark infringement can erode brand equity and good will between partnering hotels and groups.
In a recent anti-poaching case against Tarzango, an unaffiliated travel agency, U.S. Poultry, was successful in securing a default judgment award of $750,000 for both statutory and common law trademark infringements, unfair and deceptive trade practices, and attorneys’ fees. Tarzango targeted U.S. Poultry’s International Production & Processing Expo (IPPE) attendees with unsolicited room offer emails claiming to be endorsed by, or affiliated with, U.S. Poultry. These emails were brought to the attention of U.S. Poultry via attendee inquiries, and continued to be sent by Tarzango even after a cease and desist letter had been served.
This is the first major verdict for anti-poaching efforts, and the biggest win since a substantial settlement victory in 2008 by the American Society of Association Executives (“ASAE”) who brought suit against Complete Event Planning, Inc. for similar practices. Both cases were aided by general attendee awareness as well as a willingness by the event group to pursue third party violators past the demand letter phase. This allowed the event groups to collect email evidence, and to also demonstrate to poachers that demand letters might have teeth.
The Tarzango case comes on the heels of proposed legislation in both the U.S. House and Senate to make prosecution of poachers easier. The Stop Online Booking Scams Act would create standing for state attorneys general on behalf of the consumer in restitution claims.
While some remedies currently exist, such as restitution claims available to current consumers, and pending legislation, attorneys general, the recent Tarzango case indicates several positive developments and takeaways in the fight against room poaching:
In a speech given to the Heritage Foundation in October 2017, the Acting Director of ICE, Thomas Homan, indicated that he expects the number of worksite investigations to increase “four to five times” in the coming years. According to Homan, “we’re taking worksite enforcement very hard this year. We’ve already increased the number of inspections and worksite operations, you’re going to see that significantly increase this next fiscal year.”
The communicated immigration priorities of the current administration present a justifiable concern for the hospitality and retail industries and pose real operational, financial, and legal dilemmas for entities in both industries — which tend to employ a large number of immigrant workers. Recent actions by ICE support these concerns and should provide a cautionary tale to both industries.
In January 2018, ICE agents raided dozens of 7-Eleven stores in search of undocumented workers. This raid targeted 98 stores — from Los Angeles to New York — and resulted in 21 arrests. The targets of these raids, however, were not simply the workers. The managers who willingly employ undocumented workers were also a prime target of ICE.
Acting Director Homan described the raids as a warning to other companies that may employ unauthorized employees. According to Homan, “[t]oday’s actions send a strong message to U.S. businesses that hire and employ an illegal workforce. ICE will enforce the law, and if you are found to be breaking the law, you will be held accountable.” Derek N. Brenner, acting head of ICE’s Homeland Security Investigations, ominously stated that the 7-Eleven raid was “a harbinger of what’s to come.”
In order to safeguard themselves, businesses in these targeted industries must familiarize themselves with ICE’s worksite enforcement strategy. ICE utilizes a three-prong approach to conduct worksite enforcement:
A notice of inspection from ICE simply notifies business owners that ICE intends to audit hiring records to determine whether the businesses are in compliance with the law. Employers are required to produce their company’s I-9’s within three business days. Should ICE determine that employers are not in compliance with the law, the businesses will likely incur civil fines and possible criminal prosecution should it be determined that they are knowingly violating the law. Civil Penalties can range from $375 to $16,000 per violation, with repeat offenders receiving penalties at the higher end of the spectrum.
In light of the increased focus on workplace enforcement by ICE, how can employers in the hospitality and retail industries ensure that they do not become the next 7-Eleven? In order to be adequately protected and prepared it is recommended that employers conduct internal audits of their Form I-9’s and any related compliance processes and procedures. It is also suggested that any employees who are responsible for maintaining the Form I-9’s be given annual training to ensure that they are kept abreast of any updates in the law. As Benjamin Franklin famously said, “an ounce of prevention is worth a pound of cure” and taking these steps will help employers be prepared when the inevitable ICE storm arrives.
Disclaimer: This post does not offer specific legal advice, nor does it create an attorney-client relationship. You should not reach any legal conclusions based on the information contained in this post without first seeking the advice of counsel.
]]>Hotel safety protocols
Scene I
Exterior: London, England. Upscale major branded hotel. End of the year.
Interior: A conference is being set up.
Most of the conference is ready to go; we just need to email the hotel and request they present some safety and security measures for our conference attendees at the beginning of the conference. The hotel owner agrees but suggests sending this information to the guests prior to arriving for the conference. We rapidly agree and are shown some of the most thorough policies and procedures we have ever seen. The attendees greatly appreciate having this information pre-conference.
End scene I.
Scene II
Exterior: Convention Destination City, USA. Upscale major branded hotel managed by a third party. End of the year.
Interior: A conference is being set up.
Before the conference prep is complete, we speak to the owner about presenting safety and security protocols for the hotel at the beginning of the conference. We were advised that the hotel did not have such protocols in place and, in fact, that this information had never been requested by a meeting planner before.
End scene II.
As amazed as we were with the information provided by the London Hotel, we were just as dumbfounded by the response of the U.S. hotel. Given the challenging safety and security climate today, every hotel needs safety and security protocols that it is willing to share with conference hosts and attendees. Just as importantly, meeting planners need to request the information be provided to their attendees.
We are not suggesting that a hotel share its internal security response systems or all of its security methods. Hotels should be sharing just what the attendees, who are unfamiliar with the property, need to know so they can respond quickly in case of an incident at the property. This information includes emergency exit locations, safe rooms in the occurrence of a natural disaster and how to dial emergency services from the in-room phone.
As an aside to this, just as meeting planners and corporate travel buyers are ramping up their vetting of hotels from a safety and security perspective, hotels should be vetting the conference prior to entering an agreement to host the event.
Your hotel, employees and guests all benefit from strategically crafted incidence response protocols. We encourage quick development of these procedures before an incident happens.
Authors
Paige Tidwell – Marketing & Social Media Assistant, HospitalityLawyer.com
Paige Tidwell is a junior at the University of Houston, Conrad Hilton College of Hotel and Restaurant Management. She is seeking a Bachelor of Science in Hotel & Restaurant Management with an emphasis in Sales & Marketing. In addition to working for HospitalityLawyer.com, Paige works as a teaching assistant for two professors at the Hilton College where she works with students of all levels. Raised in both Baton Rouge, Louisiana and Houston, Texas, Paige naturally developed a passion for food and people. Her interest in hospitality was cultivated at a young age when she and her dad would cook for their church groups. In her free time, Paige enjoys trying new places to eat with friends and going to the gym.
Stephen Barth – Founder, HospitalityLawyer.com
Stephen Barth, author of Hospitality Law and coauthor of Restaurant Law Basics, is an attorney, the founder of HospitalityLawyer.com, the annual Hospitality Law Conference series, and the Global Travel Risk Summit Series. As a professor at the Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston, he teaches courses in hospitality law and leadership. In addition to legal and risk management insight, Stephen specializes in communicating the importance of Emotional Intelligence in leadership roles; and has provided valuable insight to many companies including The Methodist Hospital System, Best Western Hotels & Resorts, Dine Equity, Business Travel News and Aramark. His fun, fast paced presentations provide practical information and solutions to enhance your personal and professional life.
]]>GDPR compliance does not rest just with IT – it is everyone’s responsibility. Organizations can help their employees comply with the new regulation and protect against breaches by developing a comprehensive communication and training strategy. In fact, the GDPR requires that companies train their workforces on how to handle personal data under the new law. For training to be effective, it should not be limited to an annual off-the-shelf online course. Instead, training should begin at the top of each organization with a demonstrated commitment to creating awareness and a compliant culture, whether through townhalls or other company-wide communications. Supplement online training with in-person role-based training tailored to meet each functional area’s unique requirements.
Training, however, is not enough. With Privacy by Design now mandated by the GDPR, messages about information protection must be integrated throughout the business. This begins with emphasizing the value of information protection in the Code of Conduct and Ethics. Put this language into practice by embedding privacy and security in operational procedures, aligning it to business goals, and measuring it regularly. Encourage employees to champion information protection by inviting them to the conversation.
With May 25th just around the corner and 59% of U.S. employees reporting they know little to nothing about GDPR, there is still much more work to be done in creating employee awareness. And with fines of up to 4% of annual global revenues or €20 Million (whichever is greater) for non-compliance, lack of awareness could prove to be costly. Organizations with any questions about the applicability of the GDPR to their activities or how to prepare should contact their regular Fisher Phillips attorney or any of the attorneys in our Data Security and Workplace Privacy Group.
]]>Here are five pointers for businesses who believe they are on the brink of a lawsuit:
Joe Arellano’s five tips originally appeared in an article titled, “What to do when you’re about to get sued,”in the October 13, 2017, edition of the Portland Business Journal.
]]>Earlier this year, a Texas teenager, who was the unfortunate victim of human sex trafficking, filed suit in Harris County Texas against several well-known hotel chains as well various truck stop operators and the website “Backpage.com,” which was alleged to advertise and promote illicit sexual encounters. All businesses named were sued under the theory that these entities profited from the illegal sexual exploitation of a minor. This suit, along with a similar lawsuit filed last year in Pennsylvania, provides yet another cautionary tale to the hospitality industrythat the specter of human trafficking at one of its facilities raises significant concerns of civil liability to both the owner and operators of those facilities.
According to the Texas complaint, “Jane Doe,” alleges that she was involuntarily thrust into the shadowy underworld of human trafficking just prior to her 16th birthday. The suit claims that she was instructed by her trafficker to rent a hotel room, or have her exploiter rent a room, using payment methods which did not provide any identification to the hotel, i.e., a pre-paid credit card or cash. Once inside the room, Jane Doe maintains that she was sexually exploited by a “constant flow of male customers.”
Despite the warning signs raised by pre-paid credit card or cash payment, the complaint alleges that hotel management and staff failed to intervene, contact the police or otherwise prevent the sexual exploitation of minors at their properties. Essentially, Jane Doe contends that her continued sexual exploitation was caused when hotel management “turned a blind eye to the plague of human trafficking and the sexual exploitation of minors at their locations.”
Jane Doe filed her complaint utilizing a Texas law which creates liability for individuals or entities that intentionally or knowingly benefit from participating in a human trafficking venture for damages arising from such trafficking. This statute mirrors the federal Victims of Trafficking and Violence and Protection Act (TVPA) which creates civil liability for various entities, including hotels, restaurants, casinos, and bars, which “knowingly” benefit from human trafficking if it can be demonstrated that they knew or should have known about the illegal venture.
Significantly, liability under the TVPA is not restricted to hotels. Rather, as noted above, a trafficking victim may bring an action against “whoever” knowingly benefits from participation in a venture that they knew or should have known involved sex trafficking. Accordingly, businesses such as restaurants, casinos, bars, and nightclubs must take heed of the potential consequences of ignoring the signs of human trafficking.
Lawsuits filed under the TVPA, or a state counterpart, are likely to cause the hospitality industry much consternation and concern simply because of the significant potential monetary exposure and public relations/reputational risk associated with having a brand connected to human trafficking. The question thus becomes: what is a hospitality related business to do in order to properly shield itself from potential liability?
Since the legal standard is whether the business knew or should have known that human trafficking was occurring in connection with its business, it puts the onus on the business to be self-aware of what is occurring on its property. It is, therefore, crucial that a comprehensive and thorough anti-trafficking compliance program be implemented, including but not limited to, training hotel management and people working in specific departments, such as security, housekeeping, and the front desk, to identify and report human trafficking when they suspect that the illegal activity is occurring in their workplace.
One state has already taken action to ensure that businesses in the hospitality industry have a heightened responsibility in self-policing their properties. In 2016, Connecticut became the first state to pass legislation mandating that all hotel workers receive anti-trafficking training. The training instructs workers on sex and labor trafficking, the legal responsibilities of lodging establishments and practical tools for identifying signs of sex and labor trafficking. The workers also learn how to deter traffickers, report suspected crimes and help victims connect with services. Although Connecticut was the first state to require mandatory training, it is anticipated that it will not be the last. In fact, there is currently a bill before the Florida legislature which would limit the liability for businesses that can demonstrate that they had training and protocols in place to identify trafficking.
The scourge of human trafficking is not going away and will, unfortunately, continue to be synonymous with the hospitality industry. Accordingly, it is imperative that members of the industry proactively engage in anti-trafficking compliance and training in order to combat exploitation and reduce potential civil liability.
Disclaimer: This post does not offer specific legal advice, nor does it create an attorney-client relationship. You should not reach any legal conclusions based on the information contained in this post without first seeking the advice of counsel.
]]>Joint Employment
A little over a year ago, we wrote about the concept of joint employment and its impact on the retail industry, particularly as it related to franchisors and franchisees. At the time of publication (August 2016), the National Labor Relations Board was taking a very expansive view of the concept of joint employment, meaning more companies could potentially be targets for union elections and collective bargaining by individuals with whom they had no direct employment relationship.
With the advent of the new administration, however, the Department of Labor withdrew the previous guidance and its overly expansive view of joint employment. Congress also began work on a proposed law that would scale back the new standards to a less expansive legal test. Then, in December 2017, the newly constituted National Labor Relations Board overruled a 2015 decision that had expanded the concept of joint employment, returning the analysis to a traditional and reasonable interpretation.
Specifically, the Board held that two different companies would be considered joint employers for purposes of the National Labor Relations Act (NLRA) only when each entity has exercised control over essential employment terms of another entity’s employees (rather than merely having reserved the right to exercise control) and has done so directly and immediately (rather than indirectly) in a manner that is not limited and routine. This was a welcome change for businesses that had operated under these standards for thirty years.
These changes do not, however, signal an end to the joint employment doctrine. To the contrary, even after retreating to the more conservative joint employer standard, the NLRB concluded that the two employers involved in the specific case were joint employers under the narrower standard. Nor do these changes under the NLRA change the law in every arena. Retailers will continue to see plaintiffs in employment lawsuits attempting to add them as defendants under a variety of laws. There is more than just one joint employment standard. Two examples of this doctrine are also found under the Fair Labor Standards Act (FLSA) and Title VII.
Joint Employment Under Wage And Hour Law
The FLSA – the nation’s primary wage and hour law – expressly recognizes the concept of joint employment. The regulations interpreting the Act provide that “a single individual may stand in the relation of an employee to two or more employers at the same time under The Fair Labor Standards Act of 1938 . . . .” When determining whether two entities are joint employers under the FLSA, courts consider the economic realities of the relationship and apply a multi-factor test known as the “economic realities” test. For the most part, the various economic realities tests rely on the traditional common law test for employment with various economic considerations incorporated.
These economic considerations focus primarily on financial dependency. In other words, courts look to see whether the employee depends on the alleged employer for his economic livelihood based upon the parties’ actual working relationship. Whether or not the parties intended to create a joint employment relationship is irrelevant for purposes of the FLSA.
If a joint employment relationship is found to exist under the FLSA, both employers are responsible for compliance with the Act. For example, if a temporary employment agency supplies an employee to your company but fails to pay proper overtime compensation, the temporary agency and your company could both be held liable for the amount of overtime pay owed to the employee.
Joint Employment Under Discrimination Law
There is no clearly defined standard for determining whether a joint employment relationship exists for the purposes of Title VII, which is the primary federal antidiscrimination law. Nevertheless, for the purpose of Title VII liability, courts treat independent entities as joint employers if they share or co-determine matters that affect the essential terms and conditions of employment. Generally, the key issues examined by courts are whether the alleged employer has the right to hire, supervise, and fire employees.
It is important to note that a joint employment relationship is not always necessary for a finding of joint liability under Title VII. Federal regulations written by the Equal Employment Opportunity Commission (EEOC) provide that an employer may also be responsible for the acts of nonemployees with respect to sexual harassment. The EEOC will consider the employer’s degree of control and other legal responsibility with respect to the conduct of the nonemployee. Thus, regardless of whether an actual joint employment relationship exists, so long as you have some control over a contingent worker, you should take immediate corrective action if you become aware of harassing conduct.
Direct Causes Of Action
Furthermore, there are also employment-related claims that can be brought directly against you by individuals on your worksite who are performing employment duties for another employer. These claims generally arise either from direct interactions between your employees and the vendor’s employees at the worksite, or from communications between you and a vendor concerning employee performance.
Tort claims under state law are the most common source of these liabilities. For example, let’s say a worker loses their job because of negative information you reported to the direct employer. That worker might bring a defamation claim against you. This could easily arise from a situation where you accuse the individual of theft or some other criminal conduct (which could be considered defamation per se). In fact, even if you do not communicate negative information, but simply advise the direct employer that the individual is no longer welcome on your premises, the employee could bring a claim against you for intentional interference with a contract. While the premises for and viability of these claims differ among states, they do provide a means by which nonemployees can seek to punish the company that, in their minds, cost them their jobs.
Individuals may also have claims based on the conduct of one of your employees. For example, if your employee makes derogatory comments to the individual, a claim for intentional infliction of emotional distress could arise, and there is little doubt that the plaintiff’s attorney will name your company as a defendant. While one of the most difficult torts to prove, such allegations can pull your company into costly litigation.
Independent Contractors
Another problem area exists when contracting directly with an individual for services pertaining to functions commonly performed in the business. If your company identifies such an individual as an independent contractor, and therefore makes no withholding from their pay, you may run afoul of tax laws, as well as workers’ compensation, wage and hour, and unemployment insurance laws.
There is no single test for determining independent contractor status. Rather, the definition varies depending on the legal issue and the enforcement agency involved. For instance, you will find different definitions and tests for independent contractors in the IRS Code, the state unemployment insurance codes, federal and state wage hour laws, and state workers’ compensation statutes.
In the retail world, the question of whether to designate an individual as an independent contractor appears most often in situations that call for part-time employees. For example, if your store hires a janitor to clean the store twice a week, one of your managers might assume the individual is an independent contractor because they are not working full time. However, the number of hours an individual works is generally less important than the type of work being performed. Here, cleaning is a task for which most retail employees have some responsibility to oversee, which might categorize that individual as an employee in the eyes of the law. It is much safer to avoid the question by simply classifying the janitor as a part-time employee who is paid on a W-2 hourly basis.
Our Advice
No one can stop an individual from filing suit, no matter how frivolous. So your first step should be to obtain whatever protections are available before a suit is ever filed. If contracting with a company whose employees will be performing work on your premises, it is critical to negotiate for indemnification. While this won’t prevent your company from getting sued, it will put the burden of defense and associated costs on the contracted company.
Next, never sign a contract with a labor agency without a thorough review of the agreement. Oftentimes these contracts are written to assign responsibility to the retailer, indemnifying the labor provider for any event occurring on the premises that gives rise to litigation. Additionally, employment practices liability insurance policies should be reviewed with an eye toward whether they cover employment-related claims made by individuals who are not your direct employees. It’s important for your company to have this coverage.
When contracting for services, another important piece of the puzzle is to make sure the vendor supplies onsite supervision. While it isn’t necessary for these supervisors to be onsite 100 percent of the time, they should be visiting the workplace to check on their employees’ performance and to address any issues with a particular employee.
Once protections are in place, there are internal measures you should address. In-store management must understand that they are not to fill the role of supervisor to the other company’s employees. You need to conduct training identifying the individuals who fall into this category and the necessary procedures to follow for handling problems associated with these individuals. There should also be a stop-and-check mandate before a manager asks to have another company’s employee removed from your premises. While there will certainly be times when an individual’s misconduct means such action is appropriate, supervisors are often unaware of any risk in removing another company’s employee, and therefore act with little thought.
Conclusion
Hiring employees is not easy, and using another company to handle the administrative aspects of hiring can certainly be beneficial. But before traveling this road, you should take stock of where issues might arise and be prepared to address those risks.
For more information, contact the author at EHarold@fisherphillips.com or 504.592.3801.
]]>Some plaintiffs’ lawyers have found a lucrative niche by engaging the services of “testers” – private citizens who go from business to business looking for ADA violations. The law does not require claimants to notify a business of alleged violations so they might fix the problem prior to filing a lawsuit; hence, many businesses are caught off guard when served with the lawsuit. Worse, they will spend thousands of dollars in attorneys’ fees to resolve a case when the cost of actual compliance is very low. In fact, after the costs of enforcing the technical requirements of the law are paid and the lawyers receive their fees, the plaintiff often receives no damages for the case.
A 21st-Century Twist On The ADA
A modern twist on these standard ADA cases is becoming increasingly prevalent. Now people are using this same section of the ADA to bring allegations that business websites are inaccessible to those with disabilities. No longer do testers need to actually visit a brick-and-mortar establishment, but can merely surf on the World Wide Web looking for those businesses with websites that are not accessible for those with disabilities.
In 2010, the U.S. Department of Justice (USDOJ) issued an Advance Notice of Proposed Rulemaking on the Accessibility of Web Information and Services. The purpose: “to establish requirements for making the goods, services, facilities, privileges, accommodations, or advantages offered by public accommodations via the Internet, specifically at sites on the World Wide Web (Web), accessible to individuals with disabilities.” Although the comment period closed in January 2011, the USDOJ has still not published clear guidance or final regulations for the private sector. The latest news suggests that will happen sometime in 2018. For now, though, the lack of clear policy has left the field wide open to unfettered litigation.
The bad news is that the delay in the regulatory process has not slowed the torrent of ADA lawsuits against businesses for alleged failure to provide equal access to web-based services. This means that your hospitality business can be sued by someone who is simply surfing for a lawsuit. You should take steps now to ensure your company’s website is reasonably accommodating those with disabilities.
What You Can Do To Stop The Surfing Suits
Some of the more common website accessibility issues affect individuals with vision or hearing impairments and those who are unable to use a mouse and must navigate with a keyboard, touchscreen, or voice recognition software. Those with visual impairments may need special software to magnify the content of a page, have it read aloud, or to display the text using a braille reader. For those with hearing impairments, the issue is often that audio content on the website does not include closed captioning, or that images do not include captions. You may need to build your website to properly interact with any adaptive software or technology designed for accessibility purposes.
Fortunately, the Web Content Accessibility Guidelines (WCAG) exist to provide web designers with standards for making digital content more accessible to those with disabilities. The USDOJ has made it increasingly clear over the last several years that it considers a website “accessible” if it complies with the standards of the WCAG 2.0 AA. The agency has used this standard in settlement agreements and consent decrees with businesses it believes to have violated the ADA. There is speculation that this will be the standard adopted for the private sector in 2018.
If your company website posts menus, accepts orders, permits customer reviews and testimonials, takes reservations, provides addresses and directions to brick-and-mortar locations, accepts job applications, includes FAQs, has email or chat features, or your business has any other online presence, you should consult with your web designer about ways to make these aspects accessible to those with disabilities. It is both the right and the legal thing to do, and it could save your business the unwanted expense and stress of litigation.
For more information, contact the author at MAnderson@fisherphillips.com or 504.529.3839.
Want to read more about the ADA? Check out these articles:
]]>