Duff on Hospitality Law

If you had asked me one month ago to predict the winner of the presidential election, I would have been wrong. Therefore, rather than make my own [ill-fated] predictions of the changes that await employers when PEOTUS takes office, I consulted my trusty Magic 8 Ball. Here’s what it predicted:

Will the overtime rule ever become law?     

MY SOURCES SAY NO.

We all have heard by now that the Department of Labor (DOL) rules extending eligibility for time-and-a-half overtime pay to some 4.2 million additional workers (including many employees in the hospitality industry) are on hold thanks to an injunction by a federal court judge in Texas. So what now?  The DOL under the Obama administration was expected to appeal the ruling to the US Court of Appeals for the 5^th Circuit, but the Trump administration has different priorities and may decide not to pursue an appeal after all.

One big trend in the restaurant industry is no-tipping policies, replacing the optional gratuity line on the bill with a “service included” mandatory charge or higher menu prices. After a number of successful restaurants having tried and failed to transition successfully to this model, the service-included model is not necessarily the future of the industry.

Joy Ellis, member of our Labor, Employment & Immigration and Hospitality, Travel & Tourism practice groups, brings us the very latest news about Oregon’s Statewide Paid Sick Leave Bill. Thank you, Joy! – Greg

As fast food workers across the country stage walkouts in a push for a $15 hourly wage and the Obama administration renews its call to boost the federal minimum wage, states on the left coast have already embraced employee-friendly increases.

Oregon, the state with the second-highest minimum wage in the country, announced last week that it will raise its minimum wage to $9.10 in 2014. It’s in good company: Oregon’s neighbor to the north just announced that Washington will raise its state minimum wage to $9.32 (the highest in the nation), and Oregon’s neighbor to the south just enacted a law that will hike California’s minimum wage to $10 per hour over the next three years in one dollar increments – from $8 to $9 on July 1, 2014, then to $10 on January 1, 2016.

Tip Pooling Update

Catch up on Joy's previous tip pooling update here and continue reading for the latest ruling.

On June 7, 2013, a federal judge in Oregon ruled that the Department of Labor went beyond its authority when it issued regulations in 2011 prohibiting the use of tips by an employer even when the employer does not take a tip credit. Judge Michael Mosman held that Congress had intended to impose conditions on employers that take a tip credit but did not intend to impose a freestanding requirement pertaining to all tipped employees. Consequently, the 2011 tip pooling regulations are not valid in the Ninth Circuit. The decision may be appealed, so employers aren't out of the woods yet, but for now this is a big win for the restaurant industry.

Those of you following the challenge to the Department of Labor (“DOL”) tip pooling regulations interpreting the Fair Labor Standards Act (“FLSA”) may recall the events below. You may also want to view our past updates and insights on the tip pooling topic in the following articles: DOL Restrictions, Tip Pooling Remains a Hot Topic, Tip Pooling - Update, Tip Pooling in Oregon and Washington.

• • In 2010, in a case called Cumbie v. Woody Woo 596 F.3d 577 (9^th Cir. 2010), the Ninth Circuit (with jurisdiction over Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington) ruled that the FLSA did not prohibit employer-mandated tip-pooling arrangements if the employer did not take a tip credit. This meant it was lawful for employers in the Ninth Circuit to require that their tipped employees share tips with non-tipped employees (bussers, dishwashers and cooks, for example), just so long as all employees got paid minimum wage and the restaurant did not take a tip credit. (Seven states – Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington – do not allow a tip credit.)
  • The DOL then issued regulations in April 2011 addressing ownership of employee tips, in conflict with the ruling of Cumbie v. Woody Woo. The regulations created legal uncertainty for any employers who were engaging in mandatory tip-pooling with back-of-the-house employees.
  • In February 2012, the DOL issued a field assistance bulletin to its staff, declaring ”the employer is prohibited from using an employee’s tips, whether or not it has taken a tip credit …” and the DOL would “enforce nationwide the 2011 final rule explaining that a tip is the sole property of the tipped employee regardless of whether the employer takes a tip credit[.]” The field assistance made clear on no uncertain terms that that the DOL considered it a violation of the FLSA for an employer to institute a tip pool that required sharing tips with back-of-the-house employees, even if the employer did not take a tip credit.
  • In July 2012, restaurant industry associations and others filed a lawsuit in Oregon federal court, contending that the DOL regulations unlawfully prohibit back-of-the-house kitchen workers from sharing in tips left by customers when the employer does not take a tip credit against minimum wage. See Oregon Restaurant and Lodging Association v. Solis et al., Case No. 3:12-cv-01261 (D. Or.).

Our Portland, Oregon partner, Joy Ellis, updates us on the very latest news about Portland's Earned Sick Leave Policy. Thank you Joy.

Our Portland, Oregon partner, Joy Ellis, updates us on what's "bugging" the hospitality industry. Thank you Joy.

It’s no secret that bed bugs are a stubborn and growing problem for the hospitality industry. All it takes to jeopardize a hotel’s reputation is one TripAdvisor or Yelp review that mentions bed bugs. And with travel on the rise, these unwanted hitchhikers keep showing up everywhere.

Portland’s City Council may follow San Francisco and Seattle and soon enact an ordinance that would require all employees in the city limits to earn paid sick leave. The City Council could vote on an ordinance mandating paid sick days as early as the end of the year.

Seattle’s paid sick leave ordinance only went into effect September 1st, after lengthy negotiations to revise the original ordinance to make it workable for Seattle businesses. Seattle’s ordinance requires nearly all private-sector employers to provide employees who work in Seattle with specified amounts of accrued paid sick and safe time; employers with 4 to 250 employees are required to provide one hour of sick leave for every 40 hours an employee works. San Francisco’s paid sick leave ordinance has been in effect for about 5 years. There, workers accrue an hour of sick leave for every 30 hours worked, up to 5 paid sick days per year at smaller workplaces with fewer than 10 employees and up to 9 paid sick days per year at larger workplaces. A study in San Francisco by the Institute for Women’s Policy Research found that since the enactment of San Francisco’s paid sick leave ordinance, the average worker takes 3 sick days per year. Tipped employees take an average of 2 days off and return to work sooner because their paid leave cannot make up for lost tip revenue.

At lunch time, Joy Ellis can be found at Addy’s Sandwich Bar, a food cart at the corner of SW 10^th and Alder. Here, she brings us an update on the thriving food cart industry in Portland.

Portland’s bustling food cart industry has come of age. With nearly 700 food carts actively dishing out some of Portland’s most creative and tasty cheap eats, the local food cart economy here is flourishing. Portland’s food cart industry has also helped build some thriving ancillary businesses, from food cart suppliers to sustainable to-go food containers to bicycle delivery services like Portland Pedal Power.

Food carts are generally a flexible, low-risk business model. They give an aspiring entrepreneur the opportunity to incubate a business idea and gather a following before taking the financial leap to a bricks-and-mortar restaurant, and they provide an affordable investment for business owners who prefer to stay small and avoid the risks and costs inherent in a storefront restaurant. 

The City of Portland is generally supportive of food carts, which pepper urban surface parking lots and occupy vacant lots and other underutilized sites. Portland’s regulations are relatively friendly (unlike some other cities, like New Orleans – where a food truck can’t park in the French Quarter, sell seafood, stay in one place for longer than 30 minutes or be parked near a restaurant). The various permits and licenses required of a Portland food cart vendor depend upon the size of the cart, its mobility, and its location (on private property or a public sidewalk).