Duff on Hospitality Law

California employers are currently scratching their heads over how to interpret “suitable seating” that is required under California Wage Orders. Nancy Cooper, member of our Labor and Employment Group and Hospitality, Travel and Tourism practice team, discusses how that term is defined will affect your business. Thank you for today’s post, Nancy! - Greg

I’m pleased to introduce another guest author from local accounting firm Clark Nuber. Julie Eisenhauer is an audit and accounting principal specializing in the hospitality industry. We're grateful that Julie has offered to share her experience and knowledge with our readers. Welcome, Julie, and thank you for today’s post on this important revenue ruling. – Greg

In December 2012, the U.S. Department of Justice (DOJ) settled a case with Lesley University, requiring Lesley University to take significant, comprehensive measures to accommodate the needs of students with serious food allergies. Details on the settlement can be found here. DOJ took the position that food allergies may constitute a disability under the ADA, and that the many steps required in the settlement were mandated by the ADA’s requirement that public accommodations make reasonable modifications to their policies, practices, and procedures that are necessary to ensure that individuals with disabilities have access to their goods and services.

However, the ADA does not require a public accommodation to engage in any measures that would “fundamentally alter the nature of the goods, services, facilities, privileges, advantages, or accommodations” offered.  Perhaps Lesley University could have relied on that defense if it had litigated, rather than settled with DOJ, but it is impossible to predict what the outcome would have been and no one can blame Lesley University for declining to find out.

The DOJ – Lesley University settlement has had many of us worrying that restaurants are already or will soon be in DOJ’s sights for examination of allergy-free items and allergen-free facilities. While we are still concerned about the potential impacts of the DOJ - Lesley University settlement, we have not yet seen evidence of increased investigations by the DOJ. Even more encouraging, a technical assistance document released by the DOJ after the settlement with Lesley University gives some hope that DOJ is taking a reasonable approach that is consistent with the ADA. The technical assistance document confirms that “a restaurant may have to take some reasonable steps to accommodate individuals with” food allergies, such as “omitting or substituting certain ingredients upon request if the restaurant normally does this for other customers.” However, DOJ confirmed that the ADA does not require restaurants to change their menus to offer gluten or allergen-free foods. DOJ also emphasized that Lesley University’s situation was unique because it involved mandatory meal plans.

We will continue to monitor this issue along with other ADA public accommodation issues, but for the moment we wanted to pass along some good news on this issue.

Please contact me if you have any questions.

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.).

Several clients have lately been asking about notices they've received that look like this. If they come from the Eastern District court in New York, they’re legitimate, and if you are a merchant who accepted Visa or MasterCard or both between January 1, 2004 and November 28, 2012, you are a probably a member of the class and should have received one too. If you didn't, the lawsuit and proposed settlement are discussed in detail here. Take a look; the settlement could affect your legal rights. You have until May 28, 2013 to exclude yourself from the settlement (opt-out) or object to its terms; the final hearing on the proposed settlement will be September 12, 2013. Assuming the court approves the settlement, with or without changes that may occur as the result of objections, claim forms will be issued after that date to class members and a claim deadline will be set.

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). 

Back in February, we gave you the heads up that Oregon was in the process of adopting the 2009 FDA Food Code. Bar and food cart owners, restaurateurs, and folks employed in the food industry were urged to prepare for new changes in labeling laws and implement best practices to protect themselves from liability once the new rules were announced.

Bringing in an operator, restaurateur or celebrity chef to provide food and beverage service in a hotel can provide immediate and significant benefits for a hotel and its guests. Hotel owners and operators use the experience, vision and creativity of third party food and beverage providers to generate attention, energy and business for hotel properties. Further, while hotels brand their properties and earn their reputations over decades, pockets of a hotel property can be made available to third party food and beverage providers to create a more immediate change in brand direction or environment. Despite the lure, however, chemistry and contract details are important. To avoid being left with a bad taste, owners and executives should consider a number of important contracting details while evaluating or courting a third party food and beverage provider.

Two major changes are on the horizon for Oregon diners and restaurateurs—one may affect diners’ waistlines while the other will force purveyors to fess up to potentially hazardous ingredients they serve.

Way back in 2009, Oregon’s Legislature passed the Menu Labeling Act, one of the country’s toughest menu labeling laws, requiring restaurants with 15 or more locations in the state to post the calorie count for every meal it serves. But before the laws could take effect, the federal government passed its own menu labeling law thereby preempting Oregon’s Menu Labeling Act. Section 4205 of the Affordable Care Act, signed into law in March 2010, set new federal requirements for nutrition labeling of foods sold at certain chain restaurants and similar retail food establishments. Until the federal law takes effect (the FDA is expected to finalize the rules summer 2012) — Oregon won’t know whether it has to revisit its own law or rule-making process. And diners won’t know just how many calories are in that bleu cheese bacon burger.