Duff on Hospitality Law

Regular readers of this blog will know that we have been following the development and implementation of the FDA’s new menu-labeling regulations with some interest. After multiple rounds of drafts and public comment periods, the agency now has issued its final guidance for compliance with the new rules. According to the FDA’s press release, the guidance is intended to respond to the most frequently-asked questions from business potentially subject to the new rules, and “differs from the draft guidance by providing additional examples and new or revised questions and answers on topics such as covered establishments, alcoholic beverages, catered events, mobile vendors, grab-and-go items, and record keeping requirements.”

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.

The good news is the long awaited rule on overtime has arrived – finally. The proposed rule goes into effect on December 1, 2016. The quick summary is the changes aren’t quite as bad as everyone feared. The long summary is below. We have broken out the rules into specific talking points to try and make them easier to digest. This does not erase the entire prospect of heartburn, however. The Department of Labor has also developed a page of Questions and Answers on the new rule, which includes a comparison between the old rule and the new rule.

Despite lawsuits and persistent legal uncertainties, the “sharing economy” is booming, and the companies at its forefront continue to grow. Some of these businesses are a natural complement to the hotel industry, while others directly compete with it. Whatever may become of these companies as they are reined in by regulation, one thing is certain: the rise or fall of the “sharing economy” will define the landscape of the hospitality sector in the decades ahead.

Ridesharing giant Uber raised $2.1 billion in its most recent round of funding, buoyed by a valuation of more than $65 billion – a remarkable ascendance for the five-year-old company. Its success has attracted a wave of new entrants seeking to gain a foothold in this burgeoning market. But the road to a share of the sharing economy is fraught with legal peril.

In December 2015, the City of Seattle passed the “Wage Theft Prevention and Harmonization Ordinance,” which made changes to all four of Seattle’s labor standards ordinances—Paid Sick and Safe Time (PSST), Minimum Wage, Wage Theft, and Fair Chance Employment.

Across the board, the new law provides harsher penalties for noncompliance than in the past. For example, there is now a rebuttable presumption that an employer has retaliated if it takes adverse action within 90 days of the employee’s exercise of protected rights. An employer in this situation must demonstrate by clear and convincing evidence that the protected activity was not a factor in the decision to take adverse action. Thus, it is essential to carefully document all responses to concerns about employees’ protected rights as well as reasons for adverse employment actions.

After surviving its first go-around in court, New York City’s attempt to require restaurateurs to add sodium warnings to their menus has hit a roadblock in the form of a temporary injunction.

Perhaps taking inspiration from the FDA’s recent imposition of nutrition-labeling requirements on restaurant menus, the New York City Board of Health had approved a menu-labeling regulation of its own this past December. Under the regulation, the New York City Health Code was amended to require “Food Service Establishments” (or “FSEs”) to post salt-shaker icons on their menus next to any food item containing more than 2,300 milligrams of sodium – the FDA’s recommended daily allowance of the delicious mineral. The regulation also requires FSEs to include a statement on their menus that “[h]igh sodium intake can increase blood pressure and risk of heart disease and stroke.”

Oregon is making history, once again. The new minimum wage law (signed by Governor Brown on March 2, 2016) brings two new titles: 1.) the first state to implement a tiered minimum wage (the amount paid is dependent upon the location of the business); and 2.) the state with the highest minimum wage. The passage of the new law has brought a mixed response. The cheers have emanated from the employees and the advocates for a livable wage. The jeers have emanated from businesses trying to figure out how they are going to keep their doors open. While the law is effective immediately, the first increase goes into effect July 1, 2016. So, without further ado, let’s get to the details so you can determine which camp you are joining. 

Fourteen lawsuits were filed last week against employers at the Seattle-Tacoma International Airport for paying less than the $15 minimum wage approved by Sea-Tac voters in 2013. Defendants include baggage handling firms, rental car agencies, food-service establishments and logistics firms. These lawsuits have been filed by defendants represented by Attorney Duncan Turner of Badgley Mullins Turner and seek class action status. The lawsuits currently cover about 40 plaintiffs, although Mr. Turner estimates this could grow to 1,500 plaintiffs and that total back-pay sought could be $14 to $21 million.

Alaska Airlines and three other plaintiffs had filed a lawsuit arguing that the Sea-Tac minimum wage should not apply to the airport. The State Supreme Court ruled against them in August, 2015, and in December, 2015 rejected a request to review the case.

If you have any questions about these lawsuits, would like to review a copy of one of the complaints, or would like to discuss applicable wage & hour issues, please feel free to contact Greg Duff.

In the latest of a series of twists and turns regarding the legality of certain tip pools in Western states, on February 23, 2016, a divided three judge panel of the Ninth Circuit Court of Appeals validated regulations by the Department of Labor (“DOL”) that significantly limit employers’ ability to have tip pools that include more than “customarily and regularly tipped” employees. This development means that employers operating in states or territories in the Ninth Circuit (covering Washington, Oregon, Alaska, Idaho, Montana, Nevada, California, Arizona, Hawaii, Guam, and the Northern Mariana Islands) cannot include in their tip pools “back of the house” employees (such as cooks or dishwashers) or other employees who are not customarily tipped. We examine the impact of and history behind this decision below.

In a recent blog post, we highlighted the trend amongst hoteliers and restaurateurs toward adopting service charge models to meet the rise in state and local minimum wage requirements. Although “no-tip” and “service charge” policies are receiving their fair share of attention in the news, employers with improperly designed tip pools are garnering their own headlines—and lawsuits. For example, Red Robin recently agreed to a $1.3 million settlement in response to class action claims against the company that it impermissibly included back of house kitchen staff in the servers’ tip pool. If your company requires employees to pool their tips, or is considering doing so, it will want to avoid some common and costly pitfalls that have beleaguered others. For starters: