Duff on Hospitality Law

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.).

We all know the importance of appearance and design in the hospitality industry. We also know the importance and priority of saving money. Garvey Schubert Barer's client, V*Starr Interiors, founded and led by another inspirational client Venus Williams, was kind enough to put together a guest blog post on staying in budget through re-purposing. V*Starr Interiors' experience ranges throughout the US, and the team’s portfolio includes hospitality, educational facilities, public/amenity spaces, clubhouses and fitness centers. Their hospitality portfolio includes a full renovation of the presidential suites, executive suites, and club lounge at Intercontinental Hotel- Downtown Miami, Florida. Today’s post is from V*Starr Project Designer, Ariana Ranieri. We look forward to several more design-oriented posts from V*Starr in the months ahead. – Greg

B u d g e t  |  WAYS TO STAY IN BUDGET THROUGH RE-PURPOSING THE STAGNANT ELEMENTS Working within a budget is something that ultimately controls a project. However, approaching the design in a more resourceful manner can enable the dollar to go further. When deciding which elements to maintain or re-purpose, think about the space from multiple perspectives. Here are some important aspects to consider:

1)  Versatility | Look at the atmosphere and determine which style are you aiming to achieve. If you want to move from a traditional setting to a contemporary setting, assess your current surroundings and see what you can salvage. Can the room’s trim work be painted or re-finished? Then look at the furniture in the room. When it comes to furnishings be sure to carefully examine each piece. You may find a style that is classic throughout time and could possibly be re-upholstered or re-finished. You may also find furniture with a neutral shade that will marry into any color palette. For example: An old sofa with great form will look much livelier once it is paired up with new pillows. Save money by taking note of the current paint color as some neutral shades can be spruced up with the addition of an accent wall.

2)  Condition | How is the condition of the current components in the room? Think about legs, arms, finish, and filling. Also, how long has the piece been in the space and does it stand the test of time? How durable is the piece within a short period of time? If there is a component that seems to be problematic you’ll want to make sure that any reworking will not compromise the item. Let’s say you have a historic Dining Buffet with a great body but worn legs. Changing out the legs and hardware may give it a fresher look at half the cost of a new Dining Buffet. Lastly, inspect the existing plumbing fixtures and appliances and determine if there’s another fixture that could be more cost effective.

Just when it seems that businesses spend more time ensuring employment law compliance than they do on actual business, the Department of Labor (DOL) has announced they intend to increase the frequency of their FMLA audits while also increasing the number of site visits during these audits. What, you may ask, is a FMLA audit and why should I care?

For employers who qualify for the Family Medical Leave Act (“FMLA”) (over 50 employees within a 75 mile radius) the required paperwork is an administrative process and the tracking is done by the Human Resources Department. It is a formality that also provides certain job protections, but it really isn’t that big a deal once the processes are in place. Right? The short answer is, no. The FMLA is form driven and form dependant – but it takes more than the forms to make sure you are complying with the law. Audits of an employer’s FMLA practices are not something new – at least in theory. The DOL has always had the right to conduct audits, but it is not a right often exercised. It has not been unusual to see the EEOC investigating employee claims under the FMLA, but rarely has the DOL investigated. That is about to change.

DOL Branch Chief for FMLA, Diane Dawson, recently announced that the DOL’s national office has instructed the regional offices to identify occasions when an audit would include an on-site visit. These visits could be announced or unannounced. The investigations may be triggered by an employee complaint they were not given all their rights under the FMLA, that they were about to lose their job (or had recently lost their job) due to exercising their rights under the FMLA, or because DOL is seeing a pattern of FMLA issues within the target company. Violating the FMLA can be costly. The employee can sue you and the government can fine you. The DOL is opting to increase the on-site investigations because the actual visit can reduce the time an audit may take. The investigators have ready access to the records, policies and files. More importantly, they have ready access to the employees for a face-to-face discussion while reviewing the forms.

So, what can an employer do to prepare? First and foremost, an employer should be proactive and review their current processes and forms. The DOL forms were updated recently and all employers should be using the updated forms. The current poster should also be placed in the appropriate locations. It is important to note that the poster must be able to be seen by both employees and applicants.

One of the most important things to do is to review (or develop) your FMLA policy. The DOL will start with a review of the policy (and the forms) to ensure the March 2013 regulations are incorporated. So, make sure your policy is up to date. At a minimum, the policy must incorporate issues such as the leave year calculation (calendar, rolling backward, rolling forward), eligibility requirements for leave, the reasons for leave, your call-in procedures, substitution of paid leave, the employee’s obligations in the FMLA process, medical certification process, explanation of intermittent leave and that the employee is responsible for telling you when an absence is covered under approved intermittent leave, benefit rights under leave, fitness for duty requirements and any outside work during FMLA prohibitions.

Since the 2013 Hospitality Law Conference, we have received many requests for the Garvey Schubert Barer presentations. Well, here they are. Ruth and I are happy to further explain them and other details on the trending topics. Please give us a call or email. It was a fun and educational conference so it is nice to look back at these slides!

Deal or No Deal?

Daily deal (or “flash sale” sites) like Groupon, LivingSocial, and Rue La La, are quite popular with both hoteliers and their potential guests, providing, as they often do, slashed rates and an easy method for getting heads in beds during times the hoteliers want them there the most. Unfortunately, these channels may not provide the benefits they seem to, and they pose a number of legal and practical risks that may make them even less attractive.

Protect Your Good Name: Keyword Advertising and Trademark License

Published in Hospitality Upgrade, March 2013.

The Internet can be a hard, hard place for brand owners. Yet failing to engage potential guests online across a variety of platforms is no longer a viable option for the majority of hospitality industry participants. It is crucial that brand owners exercise control over their marks whenever possible. This article focuses on the legal use of keyword advertising, and provides some tips about how to negotiate trademark licenses in online distribution and marketing agreements...To read the full article click here.

Our latest post comes from Malcolm Seymour, a member of our New York office who specializes in commercial litigation and regulatory enforcement actions. His post discusses the ins and outs of Dram shop laws, and how they vary from state to state. -Greg

"A guy walks into a bar and orders a drink”: these words usually foreshadow some benign if tasteless joke. But these same words are increasingly found prefacing legal complaints based on laws known as dram shop statutes. And for businesses that sell or serve alcohol, these lawsuits are no laughing matter.

Under dram shop laws, businesses that sell alcohol can face civil liability for injuries that their intoxicated patrons inflict on third parties – even after those patrons have left their premises, and (in some states) even when the injury caused is intentional. Despite the anachronistic name, more states enact dram shop laws every decade, under political pressure from groups like M.A.D.D. These laws vary significantly from state to state, and their severity in certain jurisdictions can come as an unwelcome surprise. Any hotel, restaurant or bar that sells or serves alcohol, especially one with operations in multiple states, would do well to familiarize itself with these laws and their jurisdictional differences.

Take New York City – a nightlife capital and global destination for travelers – which happens to fall under the reach of one of the nation’s harshest dram shop laws. New York State’s Dram Shop Act allows private plaintiffs injured by intoxicated individuals to sue anyone who may have “unlawfully” sold those individuals alcohol. This would not be so vexing if New York used a clear standard to define what sales are considered unlawful. Legally prohibited sales include sales to minors, habitual drunkards and – most problematically for those on the receiving end of a dram shop complaint – anyone who is “visibly intoxicated.”

Digital Signage Part III:  Potential Legal Issues

The proverb asserting that the more things change, the more they stay the same, always seems true when one thinks about potential legal issues from new technologies.

Digital signs are still signs, and placement of signs – especially billboards – has long been an issue receiving the attention of local governments. If those signs are emitting light and displaying motion, there may be even greater concern about their placement and their potential nuisance value. The Federal Highway Administration allowed digital billboards in 2007, concluding that they did not pose a danger to drivers. However, the FHWA has been studying the research and working on a report, which is anticipated this year, focusing on whether or not electronic billboards can be a dangerous distraction for drivers because they are so much more dramatic than conventional billboards. Furthermore, as digital signs proliferate, they will likely be scrutinized more closely under federal, state and local historic preservation and environmental impact laws.

Digital Signage Part II:  Some Examples

The size, weight, quality, cost and durability of video monitors limited their use for quite some time. However, the existence of large, light-weight, high-resolution, low cost monitors that can endure considerable abuse has been instrumental in the explosive growth of digital signs.

Other factors have fueled the growth as well.

Quick Service Restaurants (also known as fast food) are under increasing pressure to provide nutritional information about the food they sell.  Regulations are in place that require posting of this factual consumer information. It is expensive and time-consuming to print, revise and reprint this information on paper. If a QSR establishment cannot change its menu until it is able to post current nutritional information, then that menu may not change very often or in any substantial ways. Digital menu boards can be controlled from a centralized location, and can be updated very quickly, if, for example, the menu changes, or if the food content or portion size of a dish is changed. At the same time, the sign can be used to quickly promote an entree, or make some last minute special offer, all designed to promote sales.

The rash of NLRB guidance and new protections for employee social media activity discussed in our previous posts may make employers shy about taking corrective action based on an employee’s social media postings. While employers should always be careful in these situations, however, the mere fact that something is posted online does not make it “protected.” Recent examples in the news are a great reminder that where a posting is vulgar, offensive, or airs a petty grievance without implicating employees’ rights to discuss the terms and conditions of employment, the employer can and in many cases should discipline the employee. Where a posting is less offensive, however, the employer should tread carefully, as unpopular personnel decisions can also draw serious scrutiny.