Hospitality Posts (140)
Are lawyers an obstacle to progress on Corporate Responsibility and Sustainability?
Having followed the evolution of the discussion on Corporate Social Responsibility, Creating Shared Value and Corporate Responsibility, and having witnessed the myriad attempts by corporations to define their policies and efforts in this area, I am constantly amazed by the decisions made in international corporations when it comes to issues of potential reputation risk and risk management.
A case in point is the disaster which occurred in Rana Plaza in Bangladesh on the 24th of April, 2013. A building collapsed and over 1,100 people working in the garment business perished. According to Michael Bride, Union of Food and Commercial workers of America,  “The building in question was built three stories higher than authorized, cracks had appeared in the building the day before and although other workers in the building were evacuated, the garment workers who died were forced to go to work under threat of having a month’s pay deducted if they refused. There was a failure of government oversight in the building planning process, the corporate responsibility of western retailers and brands and a dearth of worker representation, the workers did not have a union to back them up when they refused to enter the building”. In the absence of basic workplace health and safety standards, these workers were the victims of systematic human rights violations. A close inspection of the situation reveals the fact that many international clothing companies had work going on in the building. In the search for a solution to this devastating situation an attempt is currently underway to put in place some controls so that this type of disaster does not happen again.
One such control would be the binding Accord on Fire and Building Safety in Bangladesh which has been signed by global unions, by more than 80 fashion brands from 15 countries (H&M, Zara, C&A, Tesco, Abercrombie and Fitch and Primark to name but a few)  and by NGOs. The Accord provides full transparency and assurance through a legally binding process, with commitments to inspect and improve garment factories. The Accord also gives workers the right to refuse to enter unsafe buildings where there is a reasonable justification that they are unsafe- a very important stipulation bearing in mind the terrible case of the workers in the Rana Plaza disaster.
According to UNI Global Union  “All reports of factory inspections will be made available to worker representatives and they will be notified right away of any imminent safety threats. All factory reports will be made public in a timely fashion and there is on-going public reporting on whether factories are being renovated”. The interesting aspect of the Accord is its binding aspect which sets it apart from other prior CSR programs in Bangladesh. According to Kevin Thomas from the Maquila Solidarity Network writing in the Huffington Post  the real issue here is accountability and the Accord has a dispute resolution system that ensures this.
Gap and Wal-Mart have refused to sign this binding accord.
Walmart and Gap and other North American retailers have designed and launched their own scheme, a five-year factory safety plan for Bangladesh, which they have labeled the Alliance for Bangladesh Worker Safety.
According to UNI Global Union  this does not go far enough as under this scheme factory reports will only be made available where there are plans to remediate. According to Michael Bride  “The Accord on Fire and Building Safety in Bangladesh, on the other hand, states that the brands and retailers are responsible for the necessary repairs and remediation, whereas the Walmart/Gap plan does not. This ensures that the economics of the relationship between buyer and manufacturer make it possible under the Accord for the repairs to be paid for.”
Now coming back to my initial question as to whether lawyers are an obstacle to progress on Corporate Responsibility and Sustainability – it is my belief that we have to think about the education and understanding of legal practitioners when it comes to responsible business concerns, such as this one. This may require a lot of reflection and understanding about the difference between compliance with minimum standards, legal or not, and the organized prevention of future disasters and protection of corporate reputation.
Is it time for lawyers to begin to think about the intersection between law and business practices? It is my opinion that lawyers may look at Corporate Social Responsibility and legal obligations in a vacuum. What weight does an organization’s Corporate Responsibility policy have if the procurement decisions in a company are made by people who only base their decisions on price with no thought given to the health and safety issues of their workers in their supply chain?
Where do law students learn about issues that are considered to be non-legal?How many law schools have courses in their core program offerings which deal with Business and Human Rights, with Sustainability or with CSR? How many law schools insist on their law students doing an internship within a company setting in order that they might understand other non-legal disciplines and points of view?
My Big Question: How can we educate lawyers to go beyond pure narrow legal thinking and compliance solutions and lead them towards real risk management in an ever evolving global workplace?
Your ideas and comments are very welcome!
 Michael T. Bride, Deputy Organizing Director for Global Strategies, UFCW International Union
 UNI Global Union is the voice of 20 million service sector workers around the world. Through 900 affiliated unions, UNI represents workers in 150 countries and in every region of the world. UNI represents workers in the Cleaning & Security; Commerce; Finance; Gaming; Graphical & Packaging; Hair & Beauty; ICTS; Media, Entertainment & Arts; Post & Logistics; Social Insurance; Sport; Temp & Agency Workers and Tourism industries.
 http://www.huffingtonpost.ca/kevin-thomas/the-real-issue-is-account_b_3580943.htmlThe Real Issue is Accountability
 Michael T. Bride, Deputy Organizing Director for Global Strategies, UFCW International Union
Employee theft is a significant source of loss in the hospitality industry. Reports have found that 34% of employees in the 18-29 age bracket believe that stealing from their employer is justifiable. It is believed that as much as one-third of all restaurant failures are due, in significant part, to theft by employees, and the total amount stolen industry wide, in restaurants alone, amounts to $8.5 billion in annual losses. A study commissioned by the Association of Certified Fraud Examiners estimated that the median loss caused by occupational fraud was $140,000, and 20% of these losses exceeded $1 million. The numbers are clear: employee theft poses a serious threat to the hospitality industry.
Many hospitality industry companies attempt to mitigate employee theft loss by purchasing insurance designed to provide coverage to the company when a theft occurs. These policies, typically called commercial crime or fidelity policies, can in some cases provide the loss mitigation and risk transfer for employee theft that the policyholder believes it has accomplished through purchase of the policy. However, these insurance policies also have numerous traps for the unwary that may result in the forfeiture of this valuable risk transfer and loss mitigation tool.
Below we provide some tips for avoiding those traps. The purpose of this article is to provide a hospitality industry company with a summary of best practices and a useful, practical checklist to be used in the unfortunate event it sustains a loss due to employee theft.
Motives for Employee Theft
Employee theft is the product of a number of factors and is perpetrated by employees at all levels of the organization, from hourly workers to senior management. One in three crimes involving employee theft involves a management-level employee. Employees who steal from their employer do so for a variety of reasons, such as personal financial difficulties or simply because the opportunity presents itself.
A lack of adequate internal controls gives the employee access to assets and an opportunity to steal without detection. Typically the crime starts on a small scale, and then as the theft continues undetected the employee becomes bolder and the amount of the theft — i.e., loss — increases.
Mitigating Loss From Employee Theft Through Insurance
Adopting internal controls and employee oversight will always be the company's first line of defense against employee thefts. But no system is perfect, and employee theft is likely to occur despite a company's efforts. Hospitality companies accordingly seek to mitigate their employee theft losses by purchasing commercial crime or fidelity insurance. These policies, which are usually standalone policies, typically provide coverage for employee dishonesty, forgery document alteration, computer fraud and fraudulent funds transfer. While they are not a substitute for vigilance against employee theft, they are a critical component of a company's broader scheme to prevent employee theft losses.
But purchasing a commercial crime/fidelity insurance policy is useless unless the policyholder knows how to navigate a claim. These policies impose various duties on the policyholder seeking coverage for a loss, and a breach of these duties can result in a forfeiture of coverage.
Policy Traps for the Unwary
Commercial crime/fidelity policies have certain peculiarities that can trap the unwary policyholder and its attorney. For example:
Timing: When Did You Learn of the Loss? When did the claim accrue, and when did the policyholder first become aware that it suffered a covered loss? Under crime/fidelity policies, the policyholder is required to submit a proof of loss by a certain date or forfeit coverage–and that date is determined by when the policyholder knew it had a loss. As such, under these policies, timing is everything. It is crucial to review your policy and determine when your proof of loss is due.
Timing: How Did Your Loss Happen? These policies set out firm, specific time limits for the policyholder to meet its burden in proving how the loss occurred, and quantifying the amount of the loss. These often pose a major hurdle to coverage for the unwary policyholder. For a variety of reasons, the policyholder cannot rely on law enforcement for this purpose. Proving and documenting the loss can take some time, and the policyholder's best practice in this regard is to construct a team early on consisting of a forensic CPA, other experts as required (forgery expert, computer experts, etc.), a coverage attorney and someone in the policyholder's senior management to work with the team.
Limits: The limits of coverage under the policy may be different depending on how the crime was perpetrated.
Exclusions: The policyholder must understand what is excluded under the policy as it conducts its investigation into the loss, and be aware when it submits its proof of loss to the insurance company.
Insureds: One would expect that the policyholder’s employees are covered under the policy. But this often is more complicated than it seems. Was the perpetrator an employee at the time of the theft? Are independent contractors covered under the policy?
Avoiding these traps requires specialized knowledge and diligent investigation and documentation. Fortunately, there is at least one offsetting common policy provision that will cover the policyholder for properly pursuing its claim: the costs incurred from a team approach to proving and documenting the loss will often be covered in whole or in part by the insurance company, but only if the policyholder complies with certain terms of the policy in this regard.
Maximizing a claim and minimizing the chances of further loss when employee crime occurs requires a systematic approach. Following a loss, we recommend addressing the following questions promptly:
- What is the nature of the loss?
- How much do we think we lost?
- How was the crime perpetrated?
- Who is on our loss recovery team? Do we need:
- • a coverage lawyer,
- • a forensic CPA,
- • senior management, or
- • other experts?
- What are the notice provisions and relevant timelines in the policy, including:
- • notification of loss to the insurance company,
- • notification to law enforcement,
- • notice to the insurance company regarding investigative expenses,
- • submitting proof of loss to the insurance company, and/or
- • bringing suit against the insurance company?
- Have we taken all steps necessary to prevent further loss?
- Are there other potentially responsible parties for the loss, such as auditors, financial institutions, etc.?
Know Your Policy, Document Your Claim
Commercial crime/fidelity policies can be a useful tool for the hospitality company seeking to mitigate the risk associated with employee crime. For these policies to fulfill their function, however, the policyholder needs to be aware of the requirements they impose on the policyholder with respect to notice, documentation and burdens of proof.
If you read Part 1 of this article, you should already be convinced of the importance of addressing domestic violence in your organization and hopefully, you’re ready to learn how to develop and implement an in-house program. This piece will layout the steps to building, launching, and maintaining an effective, cost saving (and possibly life saving) internal campaign. Although every company has different needs, resources, and culture, organizations of any size can find ways to help employees at risk. Let’s begin with the prep work:
Lay a Solid Foundation
Before bringing the suggestion of a domestic violence program to management, survey the landscape for overall interest and individual supporters. Approaching management as a group will increase your chances of success, so try to find a few other people who will stand as allies. Perhaps it’s a corporate security leader who frequently mentions the issue of domestic violence when discussing risks to the company, or a human resources professional who sits on the board of the local domestic violence shelter. Any one of these people could be enlisted to help back your cause, along with legal, accounting, insurance, EAP, or payroll personnel who can help explain the benefits to senior level staff. The point is to approach management as a team of committed individuals who are willing to get the ball rolling, as opposed to just one person with an idea. This cadre will ideally be led by an upper management champion who supports and represents the voices of the group.
In addition to individuals, backing can be sought from the workforce as a whole. Consider inviting a presenter from a local domestic violence agency to come do a “brown bag” informational session at your workplace. Afterward, attendees can fill out a survey indicating their interest in a company-wide domestic violence program, and to what extent they would want to be involved.
Lastly, you will want to build prerequisite relationships with local domestic violence organizations and police departments. These groups can be great allies and resources, but it is important to develop connections before assistance is needed. Do so through activities like participating in a fundraising event for your town’s shelter, sponsoring a domestic violence conference, or attending police led community safety meetings.
Assemble the Team
The nucleus of any quality domestic violence program is a focused multidisciplinary team to oversee the process of creating, launching, and operating it. In some companies, this might be a domestic violence task force to which senior leadership assigns representatives from stakeholder departments. In others, the domestic violence committee may come from (or be incorporated into) a pre-existing threat assessment or employee wellness team.
Who should have a seat at the table when it comes to addressing domestic violence? Any department that directly deals with the issue, such as security, human resources, legal, communications, employee assistance programs and union representatives. If possible, subject matter experts should be brought on as consultants throughout the construction process and retained to advise the team on particularly challenging cases.
The training of the domestic violence team can be expanded to include threat assessment and management skills, so they can better evaluate and respond to concerns that arise. A simple protocol should be developed to determine how cases will arrive at the table, how team members will be convened to address them, and how threats will be reviewed and dealt with. Team members can also be taught to create customized workplace safety plans and help employees navigate the variety of accommodations and services offered.
Part of the team’s goal is to increase the safety of the work environment by determining what the emergency response protocol will be. Security is at the core of the team, advising members on how to best respond to crises such as an active shooter scenario. The objective is to formulate a plan that lets everyone, from upper management to front line staff, know exactly what to do when faced with an act of on-site violence.
Create New Policy
The next step in your efforts is to clearly define the company’s stance on domestic violence through a comprehensive employee conduct policy. In many states, public organizations are required by law to do so, and a multitude of complicated legal issues exist around subjects like confidentiality and non discrimination. Companies are responsible for making sure their policy is in accordance with the laws of any jurisdiction they function in, a particular challenge to companies that operate in multiple districts, therefore legal counsel will be a crucial part of your policy building process. If you need up-to-date information on legislation regarding domestic violence and the workplace in any state, the Legal Momentum website is a great place to start (www.legalmomentum.org).
Depending on the particulars of your organization, your domestic violence policy may stand alone, or fit well into an existing workplace violence document. One of the multidisciplinary team’s first tasks will be to look at what is currently in place, determine which policies and procedures already cover domestic violence, and decide what changes might be needed. Policies addressing domestic violence should concentrate on the following key areas, conveying expectations and promises to both victims and abusers.
In regard to victims, the focus should be on safety, job security and available accommodations. For instance, if an employee is being harassed at work by an abusive partner, their supervisor may be able to change their station, shift, or branch location so they are less accessible to the offender. Security may be able to provide parking lot escorts, and a two way radio to alert both parties to the presence of the abuser. Human resources may be able to assist by allowing the employee time off to deal with the medical, legal, and emotional problems that often accompany abuse. An ideal policy would also pledge that victim confidentiality and job status are protected in the event of a discovery or admission about abuse. Victims should know that specifically identified staff members (security, HR, etc.) will be alerted to their situation on a need- to-know basis only, and be assured that their lives will not become water cooler gossip.
In regard to perpetrators, the key message should be one of zero tolerance for violence (or threats thereof) on company property, at company functions, or via company resources (phones/computers/vehicles, etc.) Any one of these actions could be grounds for a negligent hiring, retention or supervision lawsuit so it is imperative that employees be well informed of the consequences for violating the rules. At the same time, batterers should be aware that counseling is available through local or employee assistance programs, and have assurance that they won’t be penalized for seeking help on their own volition.
The overall goal is to cultivate an environment of open communication that encourages disclosure. When employees know help is available and their job is secure, they will be much more likely to confide in their employer. Without that confidence, they may keep quiet, which puts the employer in the dangerous position of “flying blind”, never knowing the source or timing of a potential attack.
Train in the 3 Rs
The next stage in creating a strong program is to plan and provide specialized training for the multidisciplinary team, human resources, and management personnel around how to identify and react to situations of possible domestic violence. The focus is on skills based, regularly repeated trainings that allow for refreshers and employee turnover. This should be done in advance of any publicity about the program; otherwise, departments may find themselves flooded with questions they cannot answer.
Management staff and human resources need not be experts in the subject, and they shouldn’t assume the role of counselor or become personally involved in employee situations. However, they should at least know how to identify a domestic violence situation, how to sensitively approach and respond to victims, and where to send them for further assistance. Professionals often call this type of training the “3Rs” (Recognize, Respond, and Refer).
Included should be a brief subject overview that facilitates general awareness of the issue and the company’s policies regarding it. Some departments may need additional training that others do not. For example, the security team will need to know how to enforce protection orders, while the human resources department may need extra information on employment law or victim privacy. Trainings can be held in person or through an online module, and include line employees as well as management, so they can serve as a resource for their co-workers. After all, studies show that victims of violence are more likely to turn to their co-workers for help than their boss, reflecting legitimate concerns about confidentiality and job status.
Shout it From the Rooftops!
Once your program is ready to launch, it’s time to crank up the communications. Employees can be informed about the new effort through memos, company websites and email, electronic or paper newsletters, break room posters and brochures, or payroll inserts. While the message on a poster for example, should be brief, employers can use the company website or employee handbook to disseminate a wealth of information about domestic violence. They can also speak about it at orientation, in-service, and wellness trainings, as well as arrange quarterly seminars featuring speakers on domestic violence.
Campaign messages should stress several key points including the idea that domestic violence in the workplace affects everyone. Employees should be taught to recognize signs of abusive behavior in a partner or signals of victimization in co-workers. Lastly, they need to know specifically where to turn for help, understanding that they will not get in trouble for disclosing that they are a victim of abuse or for expressing concerns about a fellow employee. A simple referral to the EAP, or a local domestic violence hotline will suffice.
Expand Your Scope
Now that you’ve got a domestic violence program you can be proud of, it’s time to let the media, your community, your customers, your shareholders, your industry peers, and other groups know what you’ve created. Sharing cases and ideas with other employers is a great way to build strategies and connections while gaining wisdom from each other’s experiences. Employers who have already been successful in creating their own programs may offer advice through coalitions such as the Corporate Alliance to End Partner Violence (www.caepv.org) and Workplaces Respond to Domestic and Sexual Violence (www.workplacesrespond.org).
Other ways to take a stand against domestic violence include offering employees the opportunity to volunteer with or collect donations for a local battered women’s shelter, partnering with service providers at an employee health and wellness fair, or sponsoring a domestic violence conference or fundraiser.
Addressing domestic violence in the workplace isn’t an overnight task, but it is an incredibly important one, the impact of which will make your company and your community stronger and safer for everyone. Please consider what your organization can do to fight domestic violence today, and move forward with courage.
In many ways the proposed rules hew closely to the language of the ordinance and do not significantly alter the law or compliance burden. However, in a few areas the proposed rules differ from the ordinance in ways that are important to the hospitality industry.
The first area of concern relates to the exemption of positions whose job duties include “security” services, which are not covered by the ordinance. For example, questions have been raised about various positions in a hotel that have security functions and whether they would be considered exempt, such as night managers who are directly responsible for managing security situations in hours of lean staffing. The proposed rules take a strict view of a “security” position that would not cover non-traditional security employees. Specifically, the proposed rules state that “security” includes any person who is required to be licensed as a “security guard” under Washington State law who would typically be referred to as a security officer or guard, patrol service officer or guard, armed escort or bodyguard, armored vehicle guard, burglar alarm response runner, or crowd control officer or guard (these terms and the State licensing requirement come from the Washington statute RCW 18.170). This narrow definition would render the “security” exemption inapplicable to many if not most hotel employees who might be thought to perform security functions.
The second area of concern is the proposed rule’s definition of “verifiable information” of rehabilitation or good conduct that an employer should consider before deciding it has a “legitimate business reason” to make an adverse employment decision based on criminal history information. The term “verifiable information,” though vague, seemed to refer to information that could be checked—like work experience, certificates, diplomas and the like—and not to mere statements from an applicant or employee. However, the Office of Civil Rights believes differently. The proposed definition of “verifiable information” includes “any” information produced by the applicant or employee related to rehabilitation or good conduct, and specifically lists as examples “a written or oral statement” from the applicant, law enforcement or probation officer, member of the clergy, counselor, therapist, social worker, or member of a community or volunteer organization. Thus, under the proposed rules an employer would generally have to consider all applicant or employee statements of good conduct and rehabilitation when determining whether it had a “legitimate business reason” to make an adverse employment decision based on criminal history information.
The third issue is that the proposed rules make a technical change to the definition of “legitimate business reason” that requires the consideration of individualized factors in circumstances prior to an adverse employment decision. Under the ordinance, a “legitimate business reason” was one of two things:
Under the proposed rules, however, the definition of “legitimate business reason” has been changed to require consideration of individualized information before reaching type good faith belief. In other words, under the proposed rules an employer cannot reach a good faith belief that the criminal conduct would have a negative impact on the applicant or employee’s fitness or ability to perform the position without first considering individualized information. Although it is generally good practice to consider individualized factors in all cases, regardless of the technical requirements of the ordinance, the proposed rules would now this individualized consideration in all cases.
Finally, the proposed rules are disappointing in what they do not do. Specifically, the proposed rules to not attempt to further define or explain the contours of the two types of “legitimate business reason” noted above. What is a “negative impact” on “fitness or ability to perform the position?" What does it mean to believe that past criminal conduct will “harm or cause injury to” people, property, or business assets? What are “business assets” in this context? Does that term include assets other than physical property, such as public good will? These questions and others remain unanswered in the proposed rules.
Please contact Greg or me if you have questions.
Originally published on Duff on Hospitality, 16 September 2013.
Extended stay hotels remain a fast-growing segment of the hotel industry. These hotels cater to a variety of customers, including business travelers, vacationers, and families or individuals who may need temporary or semi-permanent housing. Extended-stay hotels often give customers the option of daily, weekly, or monthly payment rates, allowing the occupant to remain at the hotel for a duration that fits his or her needs.
The recent growth of extended-stay hotels raises an important legal issue for owners and operators of extended-stay hotels – namely, is an occupant of an extended-stay hotel protected by the federal Fair Housing Act (the “Act”)?
Background On The Act
Congress passed the Act in 1968. The goal of the Act is to combat discrimination in housing.[i] While the Act has been amended to add new protected classes, the heart of the Act remains largely unchanged. The Act generally prohibits discrimination in the sale or rental of housing. One cannot refuse to rent or sell, refuse to negotiate, or make housing unavailable or otherwise deny a dwelling on the basis of race, color, religion, sex, familial status, national origin, and handicap. Similarly, one cannot set different terms, conditions or privileges for the sale or rental of a dwelling, provide different housing services or facilities, or falsely deny that housing is available for inspection, sale or rental on the basis of race, color, religion, sex, familial status, national origin, and handicap. One also cannot advertise or make statements indicating a limitation or preference based on race, color, religion, sex, familial status, national origin, and handicap.[ii]
What Structures Are Covered By The Act?
The Act’s prohibitions only apply to the sale or rental of “dwellings.”[iii] Thus, all businesspersons who rent or sell property, including owners and operators of extended-stay hotels, need to assess whether their properties are considered dwellings under the Act.
The Act defines a dwelling as “any building, structure or portion thereof which is occupied as or designed or intended for occupancy as a residence by one or more families and any vacant land which is offered for sale or lease for the construction or location thereon of any such building, structure or portion thereof.”[iv] While the Act does not define “residence”, courts have looked to its dictionary definition: a temporary or permanent dwelling place, abode, or habitation to which one intends to return, as distinguished from the place of temporary sojourn or transient visit.[v]
Whether a building is a dwelling under the Act thus hinges on the intent of the occupant. Courts have applied several factors to determine an occupant’s intent: does the occupant intend to remain in the facility for any significant period of time?[vi] Is the facility designed for an occupant who may intend to remain in the facility for a significant period of time?[vii] Does the occupant view the facility as a place to return to?[viii] Does the occupant have an alternative place of residence?[ix]
Noting the Act’s remedial purpose, courts have applied the Act broadly.[x] The following structures have been found to be dwellings under the Act: summer bungalows[xi], farm worker cabins used five months of the year[xii], an AIDS hospice[xiii], a children’s home[xiv], a homeless shelter[xv], timeshare resort units[xvi], a drug and alcohol treatment facility[xvii], and outpatient halfway house residences that are part of a substance abuse treatment center.[xviii]
Are Extended-Stay Hotels Covered By The Act?
Several courts have considered whether hotels or other similar types of temporary lodging are dwellings under the Act. These courts have held that hotels, motels, and lodges are not considered dwellings and their occupants therefore are not protected by the Act.[xix]
While an extended-stay hotel is a type of hotel, it is not clear that its occupants are not covered by the Act.[xx] While courts have found that hotels are places of temporary lodging and therefore are not dwellings under the Act, some occupants of extended-stay hotels may meet the indicia courts have applied to determine whether a building is a residence under the Act. For example, extended-stay occupants may intend to remain for significant periods of time and may view the hotel as a place to return to. An extended-stay hotel may also be specifically designed for occupants to remain for significant periods of time, and it may even be marketed toward long-term occupants. Occupants of an extended-stay hotel may also lack an alternative place of residence.[xxi]
Given the growth of the extended-stay hotel industry, there will likely be cases where courts must decide whether an extended-stay hotel occupant is protected by the Act. Of course, given the case-specific tests that courts apply in Fair Housing Act cases, a black-and-white rule regarding whether extended-stay hotel occupants are protected by the Act is unlikely to emerge. Indeed, it is possible that guests of a given extended-stay hotel who reside there more permanently are protected by the FHA while the more transient guests at the same hotel are not.
The failure to comply with the Act (and with state-law equivalents of the Act) can expose an extended-stay hotel and its owner to significant liability. While it is uncertain whether the Act reaches extended-stay hotels, owners and operators should err on the side of caution and should carefully consider the potential implications of the Act when drafting hotel policies and when training hotel management and employees.
[i] U.S. v. Hughes Memorial Home, 396 F. Supp. 544, 548 (W.D. Va. 1975).
[ii] See, generally, 42 U.S.C. §§ 3604(a)-(f).
[iii] Under 42 U.S.C. section 3604(a), it is unlawful “... to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin” (emphasis added). See, e.g., Schwarz v. City of Treasure Island, No. 805-CV-1696-T-30MSS, 2006 WL 2521399, at *8-9 (M.D. Fla. Aug. 1, 2006) (concluding halfway houses were not dwellings under the Act).
[iv] 42 U.S.C. § 3602(b); see also 24 C.F.R. § 100.20.
[v] See Schwarz v. City of Treasure Island, 544 F.3d 1201, 1214 (11th Cir. 2008) (reversing district court and concluding that halfway houses are covered by the Act); Lakeside Resort Enters., LP v. Bd. of Supervisors of Palmyra Twp., 455 F.3d 154, 156 (3rd Cir. 2006) (citing U.S. v. Columbus Country Club, 915 F.2d 877, 881 (3d. Cir. 1990)); see also Hughes, 396 F. Supp. 544, 549 (W.D. Va. 1975) (first court to apply dictionary definition); Villegas v. Sandy Farms, Inc., 929 F. Supp. 1324, 1327-28 (D. Or. 1996) (courts look to the ordinary meaning of “residence” which was adopted in Hughes, 396 F. Supp. 544, 549 (W.D. Va. 1975)).
[vi] See Lakeside, 455 F.3d at 158-9 (citing Columbus Country Club, 915 F.2d 877, 881 (3d. Cir. 1990)).
[vii] See id.
[viii] See id.
[ix] See Villegas, 929 F. Supp. at 1328.
[x] See, e.g., Woods v. Foster, 884 F. Supp. 1169, 1173 (N.D. Ill. 1995).
[xi] Columbus Country Club, 915 F.2d 877 (3d. Cir. 1990).
[xii] Villegas, 929 F. Supp. 1324 (D. Or. 1996).
[xiii] Baxter v. City of Belleville, 720 F. Supp. 720 (S.D. Ill. 1989).
[xiv] Hughes, 396 F. Supp. 544 (W.D. Va. 1975).
[xv] Woods, 884 F. Supp. 1169 (N.D. Ill. 1995).
[xvi] Louisiana Acorn Fair Housing v. Quarter House, 952 F. Supp. 352 (E.D. La. 1997).
[xvii] Lakeside, 455 F.3d 154 (3d. Cir. 2006).
[xviii] Connecticut Hosp. v. City of New London, 129 F. Supp. 2d 123 (D. Conn. 2001).
[xix] See Amazing Grace Bed & Breakfast v. Blackmun, No. 09–0298–WS–N, 2009 WL 4730729, at *4 (S.D. Ala. Nov. 30, 2009) (proposed bed and breakfast is not a dwelling where it would allow six people to stay for a maximum of three days, which is the “archetype of a transient visit”); Schneider v. County of Will, 190 F. Supp. 2d 1082, 1087 (N.D. Ill. 2002) (proposed bed and breakfast does not fit within the Act’s definition of dwelling); Moore v. Red Roof Inn, No. HAR 87-2134, 1989 WL 85364, at *2 (D. Md. July 27, 1989) (motel or hotel room not within the purview of the Act); Patel v. Holley House Motel, 483 F. Supp. 374, 381 (S.D. Al. 1979) (motel is an establishment which provides lodging to “transient” guests and is not a dwelling under the Act); see also Lakeside, 455 F.3d 154, 159 n. 11 (3rd Cir. 2006) (“[v]isitors to motels and bed and breakfasts do not see those places as their homes”) (citing Schneider v. County of Will, 190 F. Supp. 2d 1082, 1087 (N.D. Ill. 2002); Villegas, 929 F. Supp. at 1327 (“[t]he [Act] does not apply, however, to lodging for transient guests such as hotels”) (citing Patel, 483 F. Supp. 374, 381 (S.D. Al. 1979)). See also Schwarz, 544 F.3d 1201, 1214-15 (11th Cir. 2008) (“… we think the differences between a home and a hotel suggest at least two relevant principles: (1) the more occupants treat a building like their home- e.g., cook their own meals, clean their own rooms and maintain the premises, do their own laundry, and spend free time together in common areas-the more likely it is a ‘dwelling’; and (2) the longer the typical occupant lives in a building, the more likely it is that the building is a ‘dwelling.’”).
[xx] The author is not aware of any reported decisions which have decided whether the Act applies to an occupant of an extended-stay hotel. See Doohan v. Doohan, No. 4:09-CV-20 (CDL), 2010 WL 3123080, at *2 (M.D. Ga. Aug. 9, 2010) (assuming without deciding that an extended stay hotel is a dwelling within the meaning of the Act).
[xxi] See generally Schwarz, 544 F.3d 1201, 1215-16 (11th Cir. 2008) (concluding that halfway houses are residents because residents of halfway houses stay six to ten weeks on average, which is more than most hotel guests, and because halfway houses are more like homes than hotels since they have common living areas, such as kitchens and living rooms, where residents can socialize like a family).
Today, after a week of difficult negotiations with huge telecommunications companies on behalf of my hotel clients, a week of wondering what to write for this blog, and a challenging sparring session on Wednesday, it occurred to me to write a bit about boxing. A lot of people hate lawyers and a lot of people think boxing is a violent, brutish sport that should be shunned in a civilized society. I’m a lawyer and I box. Full disclosure: I taking boxing lessons at Cappy’s Boxing Gym in Seattle, and the gym is a client of the firm. The thoughts in this post are my own and not our client’s. Finally, and for the record, I have never punched anyone or anything at work. I promise.
The analogy between lawyering and boxing is obvious: fight with words, fight with fists, both within a structure of rules, standards and strategies governing how and when to attack, how and when to defend and how and when to take a hit or two in order to set up a stronger or more important punch. In amateur boxing, the point is not to leave your opponent bleeding and broken on the canvas for a 10 count; it’s about being skilled—agile, flexible, strong, focused. My experience getting in the ring occurs when I spar with a partner, rather than compete with an opponent. At my gym and my level of ability, sparring is learning to apply fundamentals (punches, stance, body position, cover, blocks and parries) in a version of the “real world”—fluid and often unpredictable and, most importantly, a real world that contains a partner, a coach, noise, lights, and a lot of other stimuli. At the gym where I box, sparring is also about helping my partner improve her own skills, which requires me to listen, observe and focus even more carefully.
The same can be said for negotiating an agreement on behalf of a client. It’s less sweaty (although sometimes no less exhausting) but the goal is still the same—a mutually beneficial solution, where each party feels as though it’s taken a few punches, defended well against a few, and landed a few. At the end, we touch gloves and leave the ring with respect and dignity and an arrangement that probably looks different than either party imagined at the outset. After all, contracts are only negotiated when both parties want something good to happen between them. My role is to advance my client’s interests as vigorously as possible, while always keeping my cover up and defending them from exposure to significant risk. The negotiations themselves are always fluid and shifting; I’ve learned over the years and in the ring how to better “think on my feet,” to listen and adjust my angle of attack or defense, or just step back and wait the other side out.
And just as I’ve left the ring with my nose throbbing and my sides aching after sparring with a more skilled partner, I’ve left my office feeling brutalized after a negotiation with a potential provider who is brawnier, bigger and far more powerful than I am or my client is (see, e.g. gigantic telecommunications companies). It’s less satisfying than sparring with a more evenly matched partner, but I always manage to get a few good licks in.
As anyone who reads this blog can see, the Hospitality, Travel & Tourism group keeps up on legal developments, attends conferences, and writes for journals—we do legal theory and legal knowledge. We also have years and years of cumulative practical experience, bringing that theory out into the world of our clients. Being a good lawyer is a constant dance (pun intended) between the “right” and the “practical,” taking on the desires of my client as my own, advising that same client of the risks they’re undertaking, and, of course, getting in the ring with the other side and working each other out.
None of this is to say that negotiating contracts for my clients is a game with no real consequences, nor is it to say that when I negotiate deals for my clients that I am thinking only of myself. Quite the opposite—my clients’ interests are paramount in any negotiation. They are, to force the analogy a bit, the most fundamental of fundamentals. The sparring comes in presenting and defending those interests, staying focused on the ultimate goal and removing my ego and my pride from the equation. In other words, sometimes those pretty flicking jabs are totally useless and, well, you just can’t take those right hooks that feel like they came all the way from Oklahoma personally. It’s all part of the movement and flow of negotiation—just don’t let them get you on the ropes, right?
Originally published on Duff on Hospitality, 13 September 2013.
Last year, in the wake of Fairmont v. Turnberry and M Waikiki LLC v. Marriott Hotel Services, the hospitality industry was abuzz about the dramatic ousters of the hotel operators by the hotel owners underlying such cases. The sensational events described had even non-lawyers reading the cases. A debate raged about whether a hotel owner should have the power to terminate a hotel management agreement at will, without notice or cause, and the effect such power would have on the hospitality industry, where the revenue streams from such hotel management agreements are a key component in the valuation of brand management companies. As the hospitality industry reconsidered its business model in response to these cases, the setting continued to change as a result of the recent holdings in Marriott International v. Eden Roc and RC/PB, Inc. v. The Ritz Carlton Hotel Company.
Over the last two decades the courthouse and arbitration proceedings saw a series of cases created by an owner terminating an operator in a way that was not recognized by the management agreement the parties had negotiated. The legal justification was the Restatement of Agency. The Restatement of Agency sets forth the common law concept that a principal (hotel owner) has the power to terminate an agent (hotel operator) at any time, unless the agency is coupled with an interest (an economic interest by the hotel operator in the hotel). In response to these proceedings, the industry attempted to circumvent the agency law concept by expressly disclaiming any agency in the agreement, but the courts instead looked to the actual relationship of the parties and held that the common law of agency trumps explicit contract language. Further, the courts have indicated that for an agency to be coupled with an interest that the hotel operator must have a specific, present, economic interest in the hotel, and none of the courts applying agency law to hotel management agreements to date has found under the respective facts that the hotel operator held this type of interest. Without available guidance regarding the sufficiency of sliver equity or key money to create an agency coupled with an interest, to protect the management agreement by creating a sufficient interest may require substantial changes to the industry's current business model. Under the recent Eden Roc and Ritz Carlton cases, however, avoiding the application of agency law may not be enough to preserve the integrity of the management agreement.
Personal Service Contracts
In the Eden Roc and Ritz Carlton cases, applying New York and Florida law, respectively, the courts held that as a result of the delegation of a broad range of discretionary authority to the hotel operator, which requires the exercise of special skill and judgment, that the hotel management agreements were personal services contracts, which contracts may not be enforced by injunction or specific performance. The law regarding personal services contracts has its roots in the concepts of involuntary servitude and the difficulties courts would encounter in supervising the performance of special skills and judgment. The holding of both of these cases, which resulted in the hotel owner having the power to terminate the respective management agreement, turned on the court finding the hotel management agreement to be a personal services contract and not on the agency law concept. Protecting the management agreement from agency law, may no longer be enough.
Wrongful Termination Damages
It should be reiterated that although the hotel owner has been found to have the power to terminate its hotel management agreement under the concepts of agency law and personal services contracts, the hotel owner does not necessarily have the contractual right to do so and may still be liable for wrongful termination damages if the terms of the management agreement did not allow such termination. As most hotel management agreements eliminate punitive and consequential damages, the operator would attempt to collect as damages an approximation of the present value of the expected future management fees, which if the remaining term of the management agreement is lengthy, as is typical, may be substantial in amount.
As the conditions in which hotel management agreements are negotiated and enforced continues to change, it is critical to stay current to understand the practical effect of the agreements that are entered into, especially where the express terms of the agreement do not necessarily control the ultimate enforcement of the agreement as is the case in the areas of agency law and personal service contracts. There may not be complete certainty as the industry reacts in new and different ways, but each party will be able to best attempt to realize its intended results by understanding the uncertainty that exists.
If an environment continues where hotel owners are willing to terminate their management agreements at any cost, further changes are anticipated as new facts are presented. For example, there has not been a ruling as of yet that clarifies the application of the personal service contract concept when an agency with an interest has been established by the hotel operator (although the Ritz Carlton case does mention in dicta that an agency coupled with an interest would be an exception to the law regarding personal services contract, it is not certain if this would be followed). Further, in the cases to date, the hotel management agreements were not subject to the Maryland operating agreement statute so that the application and enforceability of such statute remains untested.
In negotiating management agreements, the parties should go into the negotiations with this environment in mind. If the hotel owners continue to have the power to terminate these agreements at will, the hotel operator needs to consider whether the recovery of damages would make it whole considering not only the loss of revenue stream but also the loss of location, brand-reputation damage, and litigation costs, and give attention to the liquidated damage and dispute resolution provisions of the agreement as well as the collectability from the hotel ownership entity. As the industry continues to react to these changing conditions, other alternatives have been considered, such as a "wrongful termination guaranty" from collectable owner parties or changes to the business model to include a present economic interest in the hotel.
All parties in the hospitality industry love heads to be in beds, but expect the operator side not to take this personal service contract trend lying down.
When a hotel employee is injured on the job and a claim is filed, the workers’ compensation system can often feel like “The Bermuda Triangle”: Employees enter and it’s anyone’s guess when, or even if, they’ll come back again.
Although the system can be complicated, and some employees seem destined to be off work indefinitely, there are a few simple steps you can take as a hotel owner or general manager to help ensure that, if possible, your injured hotel workers will progress through the treatment process and return to work.
Before walking through these steps, I think it's important to acknowledge that some employees who file workers' compensation claims are not legitimately injured on the job and do not want to return to work under any circumstances. They may seek to litigate and intentionally elongate their claim in an attempt to extract as much money as possible from the carrier and, indirectly, from your hotel. Regardless of your belief in a claim or claimant’s credulity, applying a consistent, company-wide framework for responding to an injury is the best approach. It will help you properly handle the claims of your hotel employees who are legitimately injured on the job and who have the desire, and physical ability, to return to full time duties. Such an approach will also allow you to limit your liability for malingering employees.
Step 1: Train management and supervisory staff to properly handle employee injuries when they occur.
Training your management and supervisory staff to properly handle employee injuries when they occur is the first step in the correct management of a workers’ compensation claim. This includes:
- • Making sure the injured employee receives proper medical attention, either onsite from an EMT or at a designated clinic within your workers’ compensation carrier’s Medical Provider Network (MPN). We do not recommend using hotel staff or vehicles to transport the employee on their initial visit to the clinic or any follow-up appointments.
- • Reporting the claim to the carrier immediately.
- • Completing any company or state-required paperwork after the injury occurs.
Multiple studies have shown that delays in reporting claims to the carrier are directly related to the increase of overall costs for the claim and the potential for litigation. At an absolute minimum, every GM or supervisory staff member responsible for reporting injuries should know the following information:
• Location of the designated MPN clinic for treating injured employees.
• Phone-in claim reporting number for your workers' compensation carrier.
• How to properly document the claim.
Once the claim has been reported to the carrier, an adjuster will be assigned who will be able to guide your reporting staff member through any forms that need to be completed for the claim to be properly processed.
Step 2: Let the injured employee know you care about their well-being
Letting an injured employee know that you genuinely care about their well-being can have a positive effect on the outcome of a workers’ compensation claim. Hoteliers often respond to reported guest injuries that occur on their premises with a level of accommodation, belief, and concern that epitomizes hospitality. Handle employee injuries in the same way.
Something as simple as sending flowers and a get-well-soon card to the injured employee’s home, along with a phone call from a concerned member of your management team (preferably speaking the employee’s primary language), will send an important message to your injured employee: You matter and we want you back! This is a step that requires absolutely no knowledge of the workers' compensation system and may pay huge dividends by creating a work environment that employees want to return to.
Step 3: Engage Injured Employees in the Interactive Process
Most hotels have a "return to work" or "modified duty" program for accommodating injured workers who are able to perform alternate job functions as they continue to recover and transition back to full-time, unrestricted duty. But what happens when an employee returns from the medical clinic with restrictions that don't fit a modified duty position you have available?
Hoteliers who find themselves in this situation need to engage the injured employee in the “Interactive Process.” This is not an option - it's the law! The Interactive Process is a good faith effort on the part of the employer to discuss with the injured employee, their injuries and restrictions, as they relate to available modified duty positions at the hotel. Each interaction should be documented, and an impartial translator should be present if English is not the employee’s primary language. The spirit of these meetings is to come to a group decision, with the employee’s input, regarding their current capability of performing the modified duty positions available. There are many facets regarding your attempts at accommodation that cannot be fully discussed in this article. For a comprehensive analysis of the interactive process, please follow the link below:
Step 4: Communicate with the injured employee and the adjuster during rehabilitation and closely monitor follow-up treatment visits.
Proper initial claim reporting and expressing your concern to an injured employee for their well-being, may not mean much if you do not closely monitor and communicate with them throughout their treatmentprocess. Diligently oversee follow-up visits to the primary treating physician. Know when their appointments are and follow up after every doctor’s visit to verify what changes, if any, were made to the employee's status. This will help to ensure that a claim is properly progressing towards closure. Employees who routinely miss their follow-up appointments, or who won't return your phone calls, should be monitored closely as these are red flags for potential litigation.
Working with the carrier-assigned adjuster is also a critical step in the treatment process. This includes forwarding the adjuster the status slips you receive from the clinics, notifying the adjuster immediately when lost time begins, and letting the adjuster know when employees come back to work.
Following these four simple steps when handling hotel workers' compensation claims is not a failsafe for every situation, but it does give an effective framework to help return legitimately injured employees back to their jobs. Proper claims management can also help lower overall claims costs and may even prevent a lawsuit. All of this can pay dividends, when it results in lower insurance premiums.
We wrote about the hazards inherent in hotel balconies last week, but that isn’t the only potentially troublesome amenity that hotel owners and operators must review. Hotel swimming pools seem innocuous enough to most guests and hotel staff, but as a deep body of water, they present a drowning hazard nonetheless. Hotel management should consider the variety of guests that use their facilities, including non-swimmers and people under the influence of alcohol.
Last Sunday, a six year-old boy nearly drowned in the swimming pool of a West Palm Beach hotel. The incident followed on the heels of a more lethal event earlier this summer. In June, a twenty seven year-old man drowned in the pool of a hotel in downtown Seattle. His friend went to get help from the front desk, and about fifteen staff members came out to help; only one went in the water, which was so murky that witnesses could not see the bottom of the pool. First responders arrived and began searching for a missing person; however, nearly two hours later, a retired firefighter who was also a guest at the hotel recovered the body from the pool’s murky depths. On top of that, due to confusion among emergency personnel, hotel guests had actually resumed use of the pool before the body was recovered. The swimming pool failed a subsequent health code inspection, adding to a lengthy history of similar failures.
Whether the problem is overconfidence or simple neglect, hotel owners and operators must understand that swimming pool safety measures and frequent maintenance aren’t simply going the extra mile; rather, they help a hotel meet the duty of care obligations it owes to every guest. This Seattle hotel failed to keep the water in its pool clean and clear, and as a result may have missed the opportunity to save this young man’s life. If you are responsible for safety measures in and around a hotel swimming pool, please consider the lessons learned by this incident.