web statistics
Hospitality Posts
Hospitality Posts

Hospitality Posts (140)

I’m pleased to introduce guest author Katie Nguyen, a CPA from local accounting firm, Clark Nuber. Katie specializes in state and local taxes for the hospitality industry and has offered to share her experience and knowledge with the Duff on Hospitality readers. Welcome, Katie, and thank you for today’s post on some important tax incentives available to Washington’s owners and operators. – Greg 

I’d imagine that every hotel and restaurant owner/operator is interested to know how to save money on his or her state taxes (while still following all of the applicable laws and rules, of course). As a former Washington Department of Revenue auditor, I’ve seen many exemptions, credits, and preferential tax rates go unused – primarily because businesses just didn’t know that they existed! This post provides a brief explanation of some Washington tax incentives (both old and new) that the hotel and restaurant industry should be taking full advantage of.

Sales/Use Tax Exemption for Items Imparting Flavor or Supporting Food

The Washington legislature recently enacted a measure providing a retail sales and use tax exemption on purchases by restaurants of the following two types of items:

  • • Items used to impart flavor to foods that are completely or substantially consumed by combustion during the cooking process. Such items could include charcoal, charcoal briquettes, wood chips, grape vines, and the like.
  • • Items comprised entirely of wood that support the food during the cooking process. Such items could include wood planks, etc.

This exemption expires July 1, 2017.

Commute Trip Reduction Credit

Also recently passed by the state legislation was a bill extending the life of the Commute Trip Reduction B&O tax credit. This credit is a great incentive for those taxpayers who help subsidize the cost of employee public transportation, carpooling, or non-motorized commuting. For each employee, the credit is capped at $60 or 50% of the transportation cost paid (whichever is lower) annually. Be sure to submit your application to the Department of Revenue by January 31, 2014 to get your 2013 credit!

Syrup Tax Credit

2009, the buyer is entitled to a B&O tax credit of 100% of the syrup tax paid. The credit can be taken directly on the excise tax return as well.Although not part of the new legislative changes, the syrup tax credit is another great incentive to take advantage of if you are in the restaurant industry. This is a Washington B&O tax credit that is available to any buyer of carbonated beverage syrup who uses the syrup in making carbonated beverages that are then sold (provided that the syrup tax has already been paid). As of July 1,

Lodging for Continuous Periods Greater than 30 days

Hotels and similar short-term accommodation providers are generally required to collect sales tax on charges for room rentals of 30 days or less, but not for continuous periods of more than 30 days.  A recently issued Washington Tax Determination provides a favorable application of this law to a hotel that provided blocks of rooms to a corporate customer. In the determination, an airline had a long-term contract in place with a hotel to provide rooms for their off-duty flight crews. The contract was for a term of more than 30 days and the hotel was to provide the airline a set number of rooms on an ongoing basis. The hotels did not set aside specific rooms for the airline, but the airline was guaranteed the availability of the number of rooms specified and was required to pay for them even if they went unused.

The Appeals division ruled in favor of the airline, explaining that the law does not require a specific hotel guest to be in continuous occupancy of the same hotel room for a continuous 30-day period to qualify for the sales tax exemption.  This treatment applies retroactively, so there may be refunds available to the extent sales tax has been charged on corporate contracts or other bookings of one or more hotel rooms for a continuous period of at least 30 days.

Awareness of these potential tax savings is just part of the process; implementing the exemptions and credits is the more difficult part. Contact Clark Nuber or your tax provider to “serve up” assistance in these areas.

The New York region recently has been battered by severe weather conditions, resulting in the perfect storm for the food service industry. Sales at New York’s fine-dining establishments were down 50 percent or the last week of October, and casual-dining restaurants saw sales drop by one-third. But even these statistics belie the “devastating financial impact” visited on the New York dining scene. Many restaurants sustained extensive damage to their facilities and equipment from water for various contaminants. For example, at the Alphabet City eatery Edi and Wol, owner Laura Tribuno estimated that the cost of replacing equipment and merchandise will total about $80,000, essentially wiping out a full year’s profits. Meanwhile, thousands of additional establishments were subject to lengthy power outages, resulting in widespread property damage, lost income, and other business interruption losses. Christophe Hille, the owner of Northern Spy Food Company in the East Village,offered a “conservative” cost estimate of $40,000 in lost income, $6,000 in carried payroll, and $6,000 in lost inventory following the late October storms. Joe Bastianich, the co-owner of eight New York restaurants, claimed that all six of his downtown businesses suffered food spoilage when they lost power, and that the resulting costs at just one location totaled between $50,000 and $70,000. As the region recovers and attempts to return to normal operations, food- and beverage-industry insureds should keep in mind that they may be able to recover under their property insurance policies for some or all of their storm-related losses. Many policies cover losses to real property caused by “all perils,” or by all causes “not expressly excluded.” These are known as “all risk” policies, and are designed to afford broad property coverage. “Named peril” policies, on the other hand, cover only specfic, expressly listed causes of loss. Property policies may purport to exclude losses caused by weather conditions, but not all policies contain such language, and those that do often use such unclear or ambiguous language that coverage may still be available. This article analyzes controlling case law in light of several common types of damage that resulted from severe weather conditions with the goal of assisting food service industry insureds in assessing the scope of available coverage to them and maximizing any potential recovery. Coverage or Physical Damage to or Destruction of Property

 

A. Coverage or Real Property

 

First-party property policies generally provide insurance for “direct physical loss of or damage to property.” Traditional losses under first-party property policies involve tangible property, including buildings, machinery or equipment, and inventory, but typically not loss to property not physically injured. In some cases, property that is rendered unusable, such as by the presence of contaminants, may be covered by a first-party property policy.

 

B. Coverage or Costs Incurred to Prevent Loss

 

Property policies also typically contain provisions covering preventative measures taken by the insured to avoid loss. This provision, often called the “expenses to prevent loss” provision, applies whenever the insured spends money to protect otherwise covered property from damage or destruction by a covered peril. For example, when an insured boards up its windows to prevent damage, it is entitled to reimbursement or these costs regardless of whether the covered property suffers damage from a covered peril. C. Royal Indem.Co. v. Grunberg, 553 N.Y.S.2d 527,529 (App. Div. 1990) (holding that an insured was entitled to coverage under its homeowners policy or expenses incurred to prevent imminent collapse of its home because “the policy places an affirmative duty on the insured to maintain and repair all covered property in the event of any loss”). This “expenses to prevent loss” clause supplements ordinary property coverage, so deductibles potentially applicable to other types of coverage should not apply, and the insured should receive full reimbursement from the insurer for these expenses. See, e.g., GTE Corp. v. Allendale Mut. Ins. Co.,372 F.3d 598, 617-18 (3d Cir. 2004);Berns & Koppstein, Inc. v. Orion Ins.Co., 170 F. Supp. 707, 719 (S.D.N.Y.1959). In the absence of such a clause, common law rules regarding mitigation of damage or loss may allow the insured to recover from its insurer the costs it incurred to avoid insured losses. Courts long have recognized that if an insured takes steps to prevent or minimize damage to covered property, its insurer should pay. See, e.g.,Winkler v. Great Am. Ins. Co., 447 F.Supp. 135, 142 (E.D.N.Y. 1978); see also McNeilab, Inc. v. N. River Ins.Co., 645 F. Supp. 525, 551 (D.N.J.1986); Seward Park Hous. Corp.v.Greater N.Y. Mut. Ins. Co., 836N.Y.S.2d 99, 103 (App. Div. 2007).

 

Coverage for Lost Business

 

Whether due to evacuation orders, water damage, transportation shutdowns, or utility outages, thousands of the region’s bars and restaurants experienced prolonged business disruptions that resulted in significant income losses. Many property insurance policies also provide “time element” coverages that protect against losses caused by such interruptions. Policy language varies greatly in this area, and the specific language used in any particular insurance policy will be the most important actor in determining an insured’s recovery. Insureds should consider seeking the advice of experts with experience addressing issues arising out of multiple policy provisions and coverages, including experienced counsel.

 

A. Business Interruption

 

“Business Interruption” coverage typically reimburses the insured for the amount of gross earnings minus normal expenses that the insured would have earned but for the interruption of the insured’s business. Business interruption insurance policies typically provide two different methods for calculating business interruption and CBI loss: (1) gross earnings--the net reduction in earnings less the expenses that do not necessarily continue during the interruption; or (2) business income--the profit that would have been earned plus continuing normal operations expenses during the period of interruption. Business interruption insurance is designed to “indemnify the insured against losses arising from inability to continue normal business operation and functions” that result from damage caused by a covered peril. Howard Stores Corp. v. Foremost Ins. Co., 441N.Y.S.2d 674, 676 (1st Dep’t 1981),af’d, 439 N.E. 2d 397 (N.Y. 1982). This coverage applies even after relocation if the business at the new location does business at a below-normal level. See, e.g., Am.Med. Imaging Corp. v. St. Paul Fire & Marine Ins. Co., 949 F.2d 690,692-93 (3d Cir. 1991).

 

1.Coverage Without Physical Damage

 

Insurers frequently take the position that business interruption insurance cannot apply if the insured itself does not suffer physical damage. Far from being a forgone conclusion, courts have found that in some circumstances business interruption coverage exists even in the absence of physical damage to the affected location. See, e.g., Cincinnati Ins. Co. v. Washer & Refrigeration Supply Co., No. 07-0330-CG-B,2008 U.S. Dist. LEXIS 112464 (S.D.Ala. Aug. 8, 2008); RTG Furniture Corp. v. Indus. Risk Insurers, 616 F.Supp. 2d 1258, 1264-66 (S.D. Fla.2008); Sloan v. Phoenix o HartordIns. Co., 207 N.W.2d 434 (Mich. Ct.App. 1973); Allen Park Theatre Co.v.Mich. Millers Mut. Ins. Co., 210N.W.2d 402 (Mich. Ct. App. 1973). Insureds should carefully evaluate the terms and conditions of  their policies and even retain their own counsel rather than accept blanket statements by an insurer as to whether coverage exists.

 

2.Coverage or “Restoration”or “Extended Period of Indemnity”

 

Insureds also should be aware that the period for which they can recover for interruption losses does not automatically end at the time the business is reopened. The period of recovery for interruption losses ordinarily extends coverage until business returns to normal(or until a stated period of time set forth in the policy). This coverage often is found in policy provisions or “restoration” or an “extended period of indemnity,”which are separate from the business interruption provisions, meaning they may be overlooked by insureds. Further, extended coverage is possible even without a policy provision expressly providing for an extended recovery period.

For example, an insured restaurant in Texas was able to recover its business interruption loss caused by months of reduced volume following a storm. See Lexington Ins. Co. v. Island Recreational Dev.Corp., 706 S.W.2d 754 (Tex. App.1986); see also Am. Med. at 692. Any other rule would discourage businesses from trying to get back on their feet, which is not the type of activity the court wishes to encourage. See Orrill, Cordell,& Beary, L.L.C. v. CNA Ins. Co., No.07-8234 SECTION “B”(5), 2009 U.S.Dist. LEXIS 20867, at *7-8 (E.D. La.Mar. 16, 2009).

 

B. Contingent Business Interruption

 

Restaurants and other businesses should not overlook the possibility of “Contingent Business Interruption” coverage following severe weather. Contingent business interruption coverage typically covers two types of business interruption. First, it protects against economic losses caused by a “direct” supplier’s inability to get its goods to the insured due to damage to or destruction of the supplier’s property by an insured peril. See Park Electrochemical Corp. v. Cont’lCas. Co., No. 04-CV-4916 (ENV)(ARL), 2011 WL 703945 (E.D.N.Y.Feb. 18, 2011). Second, it protects against economic losses caused by damage to or destruction of a customer’s property that prevents the customer from accepting the insured’s products. See Children’s Place Retail Stores, Inc. v. Fed. Ins.Co., 829 N.Y.S.2d 50 0 (App. Div.2007). This type o coverage also applies if an insured’s distributor suffers damage that prevents the distribution of the insured’s goods. Contingent business interruption coverage is triggered by damage to the property of a third party, not the insured. Therefore, it is often overlooked as an avenue of recovery.

Once identified, contingent business interruption claims are complex, and require coordination with the third party in order to establish the extent of the loss. Insureds are encouraged to consult with professionals regarding such losses if they suffer any supply or distribution chain disruptions.

 

C. Civil Authority

 

Businesses that find themselves unable to operate because or evacuation orders, policy actions, or other governmental activities may be able to recover or losses caused by those interruptions. “Civil Authority” insurance provides an avenue for insureds to recover business losses if access to an insured’s premises is prohibited by an act of the government. In preparation for “Super storm Sandy,” many areas were subject to evacuation orders from state and local governments. Following the devastation, access to many areas remained restricted because of the dangers posed by high waters and damage to trees, structures, and lost utilities. The availability of civil authority coverage will depend upon the particular language used in the insurance policy a tissue. Additionally, civil authority coverage often only applies for a specific and limited period of time that may be as short as two weeks. New York courts have found that civil authority coverage may be available for catastrophic events that shut down portions of New York City. For instance, in Zurich American Insurance Co. v. ABM Industries, Inc., 397 F.3d 158, 171 (2dCir. 2005), the court found that an insured could potentially recover or business losses resulting from impaired access to its facilities caused by actions of civil and military authorities following the September 11 attacks. But New York courts also have strictly construed language requiring that access be prohibited. One court found no coverage when limited access to an insured’s premises existed even though such access was restricted to levels below normal because of the acts of civil authority. See 54th St. Ltd.Partners, L.P. v. Fid. & Guar. Ins. Co.,763 N.Y.S.2d 243 (App. Div. 2003). Similarly, following the attacks of September 11, one New York court found that civil authority coverage only applied to the period of time when access to all of lower Manhattan was restricted, and did not apply to the time period when police presence and roadblocks may have confused employees and others about their ability to access the insured’s premises. See Abner, Herrman & Brock, Inc. v.Great N. Ins. Co., 308 F. Supp. 2d331 (S.D.N.Y. 2004). A slowdown in business may not trigger the coverage because a policy only responds when “a civil authority prohibits access to the insured’s premises resulting in a total loss of business income.” N.Y. Career Inst. v. Hanover Ins. Co., 791 N.Y.S.2d338, 342 (Sup. Ct. 2005).

 

D. Ingress or Egress

 

Similar to civil authority coverage,“Ingress or Egress” coverage may be available when access to (“ingress”) or from (“egress”) an insured’s premises has been prevented or made more difficult because of a storm. Unlike civil authority coverage, no governmental act is required to trigger coverage. Many insurance policies cover losses when “ingress” to or “egress” from insured premises is “prevented” because of a covered peril. Recently, many businesses have been unable to operate because millions of tri-state area employees could not access business locations. Many roads were unusable or otherwise blocked and mass transit was entirely halted. Insureds should check to see whether their insurance covers loss sustained “‘due to the necessary interruption of the Insured’s business due to prevention of ingress to or egress from the Insured’s property, whether or not the premises or property of the insured shall have been damaged’” if the interruption resulted from damage of a type insured against by the policy. See City of Chicago v. Factory Mut.Ins. Co., No. 02 C 7023, 2004 WL549447, at *2-3 (N.D. Ill. Mar. 18,2004)(citation omitted for quoting policy). Policies may also provide ingress and egress coverage by protecting against an interruption of business “as a consequence or denial, prevention of, or reduction in access to or use of highways, bridges, causeways . . . or terminals. . . or the means of access thereto” caused by an insured peril. Some ingress and egress coverage will require that damage be in close proximity to an insured location. For instance, a policy may cover an interruption when “as a result of loss, damage or an event not excluded . . . at an insured location or within two (2) miles of it, ingress to or egress from real or personal property is prevented.” Policies may also cover interruption during the time period that “access to or egress from real or personal property is impaired” but only or “ingress/egress impairments . . .located within one (1) mile of the Insured’s premises.” The availability of ingress or egress coverage or the impact of storm conditions will vary greatly depending upon the policy language.

 

E. Service Interruption

 

Significant portions of the tri-state area suffered a disruption of utility service following Superstorm Sandy. The disruption of utilities, such as water and electric services, is an important cause of business losses, and companies often are without utility service for days or even weeks after a storm has passed. Most businesses and it impossible to operate without utility service, but restaurants without electricity do not merely miss out on business, they suffer massive destruction. Several commercial property insurance policies exclude damage to the insured’s property resulting from a utility service interruption that originates away from the insured’s premises [See, e.g., ISO Causes of Loss – Special Form CP10 30 06 07 § B(1)(e)]. Under this provision, unless an insured suffers a water or power loss because of equipment failure on its own premises, insurance companies likely will seek to disclaim coverage for a company’s inability to operate because it did not have necessary power or water. However, many property policies issued to restaurants provide additional “spoilage” coverage that covers the costs of loss or damage arising out of “Power Outage, meaning change in temperature or humidity resulting from complete or partial interruption of electrical power, either on or of the described premises, due to conditions beyond [the policyholder’s]control.” Importantly, such provisions are subject to separate limits of insurance, may include separate exclusionary provisions, and might also be subject to other exclusions contained in the policy. Insureds must be careful to review its insurance policy as a whole in determining whether utility service, spoilage, or any other coverage may provide them with some recovery or storm-related losses. Complex issues may stem from large parts of the tri-state area being without electricity. For example, there has been a massive gas shortage (even those stations with gas have no power to pump it), meaning that goods and services could not get delivered and employees could not get to work. The lack of power may implicate other time element coverages addressed herein,such as contingent business interruption and ingress/egress.

 

Conclusion

 

The impact of Superstorm Sandy on businesses around the tri-state area has been severe. Many businesses have been shut down or days, and many more will be operating at reduced capacity or the foreseeable future. Restaurants in particular have been hit very hard, suffering not only interruption losses, but extensive inventory losses due to intrusion of the elements and lack of power. The availability of insurance proceeds to help reduce these business losses is a complicated matter, and insureds should carefully examine their entire policy or any possibility of a recovery that might help alleviate their losses.

 

In traffic yesterday, I saw a bumper sticker that read “Dogs have owners, cats have staff.” Given the sticker was surrounded by other feline-themed paraphernalia, I surmised that the driver was boasting about her personal capacity to successfully coexist with Tigger, Boots, or whatever the name she gave to her cat, regardless if the cat actually answers to the name (which it very likely does not). I have nothing against cats; they’re cool, elegant and mysterious. I mean, I dig the tune: “Stray Cat Strut, I’m a Stray Cat.” Cats are referenced in poetry and frequently watched on YouTube.com. However, unlike their house pet counterparts (dogs), cats are not prone to compliance. They’re independent. They follow their own rules, even if the guidance they receive is in their best interest. And that got me thinking about PCI compliance and the hospitality industry.

Hospitality is the most feline of industries. At their best, hotels are elegant, comforting, practical and even romantic. However, they don’t have a pack mentality. And when it comes to PCI, establishing payment card security in hospitality is like herding cats.

A recent work by noted war correspondent Elizabeth Becker revealed that 1 in 12 people on Planet Earth are employed in Hospitality (including Travel and Tourism). In terms of raw numbers of people, no other industry compares. However, of the world’s 50 largest corporations, you won’t find a single organization from the industry. Meanwhile, 78% of data breaches occur in Hospitality and Retail. Over 50% of attacks are targeted at point-of-sale terminals. And in an even more terrifying new trend, new harvesting techniques allow today’s hackers access to small business (less than 250 employees). Small businesses now comprise 31% of data breaches. There are so many people, so many places, and there’s so much money in hospitality. Meanwhile, there is no central industry oversight. But it’s not from a lack of trying; practically every industry conference includes some sort of PCI Compliance “bootcamp”.

All together now: “Here Kitty, Kitty, Kitty!”

Now, governments are getting involved. In the US, legislators from the midwestern state of Iowa are considering an act that will make PCI compliance part of the legal code. You may ask, “who cares?” Well, any companies doing business in Iowa and/or doing business with Iowans should care. For example, a resort in Florida with vacationing guests from Des Moines would fall into that group. At the federal level, the White House estimates that $300 billion USD are lost annually due to cyber crime. Meanwhile, in January of 2013, Europol issued a Situation Report on payment card fraud. The two key points of the report are (1) the criminal cyber crime market is well organized and (2)most illegal ace-to-ace payment card fraud occurring to Europeans is occurring to them while abroad, principally in the U.S. With the amount of attention paid to cybercrime, the political trend won’t likely go away. As the issues of cyber crime and identify theft grow in people’s consciousness, savvy politicians eager to win political points may shrewdly wage a war (whatever that means) against cyber crime. As a result, independent merchants that are not PCI compliant may find themselves feeling very alone.

Dogs instinctively know the pack provides leadership, structure, and protection. Cats do not.

However, it isn’t that the independent merchants are entirely powerless. They can start protecting themselves by instilling a culture of security awareness within their company so staff can recognize security threats and know what procedures to follow. Recent reports (i.e. Trustwave 2013) show that PCI-DSS Guideline 5.7, Implement Security Training for All Staff, ought to be the very first step businesses make in their journey toward PCI compliance. For example, in a survey of IT professionals at the RSA 2013 conference in San Francisco in February, 75.8% of respondents believe their colleagues have too much access to sensitive data. Even more concerning, 38.3% of respondents have actually seen colleagues access sensitive data that they simply shouldn’t have been able to access. And of those, only 45.3% reported the instance. This is shocking; these IT professional obviously know better. They are, after all, the kinds of people that attend the RSA conference. And yet, the majority of them still do not securely manage the access to the systems under their protection. Meanwhile, according to the “Payment Card Threat Report 2013” by Security Metrics, there are an estimated 315 million payment cards stored on business systems that should not be there. And if having payment card data stored on your PMS or POS isn’t dangerous enough, consider how reckless it is to allow users to have ridiculously easy-to-guess passwords. A Techweek study in February found that 90% of enterprise systems are guarded by weak passwords. Annually, Gizmodo publishes a list of the year’s 25 worst passwords. In a remarkable display of sportsmanship, it’s the hackers themselves that provide the list. Included in 2012’s hall of shame are such hackable abominations as (#1) “password”, (#2) “123456”,(#12) “trustno1”, (#17) “welcome” and (#21) “jesus”.

Merchants that have IT teams that ignore security threats while their systems are weighed down with payment card data and guarded by absurdly easy-to-guess passwords, are wise to be concerned. For they are the sleepy, cat , declawed tabbies of the animal kingdom. And as far as the cyber attack dogs are concerned, they are out of doors and it’s open season.

With the holidays right around the corner, many businesses will host festive company outings and events for their employees, including parties at the office—and often these celebrations include alcohol.

Employers need to understand the legal parameters of having alcohol in the workplace in order to establish a safe, responsible and enjoyable work environment for their employees. A few common questions from employers at this time of year are:

Are there any legal restrictions on serving alcohol at company functions?

Some states have laws that govern "social host liability."  Through these laws, bartenders or social hosts can be held liable for events that result from over-serving someone (e.g. accidents, injuries, etc.).  These laws would make the organization responsible for monitoring consumption and cutting off drinking by anyone who becomes intoxicated, so be aware of the laws in your jurisdiction.

If some of our employees are under the legal drinking age, can we still serve alcohol?

 Employers must ensure that no one underage has access to alcohol. If alcohol is served to a minor, the employer can be subject to the same stiff fines and penalties that a store or bar that serves a minor would face.  Accordingly, if underage employees will be attending the party, employers must be vigilant in making sure that they are not served or allowed access to alcoholic beverages.

If an employee has too much to drink and has an accident, it is still covered by our insurance, right?

Employers who provide alcohol to their employees may unwittingly negate coverage under their general liability insurance policies and be on the hook for costs associated with alcohol-related incidents or injuries, so be aware of the limitations and exceptions applicable to your organization’s employee-related policies.

Any other legal risks the organization might face if alcohol will be served at holiday functions?

There is an increased risk of sexual harassment-related complaints that result from company events where alcohol is present (e.g. the stereotypical office holiday party that is always satirized in movies and TV shows).  Remember that even though the function might be held outside normal working hours, employees are still afforded protection from harassment or other inappropriate conduct that might be directed at them by their colleagues.

 

 

In an important decision upholding the right of hotels to make pragmatic agreements with unions on hotel operations, the United States District Court for the Southern District of  New York dismissed a claim brought by banquet servers at the St. Regis New York who had claimed that assigning certain banquet-like events to restaurant waitstaff and room service servers violated their contract rights. In granting dismissal, the court upheld the right of  hotels and unions to reach private,special purpose agreements allocating work opportunities to different job classifcations without  fear that disfavored employee groups could sue  or breach for  the underlying labor agreement.

Background

The lawsuit arose from the hotel’s practice of using room-service servers (rather than banquet servers) for certain private meetings held in hotel guest rooms that were temporarily converted to meeting room space. The hotel had also previously reached an agreement with the union that restaurant wait staff could serve all private parties held in the hotel’s signature restaurant. A group of union-represented banquet servers demanded that the union fle a grievance on their behalf against both practices claiming that they, effectively, created a separate, second banquet department and deprived them of the right to work all banquet events — a right they claimed had been granted by both the labor agreement and by a prior settlement agreementresolving certain past grievances. After the union failed to file the grievance requested, the banquet servers brought a claim against both the union and the hotel under a provision for federal labor law that allows individual union represented employees to sue in federal court over alleged violations of the labor agreement governing their employment. The banquet servers alleged that the hotel violated their rights under the applicable labor agreements and conspired with the union to deprive them of work opportunities.

The District Court Ruling

Judge J. Paul Oetken of the Southern District of New York disagreed with the banquet servers on all counts. In support of his decision granting the St. Regis’ motion to dismiss, the court ruled that the plaintiffs could not bring a claim against the hotel because they had not adequately pled that the union breached its duty of fair representation, which is a precondition of any claim by union represented employees against their employer. In language that will likely benefit both labor and management in all cases governed by federal labor law, the court accepted the hotel’s argument that unions can enter into special arrangements with employers andotherwise deal with management, even if that results in economic benefits flowing to one group of workers rather than others. It also ruled that conclusory allegations of conspiracy based only on unions and companies jointly agreeing to do things that disfavor the plaintiffs do not properly show the bad faith needed to challenge such agreements in federal court. The court also held that the hotel had not violated any contract rights granted to the banquet servers in the prior settlement agreement, accepting the hotel’s argument that the agreement, considered as a whole, could not support the plaintiffs’ interpretation. This victory for hotel operators is noteworthy because it underscores the broad rights that management and unions have to reach pragmatic agreements affecting hotel operations without fear of collateral attack from disaffected workers who did not benefit from the special agreement. Holland & Knight represented the hotel in this matter.

Social Media is the new land of opportunity for all in manufacturing and retail.  Facebook and Twitter alone allow restaurants, hotels, and bars unprecedented conversation with their customers.  The access to these consumers is in real time and moves beyond the capabilities of any standard brand website.  Understandably, motivation to interact with consumers by offering promotions on social media sites is high, especially during periods when traffic is down due to economic conditions, and everyone’s focus is on driving traffic and spending.

Hotels and restaurants use social media to drive loyalty deals and promotions generally around all aspects of the business.  In the restaurant context, marketers see natural opportunities using social media to promote new menu items, special pricing, and food and beverage pairings, for example.  The opportunities in social media are many and they are exciting, but those who use this platform to promote alcohol need to understand that alcohol continues to be a regulated product and must be marketed as such, even in the social media context.  Many people mistakenly believe that because social media operates through the internet, social media is not subject to some of the same alcohol beverage laws and regulations which apply to more traditional means of marketing alcohol beverages.  This is in fact not the case: this “new world” is governed by “old laws,” and as operators and counselors to the industry, we need to learn to work within them.  Offering consumers a bucket of beer on Facebook is not the same as offering them a bucket of chicken wings.  Here are some basic pointers and issue spotters to get you started.

First Protect Your Brand

When building a social media identity for your brand, protect your own intellectual property and avoid infringing the intellectual property of others.  This is a threshold legal issue and is important in any social media campaign, even if alcohol beverages are not involved.  If you are building a fan page or a Twitter page, consider the graphic or any tag lines you use carefully.  Make them consistent with your branding in other media and make sure they are protected.  Be very careful that you do not inadvertently infringe upon the intellectual property of others.  Twitter, for example, has an “impersonation” policy, and also has a policy against “name squatting.”  Along the same lines, you may wish to perform periodic searches to monitor against third parties improperly imitating your brand in social media.

Multi-State Promotions Require Multi-State Legal Analysis

When planning an alcohol promotion, consider whether it is the type of promotion which would be regulated in traditional media.  For example, is it a sweepstakes, contest, coupon, happy hour deal, or similar?  Does it have elements of these things?  If so, remember that multi-state laws and regulations on promotions will still be relevant in the social media world.  Social media websites may be a completely new way to market, but promotional rules will still apply.  When planning advertising, sweepstakes, coupons, or other consumer premium offers, make sure that your campaigns comply with all applicable state laws and regulations.  If you operate a chain of hotels or restaurants, bear in mind that even though offers you plan to run through social media are national, they may need to be tweaked for consumers in different states if the same offers are not legal for all due to state law variations.  For example, if you intend to offer your restaurant’s Facebook fans happy hour specials at the bar between 5:00 and 7:00 p.m., you need to recognize that some of the fans live in states where this activity is legal, and some live in states where it is not.  As a result, you may need to consider technical tweaks to your social media campaign to create different legal offers for different consumers, i.e., appetizer specials only for some.  Alternatively, you may wish to tailor your offers so as to be consistent with the legal analysis, resulting in a “one size fits all” approach.

Direct Social Media Promotions Involving Alcohol to Legal Age Consumers Only

If you promote alcoholic beverages via social media, be mindful of your target audience.  Social media websites are open to consumers under twenty-one years of age, and therefore these individuals may be exposed to marketing of products they may not buy legally.  Build safeguards into your pages, and limit access to those sections involving alcoholic beverages to the twenty-one and over set. 

Recently, the Distilled Spirits Council of the United States (“DISCUS”) published a Guidance Note on Responsible Digital Marketing Communications which provides standards for industry when advertising alcohol beverages through mobile and digital means, including social media.  DISCUS outlined several basic principles for responsible use of social media which are helpful to suppliers, retailers, and unlicensed advertisers of alcoholic beverages.  The basic principles articulated by DISCUS include, among other things: (1) limiting digital marketing of alcohol beverages to media where 71.6% of the viewing audience is of legal purchasing age; (2) requiring the user to affirm that s/he is of legal purchase age before allowing the user to proceed to the alcohol beverage advertisement; (3) monitoring user-generated content on a regular basis; (4) placing warnings about forwarding content to non-legal users. 

These general principles can be implemented in a variety of ways.  For example, alcohol-related content on social media should contain a pop-up or other gatekeeper mechanism so as to require viewers to verify that they are of legal drinking age before proceeding to the content or offer.  This is currently industry standard on the websites and microsites of alcohol beverage suppliers, and should be integrated into social media sites representing these brands, or other sites which advertise alcohol beverages generally.  Once the “gate” is opened and users enter, site owners and operators (including the administrators of social media pages) should monitor the conversation for the purpose of responding to and removing inappropriate content about minors drinking or intemperance.  Finally, carry through age-gating to any “forwardable” content in the form of a download, “share”, or “like.”  Your alcohol-related social media advertisements are intended for legal users only, and so there must be a mechanism in place to prevent a legal user from forwarding content to a non-legal user.  Usually this takes the form of another pop-up requesting confirmation of legal age.

Before you use social media marketing to communicate with your fan base, make sure that any alcohol-related content is legal, contains appropriate disclaimer language if needed, and does not inappropriately target minors.

Promote Responsible Consumption and Protect Your Image

Finally, any social media campaigns involving alcohol should promote responsible consumption, not only through offers, but also in accompanying photographs, slogans, and postings, either by your company or by your fan base.  Remember that the social media pages maintained by your company are available for the world to see, including the plaintiffs’ bar!  In the unlikely event that your restaurant or bar becomes a defendant in a dram shop litigation matter, your social media pages will become exhibits.  Therefore, any offers or representations of your establishment should reflect the responsible service practices of your business and should not promote overconsumption in any way.  Furthermore, and as recommended by DISCUS, businesses should also consider monitoring any fan/consumer postings carefully and adopting an internal policy for how to remove and address any improper content or postings.

In addition to widening the boundaries and the reach of advertisers, social media has also changed the course of discovery in litigation dramatically.  Social media is in a sense a free discovery tool, and it goes both ways.  Consider the following hypothetical.  John Doe sues ABC Restaurant for dram shop liability, claiming that the employees served him while knowing that he was obviously intoxicated.  John Doe was involved in an automobile accident after leaving ABC Restaurant, and claims that he was injured and out of work for three weeks.  John Doe presents evidence including a printout of ABC Restaurant’s Facebook page.  The Facebook page shows posted content from patrons of ABC Restaurant who “like” it there, including postings that discuss how the fans got sloshed at ABC and corresponding photos which show them slumped over the bar.  ABC Restaurant’s attorney is disappointed that her client did not monitor these harmful posts and remove them so as to show that the restaurant does not approve of this kind of behavior.  She makes a note to review ABC Restaurant’s compliance practices with the management and to help the company develop a social media policy.  Then, she decides to review John Doe’s Facebook page to learn more about his activities.  Incredibly, she finds a post from John four days after the accident with a photo of John looking handsome and a status which says “[m]y boss is a slave driver man, he gave me an extra shift at work today.  I am going to tie one on tonight at Bango’s Bar.” Relieved, ABC Restaurant’s attorney confronts John Doe at his deposition about his claim that he was out of work for three weeks, and the case ultimately is dismissed.

Social media has now become mainstream and has changed the way on premises retailers speak to their customers with measurable results. As social media evolves further, the legal landscape will need to change to adapt to this new marketing force. Stay tuned!

Co-Authored By:  Lucy Bisognano

The Office of Federal Contract Compliance Programs (OFCCP) enforces regulations aimed at federal government contractors, with a specific eye towards preventing both intentional and unintentional employment discrimination based on any protected class (e.g. race, sex, or disability).  Many employers think that the OFCCP has no interest in them because they do no business with the federal government.  If only it were that easy.  Many clients have called after receiving notice that they now are considered a federal contractor because of a service that was purchased by a previously unknown federal government group.

It is important to be aware of your status as a federal contractor because you may need to comply with complex affirmative action practices, including for hiring, and you may need to keep detailed records of your efforts to comply.  In addition, OFCCP rules have been changing lately.  The new rules expand the affirmative action, non-discrimination, and related record keeping obligations for contractors regarding covered veterans and individuals with disabilities.  So, even if you thought you were doing it right – you may need to make changes.

Do the OFCCP rules apply to hoteliers and restaurateurs?

As a general rule, if your business does any work pursuant to a federal or federally-assisted contract, you could be subject to regulatory requirements under one or more of the laws enforced by OFCCP. The work that triggers OFCCP compliance obligations could include providing guest rooms, hosting a meeting or event, or providing catering for a federal government group.

Hotels have been subject to OFCCP compliance actions in the past.  Although we are aware of no compliance action directed at a restaurant, that likely stems from the relatively large dollar amounts required to trigger enforcement.  Contracts of less than $10,000 do not generally trigger OFCCP enforcement. Contracts of $50,000 or more generally require that each contractor/subcontractor with 50 or more employees develop a written Affirmative Action Program or Plan (AAP). Specific requirements will vary depending on the industry and services involved under the contract (for instance, construction contractors are subject to separate requirements from other service providers).  The OFCCP’s website is a good starting point for determining whether your business qualifies as a federal contractor, and includes tests and other resources.

If you suspect that you may be a federal contractor, you should become familiar with OFCCP requirements.  The most recently issued rules regard two laws enforced by OFCCP: Section 503 of the Rehabilitation Act (Section 503), which prohibits discrimination against qualified individuals with disabilities, and the Vietnam Era Veterans’ Readjustment Act (VEVRA), which prohibits discrimination against protected veterans. Both laws are administered and enforced by the OFCCP as they apply to federal contractors and subcontractors, and the new rules clarify and expand contractors’ obligations.

What do the new rules require?

Noteworthy provisions found in the new rules include the following:

  • Opportunity for Self-Identification. Contractors must invite all employee applicants to self-identify protected status at the pre-offer and post-offer stages of the hiring process, on a form to be published by the OFCCP. For disabilities, contractors can identify disabilities (visually or based on applicant disclosures) if the applicant does not self-identify as disabled, and the contractor must offer employees the opportunity to self-identify every five years.
  • Records Collection and Retention. Contractors must evaluate the effectiveness of their outreach and recruitment efforts to reach affirmative action goals.  The new rules require specific steps including measuring effectiveness of affirmative action efforts (e.g., comparing number of individuals with disabilities who apply to number hired) and determining necessary remedial actions. Contractors must retain certain documents for three years, including outreach and recruiting information, data collection analysis, and records regarding utilization and hiring benchmarks. OFCCP must be permitted to review documents either on-site or off-site, at OFCCP’s option.  (Also known as an audit.)
  • Specific Equal Opportunity (EO) Clause Reference. The new rules provide specific language to be used when the EO clause is incorporated into a subcontract so that subcontractors will be on-notice about their responsibilities as federal contractors.
  • Utilization Goals under Section 503 set at Seven Percent. Contractors must analyze the percentage of disabled individuals employed in each job group and compare their figure to the 7% goal. For contractors with 100 or fewer total workers, the analysis can be workforce-wide rather than by job group. If a contractor does not reach the 7% goal, the contractor must assess impediments to equal employment, and execute an appropriate program to reduce those impediments.
  • Hiring Benchmarks under VEVRA. Contractors can either use the national percentage of veterans in the civilian work force (currently 8%), or develop their own custom benchmark by considering factors including average percentages in the civilian work force over the previous three years, veteran participation in the state’s employment service delivery system over the previous four quarters, and the contractor’s assessment of its external outreach and recruiting efforts.

The final rules were published in the Federal Register on September 24, 2013, and become effective on March 24, 2014.  The rules are available at the following links:

https://www.federalregister.gov/articles/2013/09/24/2013-21227/affirmative-action-and-nondiscrimination-obligations-of-contractors-and-subcontractors-regarding

https://www.federalregister.gov/articles/2013/09/24/2013-21228/affirmative-action-and-nondiscrimination-obligations-of-contractors-and-subcontractors-regarding

If you have any questions about this development or how OFCCP-enforced laws impact your business, please contact Nancy Cooper or Lucy Bisognano.

Originally published at Duff on Hospitality Law.

Lately, bars, lounges and nightclubs are using a variety of new devices that scan patron identification cards upon entry, storing the information for future reference, and in some instances, sharing the information with other proprietors or using it for marketing purposes.

The justification for the scanners is that they assist in age verification and fake ID detection. And law enforcement is encouraging and sometimes requiring the use of scanners for these reasons.

But the saving and storing of more information than is necessary to verify age, or the sharing or selling of the information to a third party without the consent of the patron, may violate state laws and/or invade the privacy of the patron.

Making the situation a little more complicated is that these practices are enabled by the continuing evolution of technology at the speed of light, while the law, typically moving at a tortoise pace, tries to keep up. 

Even if a specific law is not in place to provide boundaries for these practices, there are other civil legal pitfalls that we need to be concerned about.

Several questions should arise when these practices are being considered:

  1. Does the operator have the right, without the patron’s consent, to even collect/store the information that it is being used to validate age? What about addresses, demographics, etc?
  2. Are there local or state laws (be sure to check the state alcohol beverage code) that prohibit the collection or storage?
  3. What is the operator’s obligation to protect the personal data that it collects? How is it being stored? Is it password and firewall protected?  Is it being aggregated with other personal information such as credit card numbers? If so, does that trigger the Payment Card Industry Data Security Standards?
  4. Does the operator have the right to use the collected data that was gathered, ostensibly to validate age, to market to the patrons in the future? Again, is there a local or state (such as New York) law that prohibits this practice?
  5. Are they violating the privacy of the card holder by sharing the collected data with other proprietors or third party marketers?
  6. What is the reason the data is being shared?  Is it for blacklisting? These practices may trigger broader based claims outside of the privacy realm.
  7. How is it being shared?  If electronically, is it encrypted?

As the jury is still out on the appropriateness of some of these practices, savvy alcohol beverage outlets that are using these devices should proceed with caution. Suggested practices to be adopted in the interim include checking with a local attorney to be sure your practices are in compliance with local or state law and with your state alcohol beverage commission to be sure you are operating within their boundaries.  If the green light is given, then post a large notice where the scanners are being used, informing the patron of the practice and extent of collection (what is being collected and saved, if shared, and other potential future use).

When it comes to private data, the adage of “collection spurs protection” applies, so be sure the data is protected (using the PCI-DSS standards would be a good practice) when stored or distributed.

Clearly understand the potential consequences of a breach of the security measures. In many states, fines are significant, as are the expenses incurred to notify the affected patrons of the breach; and of course the loss of customer good will is enormous.

Co-Authored By:  Peter Campbell Sode

Whether it’s the Hotel Shangri-La Hotel in Santa Monica, CA, the Millennium Broadway Hotel Times Square NYC, NY, the Comfort Suites Mission Valley Hotel, San Diego, CA or the Fontainebleau Miami Beach Hotel, Miami Beach, FL, allegations of discrimination are not new to the hotel industry. Unfortunately, the hospitality industry is subject to discrimination claims from guests and employees based on religion, race and disabilities.  As you can imagine, the term “discrimination” evokes a pantheon of emotions within the general public due to the fact that it has different connotations for different people.  Discrimination for any reason exerts a wide-ranging impact not only on those being discriminated against, but also on the parties responsible for the discrimination.

Discrimination is of particular importance to the hospitality industry because most, if not all, United States federal anti-discriminatory statues prohibit discrimination in places of public accommodation, inclusive of hotels and other business entities that provide lodging to the general public as a whole. Furthermore, the hospitality industry employs a large number of individuals in order to ensure that daily operations within hotels go as planned and thus, the hoteliers’ status as employers’ means that they absolutely have to be cognizant of anti-discriminatory laws and statutes that relate specifically to employees and their civil rights.

Religious Discrimination (Guests): Hotel Shangri-La in Southern California.

As a matter of fact, a recent high-profile legal dustup involving the famed Three Diamond Rated Hotel Shangri-La in Southern California demonstrates the need for hoteliers to understand the anti-discrimination laws in the context of daily hotel operations.  In July 2010, Tehmina Adaya, “the owner of the Hotel Shangri-La in Santa Monica discriminated against Jews during a charity event in July 2010.  The owner reportedly yelled ‘Get the [expletive] Jews out of my pool!’ and forced the party to pack up and leave” (See Miles). Kathleen Miles of the Huffington Post reported that the 18 participants in the Friends of the Israel Defense Forces charity event subsequently sued the hotel due to the fact that they had suffered negligent emotional distress and/or intentionally-inflicted emotional distress.  Miles stated that the lawsuits resulted in $100,000 in general damages to certain plaintiffs and $1.2 million in general damages to the group.  However, total damages increased when “a jury in California Superior Court ordered the hotel and owner to pay approximately $440,000 in additional punitive damages to the plaintiffs” (See Lowenfeld). In total, the Hotel Shangri-La’s discriminatory actions resulted in a damage award of  $1.65 million . 

Racial Discrimination (Employee): Millennium Broadway Hotel, Times Square.

Hotel guests are not the only class of plaintiffs filing anti-discrimination lawsuits against hotels across the country. Hotel employees have also utilized the legal system to pursue remedies for their employers’ discriminatory actions.  The Three Diamond Rated Millennium Broadway Hotel in Times Square in Manhattan was hit by a discrimination lawsuit in 2011. In this particular lawsuit, Freddrick MacMillan, “who had been an employee of Millennium for over two decades, sued the hotel in Federal District Court alleging that he was forced to work in a racially hostile work environment” (See Hotel).  Mr. MacMillan asserted that he decided to sue the hotel because his status as the only African-American employee in the engineering department led to co-workers using “inappropriate racial terms in his presence in order to upset and harass him. Mr. MacMillan claimed that co-workers referred to him as ‘boy’ and one of them suspended a lynched voodoo doll hanging from a noose in a supervisor’s office. The doll remained…in the supervisor’s office until an union representative intervened” (Id.). Macmillan allegedly suffered because he had to work in a racially hostile environment and the jury that heard this particular case awarded Mr. MacMillan “$1,000,000 in punitive damages and $125,000 in compensatory damages” (Id.). 

ADA Discrimination (Employee): Comfort Suites Mission Valley Hotel, San Diego.

An allegation under the American With Disabilities Act resulted in a discrimination lawsuit when “supervisors at the [Three Diamond Rated] Comfort Suites Mission Valley Hotel in San Diego denied a former front desk clerk diagnosed with autism access to a job coach that ‘would have helped the clerk learn to master his job using autism-specific training techniques.’ Supervisors also allegedly  made repeated disparaging remarks about his condition” (Dunning).  The supervisors in this particular case were bound and determined to wash their hands of this disabled employee and “after refusing on several occasions to allow the job coach into the hotel, the supervisors allegedly accused the clerk of mishandling a hotel guest’s packages and fired him” (See Dunning). 

The fired clerk and the United States Equal Employment Opportunity Commission (EEOC) subsequently brought a discrimination lawsuit against the Comfort Suites Mission Valley Hotel due to the the company’s failure “to make a reasonable accommodation for the clerk’s disability, discrimination, and wrongful termination” (See Dunning).  The case was settled  and “according to the terms of the settlement, the former clerk will receive $125,000, while San Diego-based Partnership with Industry-the non-profit employment support organization that sent the job coach-will, receive $7,500” (Id.).  Total damages paid by the hotelier in this case amounted to $132,500.00. 

Racial Discrimination: Fontainebleau Miami Beach Hotel in Miami, FL.

Finally, a recent incident involving the Four Diamond Rated Fontainebleau Miami Beach Hotel in Miami, Florida could provide a case study on why sensitivity to potential discrimination-related issues is critical to the hospitality industry.  According to the news, the racial discrimination allegations are that “a group of South Florida women claim they were recently turned away from a club inside Miami Beach’s famed Fontainebleau Miami Beach Hotel and they say it’s a case of racial discrimination” (See Shepard).  The alleged victims  claim  they ‘‘‘saw all these other white girls, you know, getting in…One of the security guards saw us and kind of felt bad and approached me.  He said ‘you know what, he’s not going to let you guys in because you’re black, you know that’” (Id.).  The alleged victims also claim that Rodrick Dudley, who was supposedly employed by the Fontainebleau Hotel as a club promoter, sent one member of the group a text message stating “It’s a double standard @ the fountainbleu.  White chics can be ok.  Black chics gotta look twice as good and they only cater to a so-called urban crowd on thursdays and sundays” (Id.). 

As of press date, no lawsuit has been filed and Fontainebleau Management disputes the allegations. Although this incident has generated a large amount of publicity in the Miami area as well as nationwide, it is uncertain if the image of the Fontainebleau Hotel will be cast in a negative light.

The Cost of Litigation: $2.9M or Alternatively, $969K Per Each of the Three Hotels.

The dollar amounts paid out to resolve the previously mentioned hotel discrimination cases (Hotel Shangri-La, Millennium Broadway Hotel Times Square and Comfort Suites) totaled $2,907,500. The total settlement amount in these three cases effectively cost each hotel an average of $969,166.67 in damages.  In other words, each hotel averaged about $1M in damages - an enormous hit to the hotel’s bottom line. But in all probability, each hotel saw a significant diminution in its value.

The Lesson for the Hospitality Industry.

Therefore, the question of how hoteliers can protect themselves from financially crippling discrimination lawsuits takes on great importance.  The easiest way for hotels and their owners to prevent discrimination lawsuits from occurring is to familiarize themselves with federal laws against discrimination, how these federal statues work and the standards of evidence that such laws require of the plaintiffs to prove their case. 

Title 42 of the Civil Rights Act, Chapter 21 - Civil Rights, Subchapter II – Public Accommodation

One federal anti-discrimination statue that relates to potential discrimination lawsuits against hotels and their proprietors is U.S. Code Title 42, Chapter 21, Subchapter II.[1]  This statue prohibits discrimination or segregation in places of public accommodation based on the equal access principle, which states that “all persons shall be entitled to the full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations of any place of public accommodation, as defined in this section, without discrimination or segregation on the ground of race, color, religion, or national origin”.[2] Hotels clearly fit under the umbrella of “places of public accommodation” and are subject to this statue.  Therefore, the Hotel Shangri-La Santa Monica incident fits under the umbrella of this statute. It remains to be seen if the allegations against the Fontainebleau Hotel Miami Beach also fall within this statute.  However, if hotel management and employees are made more aware of this federal law and the potential damages emanating from violations of this statute, they would have been less likely to expose themselves to damaging discrimination lawsuits. 

Title VII of the Civil Rights Act of 1964, Volume 42.

Another federal anti-discrimination law that hoteliers absolutely have to be aware of is Title VII of the Civil Rights Act of 1964.  Volume 42 of the United States Code states that “Title VII prohibits employment discrimination based on race, color, religion, sex, and national origin”[3].  Furthermore, the United States Code makes it clear that Title VII is intended to grant US District Courts jurisdiction to grant injunctive relief against discrimination in public accommodations and provides the US Attorney General with the power to institute suits to protect Constitutional rights in public facilities. 

Scope of Title VII of the Civil Rights Act of 1964,  Volume 42.

The three categories of discrimination covered by Title VII are disparate treatment, disparate impact, and failure to reasonably accommodate religious or disability needs.  If an individual wishes to bring a Title VII disparate treatment, disparate impact, or failure to reasonably accommodate discrimination claim, he or she has to file an complaint with the US Equal Employment Opportunity Commission.  The EEOC will usually perform a quick inspection regarding the individual’s allegations.  The EEOC will then issue the plaintiffs a “right to sue” letter authorizing them to bring a discrimination lawsuit under that particular statue.

Furthermore, if a plaintiff wishes to bring a Title VII claim, their suit must pass the three-step evidentiary analysis mandated by the Supreme Court in McDonnell Douglas Corp. v. Green.[4]  In order to pass the McDonnell Douglas test, the plaintiffs must first prove a prima facie case against the defendant[5].  Once a prima facie case is proven, the defendant has to provide a plausible, non-discriminatory reason for their actions. After the defendant has articulated their reason for acting in the manner in which they did, the plaintiffs have to demonstrate that the defendant’s stated reason for the behavior in question is merely pretext for discrimination.  Title VII covers the discrimination present in the Millennium Broadway Hotel in Times Square and Comfort Suites Mission Valley Hotel discrimination cases. Therefore, it would be prudent for hotel owners to familiarize themselves with this statue in order to avoid potential lawsuits. 

Americans with Disabilities Act (ADA) and Americans with Disabilities Act Amendments Act (ADAAA). 

Other federal statues prohibiting hotels and other related business entities from engaging in discriminatory actions are the Americans with Disabilities Act (ADA) and the Americans with Disabilities Act Amendments Act (ADAAA).  These two laws prohibit discrimination against persons with all kinds of disabilities, inclusive of their activities as business patrons and employees.  The ADA mandates that public buildings facilitate equivalent access for people with disabilities and able-bodied persons.  Since all hotels are “places of public accommodation”, they fall under the umbrella of “public buildings” and thus are required to provide equal access to disabled persons.  The ADA also prohibits employment discrimination against disabled persons in the event that reasonable accommodations can be made for the person’s disability.  The level of expenses required for the reasonable accommodation threshold varies by company size and revenue.  Some small companies may not be required to make any reasonable accommodations at all, but most companies are required to provide at least some dollar amount of accommodation. 

Let’s use the Comfort Suites Mission Valley Hotel case to examine the reasonable accommodation doctrine.  The autistic employee requested access to a job coach for brief sessions of job training.  It’s clear that the hotel in question did not have to pay for the job coach’s services, therefore this service can be classified as a reasonable accommodation since it obviously fell well below the company’s reasonable accommodation expense threshold (said service was free).  Since the Comfort Suites Mission Valley Hotel refused to allow their employee reasonable accommodations, they were in violation of the ADA and thus exposed to discriminatory lawsuits. The ADAAA was passed in 2008 and widens the scope of the ADA, and it is imperative that hotels and their owners/staff familiarize themselves with these two laws in order to avoid discriminatory lawsuits from disabled persons.  Furthermore, it’s imperative that lawyers who are retained by hotels obtain a working understanding of the ADA and ADAAA as well as US Code Title 42, Chapter 21, Subchapter II and Title VII of the Civil Rights Act of 1964 because by doing so, they will have a better understanding of how to handle discrimination cases against their clients.

Summary

It is rather obvious that hotels are extremely vulnerable to discrimination lawsuits of all kinds and that such lawsuits can be brought by patrons and employees alike.  As places of public accommodation and employers, hotels have a civic responsibility to ensure that they do not partake in discriminatory actions of any kind.  After all, no hotel owner wants to find his or her name associated with the negative publicity that discrimination brings and above all else, many hotel owners cannot afford a $1 million hit to their bottom line.  Take action!  Protect yourself by educating your employees about various forms of discrimination and how to avoid them.  Your wallet will thank you in the long run.   

 

Table of Authorities

“Case Elements for Use in Reality Checking.  Air Force Alternative Dispute Resolution Program.  The United States Air Force.  n.d.  Web.  28 June 2013. 

Dunning, Matt.  “EEOC settles discrimination lawsuit against hotel chain for firing autistic clerk.”  Business Insurance.  Business Insurance.  8 November 2011.  Web.  28 June 2013.

“Hotel Employee Wins Substantial Discrimination Verdict.”  New Jersey Employment Lawyer Blog.  Siegler & Traub, L.L.C.  20 December 2011.  Web.  28 June 2013. 

Lowenfeld, Jonah.  “Jewish plaintiffs win Hotel Shangri-La discrimination lawsuit.”  The Jewish Journal.  The Jewish Journal.  15 August 2012.  Web.  28 June 2013.

Miles, Kathleen.  “Hotel Shangri-LA Discriminated Against Jews, Jury Finds.”  Huffington Post.  Huffington Post.  16 August 2012.  Web.  28 June 2013.

Shepard, William.  “Group Of South Florida Women Claim Racial Discrimination at Club Inside Fontainebleau.”  NBC Miami.  National Broadcasting Corporation.  21 May 2012.  Web.  28 June 2013.

Title VII of the Civil Rights Act of 1964.  U.S. Equal Employment Opportunity Commission.  U.S. Equal Employment Opportunity Commission.  n.d.  Web.  28 June 2013.

42 U.S.C 2000a: US Code-Section 2000A: Prohibition against discrimination or segregation in places of public accommodation.  FindLaw.  FindLaw.  n.d.  Web.  28 June 2013. 



[1]See 42 U.S.C. § 2000a et seq., Chapter 21 - Civil Rights, Subchapter II - Public Accommodation;  see also URL: codes.lp.findlaw.com/uscode/42/21/II/2000a.
[2]See 42 U.S.C. § 2000a et seq., Chapter 21 - Civil Rights, Subchapter II - Public Accommodation.
[3]See 42 U.S.C. 2000, Title VII et seq.
[5] See “Case Elements for Use in Reality Checking” for more information regarding Title VII and prima facie case requirements under this statue.  URL: http://www.adr.af.mil/shared/media/document/AFD-070212-063.pdf

Co-Authored By:  Jordan Schwartz

A broadly worded settlement agreement between the U.S. Department of Justice and Lesley University extends the Americans with Disabilities Act’s protections to individuals with severe allergies. This new, expansive interpretation of the term “disability” could increase potential legal exposure to failure to accommodate claims under the ADA, making it more important than ever to ensure that your restaurants and bars are equipped to provide reasonable accommodations to individuals with severe food allergies.

Title III of the ADA requires hospitality operators to maintain facilities that are accessible to individuals with disabilities, and make their goods and services available to and usable by individuals with disabilities on an equal basis with members of the general public. This includes making reasonable modifications to policies, practices, and procedures when necessary to serve customers/guests with disabilities.

Lesley University had required all students living on campus to participate in, and pay for, its meal service plan, even if some students with severe allergies could not eat the food available through the plan without risk of illness. Several students complained that the school’s food services were inadequate for their needs, and alleged that the university had violated the ADA by neither addressing the needs of students with food allergies nor ensuring them an equivalent dining experience.

The DOJ commenced an investigation, and charged that the university violated the ADA by failing to accommodate the special food needs of these students, reasoning that they could not fully and equally enjoy the university’s dining services. On Dec. 21, 2012, the DOJ announced its settlement with Lesley University, which required the university to provide allergen-free options in its food lines, and develop individualized meal plans for students with food allergies.

While the DOJ settlement agreement refers only to universities and students, it has now, for the first time, identified all severe food allergies as disabilities, which could trigger reasonable accommodation requirements of the ADA. This settlement makes it possible that when this issue is litigated, the courts will broadly apply the terms of this agreement to all employers that serve food in the workplace. As a result, the settlement is likely to have wide-ranging implications for all businesses that serve food, either as a primary or secondary practice. Thus, hospitality operators should evaluate their practices for offering and providing accommodations for food allergies to minimize any potential exposure to disability discrimination charges under the ADA.

While there may not be a “one size fits all” solution to this issue, hospitality companies can take prudent steps to ensure that guests with allergies have the ability to fully and equally enjoy the dining services and the social benefits that accompany such services (see list below).

Depending on the size and resources of your company, many strategies to provide alternatives may not be practical or feasible. However, to ensure compliance with the ADA and avoid a civil lawsuit or DOJ investigation, hospitality operators that serve food to the public must be proactive in at least considering, if not implementing, some of the allergen protective measures.

Tips to Accommodate Food Allergies

There are many practical strategies that hospitality operators can implement to reduce Americans with Disabilities Act exposure regarding allergens:

•  Display signs concerning food allergies and identify foods that contain specific allergens.
•  Evaluate the feasibility of providing gluten- and allergen-free food options.
•  Provide a dedicated alternative space to store and prepare foods to avoid cross-contamination, or if space does not allow for that, use different utensils, cutting boards and other preparation materials.
•  Use vendors who offer food without allergens.
•  Alert customers with food allergies via marketing materials and your website to notify you in advance so that you can make every effort to accommodate their particular allergies and other dietary needs.
•  Create internal policy and procedures for manufacturer recalls and customer complaints.
•  Educate your staff about common food allergies and provide ongoing training to your staff so they can appropriately respond to questions about food ingredients and requests for alternatives.

Page 8 of 10
Go to top