How Hoteliers Must Comply With WARN

By Kara M. Maciel

When hoteliers are considering purchasing, selling or remodeling hotels, one of the most overlooked issues during the due diligence and planning phases relates to the Worker Adjustment and Retraining Notification Act.

This statute requires covered employers to provide 60 days’ notice to employees, union representatives, state agencies and localities before carrying out plant closings or mass layoffs.[1] Congress intentionally devised WARN to provide affected employees adequate time to prepare for employment loss, seek and obtain alternative employment, and/or arrange for skill training or retraining to compete successfully in the job market.

Accordingly, hotel buyers, sellers, owners and management companies should be mindful of WARN’s obligations and be aware of potential liability for failure to provide written notice.

WARN’s Threshold Requirements

To fall under WARN, a hotel must employ at least 100 full-time employees, or employ 100 or more full-time and part-time employees who work at least 4,000 hours per week (exclusive of overtime). In determining whether a hotel has the requisite number of employees, hotels must count temporary employees and individuals who are temporarily laid off or on a leave of absence but who have a reasonable expectation of recall toward the threshold number of “full-time” employees.

In contrast, part-time employees are excluded from determining if a hotel satisfies the threshold levels. Part-time employees are individuals who work on average fewer than 20 hours per week, or who have been employed fewer than six of the 12 months preceding the date on which notice is required (e.g., recent hires working full-time schedules and seasonal workers).

Covered Employees and Content of Notices

Hotels covered by WARN must provide 60 days’ notice of a qualifying termination event to each hourly and salaried employee, manager and supervisor who may reasonably expect to experience employment losses. This notice requirement applies to both full-time and part-time employees.

Although temporary employees are counted for purposes of determining coverage under WARN, they are not entitled to advance notice so long as they were hired with the clear understanding that their employment was limited in duration.

The required content of written WARN notifications vary depending on whether the hotel is notifying employees, union representatives or government entities. Nevertheless, common to all notifications are (1) a description of the termination event and a statement as to whether the event is expected to be permanent or temporary; (2) the expected date(s) when the layoffs will commence; and (3) the name and telephone number of a hotel official to contact for further information.

Triggering WARN Notice Requirements

Fundamentally, three types of termination events trigger WARN notification requirements where 50 or more full-time employees experience employment losses. Those events are:

  • A plant closing that is a permanent or temporary shutdown of a “single site of employment” or one or more facilities or distinct operating units within a single site of employment that results in an employment loss during any 30-day period for 50 or more full-time employees.
  • A mass layoff (exclusive of a plant closing) of at least 50 full-time employees where the employment loss consists of at least 33 percent of the full-time employees at the single site.
  • A mass layoff of 500 or more full-time employees at a single site of employment, regardless of its proportion of the total employment at the site or if the employment loss is part of a plant closing.

Additionally, WARN defines “employment loss” as involuntary separations of workers exceeding six months; or a reduction in hours worked of at least 50 percent during each month for a six-month period. Any employment losses during a 30-day period are considered a single event for the purposes of the WARN Act.

Notably, even if a hotel’s initial terminations during a 30-day period do not constitute a covered termination event, WARN may be retroactively applied under certain circumstances. If two or more groups of employees suffer employment losses at a single site of employment during a 90 day period, and each group alone does not meet the threshold employee levels, the groups can be aggregated and treated as a single event.

Thus, when smaller layoffs that occur within 90 days collectively satisfy the WARN threshold level, each affected employee must receive 60 days’ notice prior to his or her date of termination. To avoid treating group terminations as a single event, hotels must establish that (1) the employment losses are unrelated and distinct; and (2) they have not structured or phased the terminations to avoid the WARN requirements.

Additionally, if a hotel announces a non-WARN covered layoff of six-month or less but subsequently extends the layoff past six months, the hotel may have WARN notification responsibilities. Unless the hotel can establish that the layoff extension was due to unforeseeable circumstances at the time of the original layoff, the matter is treated as if notice was required for the original layoff.

Finally, plant closing or mass layoff stemming from a relocation or consolidation of all or part of a hotel’s business is not considered an “employment loss,” if before the event (1) the hotel offers to transfer an employee to another site within a reasonable commuting distance and not more than a six-month break in employment occurs (regardless of whether the employee accepts or rejects the offer); or (2) the employee accepts a transfer to another site (regardless of distance) with no more than a six-month break in employment, within 30 days of the hotel’s offer or the closing or layoff, whichever is later.

Notification Exceptions

The WARN Act specifies exceptions in which hotels may provide less than 60 days’ notice to employees, state agencies and localities affected by an employment loss. The primary exceptions are:

  • Faltering Company Exception. Hotels can provide reduced notice for plant closings — but not mass layoffs — where they are actively seeking new capital or business to prevent the closing, have a realistic chance of obtaining sufficient funds or new business, and believe in good faith that giving notice would prevent it from obtaining the necessary capital or business to remain open.
  • Unforeseeable Business Circumstances Exception. Hotels can provide reduced notice where plant closings and mass layoffs are caused by business circumstances that were not reasonably foreseeable at the time notice would otherwise have been required (e.g., swift onset of a deep economic downturn, a nonnatural disaster).
  • Natural Disaster Exception. Hotels can provide reduced notice if a natural disaster, such as hurricane, flood or earthquake, directly causes a plant closing or mass layoff. Although this exception does not apply when the natural disaster indirectly causes the closing or layoff, the unforeseen business circumstances exception above might.

If the hotel provides less than 60 days’ notice under one of the aforementioned exceptions, it must explain in the notice the reason for the reduced notice period.

Who Must Give Notice in Shutdown: Owner or Operator?

Although hotel owners more often decide to shut down operations permanently rather than the managing entities that operate the hotels, the managing entity bears the primary responsibility for giving WARN notices.[2]

Accordingly, in negotiating management agreements, prudent hotel managers should secure protection from the owner against WARN liability for a permanent shutdown. That protection may be requiring the employer to notify the manager of a shutdown with sufficient time for the manager to comply with the WARN Act and securing indemnification against WARN liability if the owner gives insufficient notice to allow for WARN compliance.

Sale of Hotels

The general rule under WARN is that the responsibility to notify affected employees of a mass layoff or plant closing shifts at the time of sale. In this regard, when part or all of a business is sold and WARN’s threshold requirements are satisfied, the seller is responsible for providing notices to affected employees for any closing or layoff, up to and including the effective date of the sale. After the effective date of the sale, however, the buyer is responsible for providing notice for any such event.

Under WARN, however, employees who are merely transferred from the seller to buyer as part of the sale are not deemed to have suffered an employment loss.[3] In other words, the obligation to notify affected employees of a mass layoff is not triggered by the actual sale but by the employment loss.

The U.S. Department of Labor’s corresponding regulations further provide that employees who remain the sellers’ employees until the effective date of the sale and then are terminated, even if on account of the sale, will be treated as if they are employed by the buyer thereafter.

Thus, as the seller’s employees are treated as employed by the buyer after the sale, the seller will have no WARN responsibilities in connection with the post-sale termination of employees incident to the sale. The buyer will be responsible for WARN compliance if it elects not to retain those employees.[4]

If the seller has knowledge that a significant number of employees might be terminated within the first 60 days after the sale is consummated and the seller can identify those affected employees, the seller, although not required to do so, may send WARN notices to the affected employees as the agent of the buyer.[5] The regulations also encourage the parties to discuss and arrange who will bear the WARN obligations and include the specifics in the purchase agreement with appropriate indemnity language.

For the seller to avoid WARN obligations and liabilities, the seller should, to the extent possible, postpone any terminations incident to the sale until after the effective date of the transaction. In addition, a seller should notify employees who are laid off prior to completion of the transaction if their layoffs are temporary, (i.e., expected to be for less than six months), and that the buyer expects to hire some or all of them.

Under these circumstances, short-term layoffs incident to the sale do not constitute an employment loss under WARN and do not trigger WARN notice requirements. The notice obligations would only arise if the buyer fails to rehire a sufficient number of the seller’s employees. In this case, however, the buyer is solely responsible for giving any WARN notices.

It would therefore be prudent for the seller to obtain a provision in the purchase agreement that indemnifies the seller and obligates the buyer to comply with WARN under such circumstances. If, of course, the seller assumes WARN obligations, then it must also comply with WARN’s specific notice requirements.

Enforcement and Penalties

Federal courts enforce WARN through private right of actions, as the U.S. Department of Labor lacks investigative and enforcement authority for the act. Since district court lack injunctive authority to stop a plant closing or mass layoff, a plaintiff’s remedies are limited to statutory damages, attorneys’ fees and costs, and/or civil penalties.

In sum, in light of WARN’s potential for significant financial exposure, hoteliers should carefully plan in advance any notice requirements prior to the purchase, sale or remodel of a hotel.

[1] See 29 U.S.C. §§ 2101-2109 (1988). Many states have mini-WARN laws which may provide more generous notice to employees; therefore, it is critical that hoteliers check state law in addition to the federal notice provisions under WARN.

[2] See Local 217, Hotel and Restaurant Employees Union v. MHM Inc., 976 F.2d 805 (2d Cir. 1992) (finding the hotel’s management company to be liable under WARN for firing its staff in the wake of the hotel’s closing, even though the hotel owner ordered the shutdown).

[3] See Wiltz v. MG Transport Servs., 128 F.3d 957 (6th Cir. 1997) (holding that the actual sale was not a WARN event and that employees who the buyer retained did not fall under WARN).

[4] See Local 54, Hotel Employees International Union v. Elsinore Shore Associates, 724 F. Supp. 333 (D.N.J. 1989) (holding that whoever is the employer at the time of the plant closing or mass layoff is responsible for notifying the employees 60 days in advance).

[5] 29 C.F.R. § 639.4(1).
 

Wage and Hour Update

Our colleague Kara M. Maciel of Epstein Becker Green wrote a wage and hour update in this month’s Take 5 labor and employment newsletter.

Here’s a preview of the five items:

1. IRS Will Begin Taxing a Restaurant's Automatic Gratuities as Service Charges
2. The New DOL Secretary, Tom Perez, Spells Out the WHD's Enforcement Agenda
3. DOL Investigates Health Care Provider and Obtains $4 Million Settlement for Overtime Payments
4. Federal Court Strikes Down DOL Tip Pooling Rule
5. Take Preventative Steps When Facing WHD Audits

Read the full article here.

 

Take 5 Views You Can Use: Wage and Hour Update

By:  Kara M. Maciel

The following is a selection from the Firm's October Take 5 Views You Can Use which discusses recent developments in wage hour law affecting the hospitality industry.

IRS Will Begin Taxing a Restaurant’s Automatic Gratuities as Service Charges

Many restaurants include automatic gratuities on the checks of guests with large parties to ensure that servers get fair tips. This method allows the restaurant to calculate an amount into the total bill, but it takes away a customer’s discretion in choosing whether and/or how much to tip the server. As a result of this removal of a customer’s voluntary act, the Internal Revenue Service (“IRS”) will begin classifying automatic gratuities as service charges, taxed like regular wages, beginning in January 2014.

This change is expected to be problematic for restaurants because the new treatment of automatic gratuities will complicate payroll accounting. Each restaurant will be required to factor automatic gratuities into the hourly wage of the employee, meaning the employee’s regular rate of pay could vary from day to day, thus adding a potential complication to overtime payments. Furthermore, because restaurants pay Social Security and Medicaid taxes on the amount that its employees claim in tips, restaurants are eligible for an income-tax credit for some or all of these payments. Classifying automatic gratuities as service charges, however, would lower that possible income-tax credit.

Considering that the IRS’s ruling could disadvantage servers as well, restaurants may now want to consider eliminating the use of automatic gratuities. Otherwise, employees could come under greater scrutiny in reporting their tips as a result of this ruling. Furthermore, these tips would be treated as wages, meaning upfront withholding of federal taxes and delayed access to tip earnings until payday.

Some restaurants, including several in New York City, have begun doing away with tips all together. These restaurants have replaced the practice of tipping with either a surcharge or increased food prices that include the cost of service. They can then afford to pay their servers a higher wage per hour in lieu of receiving tips. This is another way for restaurants to ensure that employees receive a sufficient wage, while simultaneously removing the regulatory burdens that a tip-system may impose.

The New DOL Secretary, Tom Perez, Spells Out the WHD’s Enforcement Agenda

On September 4, 2013, the new U.S. Secretary of Labor, Tom Perez, was sworn in. During his remarks, Secretary Perez outlined several priorities for the U.S. Department of Labor (“DOL”), including addressing pay equity for women, individuals with disabilities, and veterans; raising the minimum wage; and fixing the “broken” immigration system.

Most notably, and unsurprisingly, Secretary Perez emphasized the enforcement work of the Wage and Hour Division (“WHD”). Just last year, the WHD again obtained a record amount—$280 million—in back-pay for workers. Employers can expect to see continued aggressive enforcement efforts from the WHD in 2013 and 2014 on areas such as worker misclassification, overtime pay, and off-the-clock work. In fact, Secretary Perez stated in his swearing-in speech that “when we protect workers with sensible safety regulations, or when we address the fraud of worker misclassification, employers who play by the rules come out ahead.” By increasing its investigative workforce by over 40 percent since 2008, the WHD has had more time and resources to undertake targeted investigation initiatives in addition to investigations resulting from complaints, and that trend should continue.

Federal Court Strikes Down DOL Tip Pooling Rule

In 2011, the WHD enacted a strict final rule related to proper tip pooling and service charge practices. This final rule was met with swift legal challenges, and, this summer, the U.S. District Court for the District of Oregon (“District Court”) concluded that the DOL had exceeded its authority when implementing its final rule. See Oregon Rest. and Lodging Assn. v. Solis, No. 3:12-cv-01261 (D. Or. June 7, 2013).

Inconsistent interpretations of the FLSA among various appellate courts have created confusion for both employers and courts regarding the applicability of valid tip pools. One of the most controversial interpretations of the FLSA occurred in early 2010, when the U.S. Court of Appeals for the Ninth Circuit held that an employer could require servers to pool their tips with non-tipped kitchen and other “back of the house staff,” so long as a tip credit was not taken and the servers were paid minimum wage. See Cumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010). According to the Ninth Circuit, nothing in the text of the FLSA restricted tip pooling arrangements when no tip credit was taken; therefore, because the employer did not take a tip credit, the tip pooling arrangement did not violate the FLSA.

In 2011, the DOL issued regulations that directly conflicted with the holding in Woody Woo. As a result, employers could no longer require mandatory tip pooling with back-of-the-house employees. In conjunction with this announcement, the DOL issued an advisory memo directing its field offices nationwide, including those within the Ninth Circuit, to enforce its final rule prohibiting mandatory tip pools that include such employees who do not customarily and regularly receive tips.

Shortly after the issuance of the DOL’s final rule, hospitality groups filed a lawsuit against the DOL challenging the agency’s regulations that exclude back-of-the-house restaurant workers from employer-mandated tip pools. The lawsuit sought to declare the DOL regulations unlawful and inapplicable to restaurants that pay employees who share the tips at least the federal or applicable state minimum wage with no tip credit. On June 10, 2013, the District Court granted the plaintiffs’ summary judgment motion, holding that the DOL exceeded its authority by issuing regulations on tip pooling in restaurants. The District Court stated that the language of Section 203(m) of the FLSA is clear and unambiguous; it only imposes conditions on employers that take a tip credit.

The District Court’s decision may have a large impact on the tip pool discussion currently before courts across the country, especially if employers in the restaurant and hospitality industries begin to challenge the DOL’s regulations. Given the District Court’s implicit message encouraging legal challenges against the DOL, the status of the law regarding tip pooling is more uncertain than ever. Although the decision is a victory for employers in the restaurant and hospitality industry, given the aggressive nature of the DOL, employers in all circuits should still be extremely careful when instituting mandatory tip pool arrangements, regardless of whether a tip credit is being taken.

Take Preventative Steps When Facing WHD Audits

In response to a WHD audit or inspection, here are several preventative and proactive measures that an employer can take to prepare itself prior to, during, and after the audit:

  • Prior to any notice of a WHD inspection, employers should develop and implement a comprehensive wage and hour program designed to prevent and resolve wage hour issues at an early stage. For example, employers should closely examine job descriptions to ensure that they reflect the work performed, review time-keeping systems, develop a formal employee grievance program for reporting and resolving wage and hour concerns, and confirm that all written time-keeping policies and procedures are current, accurate, and obeyed. Employers should also conduct regular self-audits with in-house or outside legal counsel (to protect the audit findings under the attorney-client privilege) and ensure that they address all recommendations immediately.
  • During a DOL investigation, employers should feel comfortable to assert their rights, including requesting 72 hours to comply with any investigative demand, requesting that interviews and on-site inspection take place at reasonable times, participating in the opening and closing conferences, protecting trade secrets and confidential business information, and escorting the investigator while he or she is at the workplace.
  • If an investigator wants to conduct a tour of an employer’s facility, an employer representative should escort the investigator at all times while on-site. While an investigator may speak with hourly employees, the employer may object to any impromptu, on-site interview that lasts more than five minutes on the grounds that it disrupts normal business operations.
  • If the DOL issues a finding of back wages following an investigation, employers should consider several options. First, an employer can pay the amount without question and accept the DOL’s findings. Second, an employer can resolve disputed findings and negotiate reduced amounts at an informal settlement conference with the investigator or his or her supervisor. Third, an employer can contest the findings and negotiate a formal settlement with the DOL’s counsel. Finally, an employer may contest the findings, prepare a defense, and proceed to trial in court.

In addition, employers should review our WHD Investigation Checklist, which can help them ensure that they have thought through all essential wage and hour issues prior to becoming the target of a DOL investigation or private lawsuit.

Following these simple measures could significantly reduce an employer’s exposure under the FLSA and similar state wage and hour laws.

Serving Up More Taxes - IRS to Begin Taxing Automatic Gratuities as Service Charges

By: Kara M. Maciel

Many restaurants include automatic gratuities on guests’ checks with large parties to ensure servers get fair tips. This method allows the restaurant to calculate an automatic gratuity or tip into the total bill, but it takes away the customer’s discretion in choosing whether and/or how much to tip the server. As a result of this removal of a customer’s voluntary act, the IRS has decided that it will separately tax automatic gratuities.

In 2012, the IRS issued a ruling to clarify earlier tax guidance on tips, particularly automatic gratuities, but because restaurants persuaded the IRS to hold off for a year, the IRS did not immediately enforce that ruling. As of January 2014, however, the IRS will begin classifying automatic gratuities as service charges, taxed like regular wages. 

This change is expected to be problematic for restaurants because the new treatment of automatic gratuities will complicate payroll accounting. Each restaurant will be required to factor any automatic gratuities into the hourly wage of the employee, meaning the employee’s regular rate of pay could vary from day to day, thus adding a potential complication to overtime payments. Furthermore, because restaurants pay Social Security and Medicaid taxes on the amount its employees claim in tips, restaurants are eligible for an income-tax credit for some or all of these payments. Classifying automatic gratuities as service charges, however, would lower that possible income-tax credit. Finally, it will produce more paperwork and add to the already rising costs restaurants will incur due to the Affordable Care Act. 

Restaurants considering eliminating the use of automatic gratuities are unlikely to face much backlash from employees, as the IRS’s ruling could disadvantage them as well. For example, employees could come under greater scrutiny in reporting their tips as a result of this ruling. Furthermore, these tips would be treated as wages, meaning upfront withholding of federal taxes and delayed access to tip earnings until payday. For those waiters and waitresses used to coming home with money in their pockets each workday, such a delay could prove a serious financial hardship.

Some restaurants have begun moving toward the use of suggested tips on a customer’s bill instead of charging an automatic gratuity in light of this change. For example, Darden Restaurants Inc., has begun implementing a new system in some of its restaurants in which three suggested tip amounts, 15%, 18% and 20%, appear on all customer bills. This system allows the customer to exercise discretion in choosing whether and how much to tip. In its ruling, the IRS suggested that such a practice would not be subject to federal withholdings because the decision to leave a tip is still voluntary. Therefore, this practice presents a viable alternative to automatic gratuities as it provides some protection for employees without incurring increased tax penalties.

Other restaurants, including several in New York City, have begun doing away with tips all together. These restaurants have replaced the practice of tipping with either a surcharge or food prices that include the cost of service. They can then afford to pay their servers a higher wage per hour in lieu of receiving tips. This is another way for restaurants to ensure employees receive a sufficient wage, while simultaneously removing the regulatory burdens that a tip-system may impose.   

ADA Compliance: Implications for Owners and Managers When Acquiring or Developing New Lodging Facilities

On September 18, 2013, our hospitality practice attorneys, Kara Maciel and Mark Trapp, have the pleasure of speaking at the Lodging Conference in Scottsdale, Arizona on key financial and legal issues under the Americans with Disabilities Act impacting hotel owners and managers when acquiring, selling, developing or managing properties. 

Under the 2010 ADA Standards, which became effective in March of 2012, hotels must take steps to remove access barriers for individuals with disabilities. The new federal standards encompass some key changes for hotel owners, operators and developers.   Our Round Table discussion will focus on hot-button issues facing the hotel industry, including:

·         Why Owners and Managers Should Care about ADA Compliance when Purchasing / Selling / Developing / Managing a Property

·         Key Financial Issues In Acquiring / Selling Properties

·         Key Financial Issues in Developing New Construction / Renovating Older Properties

·         Key Financial and Operational Issues in Management Agreements 

·         Best Practices for Compliance under the ADA for Lodging Facilities

Attendees will leave the workshop better equipped to address the critical operational issues affecting their deals and profit margins, including:

·         How to conduct Due Diligence to minimize financial exposure and legal risks

·         How to negotiate and maximize your financial investment in a Purchase Sale Agreement

·         What issues are important in a Management Agreement

·         How to draft and implement employment and related policies to minimize the risk of ADA lawsuits

For more information about this important topic impacting the lodging industry, contact Kara or Mark. 

ADA Accessibility Notes from the Resort Hotel Association Conference

By:  Kara Maciel

Last week, I had the honor of attending the Resort Hotel Association’s (“RHA”) Annual Conference at The Edgewater Hotel in Seattle.  RHA is comprised of 130 independently-owned resorts, hotels, city clubs and spas in the United States and specializes in insurance programs that address the risks unique to the lodging industry.  For the second year in a row, RHA invited me and my colleague, Jordan Schwartz, to speak on the Americans with Disabilities Act (“ADA”) and public accommodations issues that hotel and lodging operators face. The room was packed and due to constant questions from the audience we were unable to review all our material in the 75 minute speech. Needless to say, ADA compliance remains a hot topic within the hospitality industry! 

Here are the main points from our speech:

1. ADA Lawsuits continue to the flood the federal courts since the 2010 ADA Standards took effect in March 2012. Civil penalties increased to $55,000 per violation, and many lawsuits are now being filed after a potential guest merely calls the property to ask about accessibility standards. Hoteliers continue to struggle with responding to complaints from national advocacy groups and professional plaintiffs across the country.

2. Pool Lifts - Fixed lifts should be in place at each pool, spa, Jacuzzi on property since January 1, 2013 unless you can demonstrate it is not readily achievable. Lifts must remain in operation at all times the pool is open which means batteries must be charged, covers must be removed, and lifts can't be locked away in storage pending a guest request. Hoteliers remain concerned about the significant liability and exposure from children or other unauthorized persons playing on the lifts that could lead to injury. Many operators at the conference reported that while they have installed the lifts, they have yet to be used in practice. 

3. Room Reservations – Under the 2010 ADA Standards, hotels must now modify their policies, practices, or procedures to ensure that individuals with disabilities can make reservations for accessible guest rooms during the same hours and in the same manner as other individuals; be able to identify and describe accessible features in the hotel and guest rooms offered through their reservations service; ensure that accessible guest rooms are held for use by individuals with disabilities until all other guest rooms of that type have been rented and the accessible room requested is the only remaining room of that type; and prevent accessible guest rooms from being double booked.   As a practical matter, this will require many hotel operators to revise their electronic reservations systems and to train employees who take reservations so that they understand the features of accessible rooms.

4. Food Allergies – The Department of Justice has now identified all severe food allergies as disabilities, which could trigger reasonable accommodation requirements under the ADA.  This pronouncement could have wide-ranging implications for all hoteliers 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

5. Website Accessibility – Online marketing is a key tool for hotels and resorts, and most individuals will review a hotel’s website before booking their stay. Thus, it is critical that hotels position themselves as an ADA-friendly property, with notices about their accessible rooms and amenities. In addition, to the extent hotels allow guest to check room availability or book a stay online, the website must be accessible for individuals with visual and other impairments. The Department of Justice has begun to focus on website accessibility for online retailers, and more individuals are filing civil suits over inaccessible on line services. 

Overall, the hospitality industry should continue to be vigilant and proactive in ADA compliance ensuring their property meets accessibility requirements before a civil complaint is filed. Necessary steps include an internal audit and inspection of the entire property to ferret out areas needing improvement, staff training on ADA policies and procedures and how to respond to guest inquiries on the phone or in person, and finally, removing architectural and structural barriers where readily achievable to ensure barriers to access are eliminated. 

Our next speech will be at The Lodging Conference in Scottsdale on September 16 where we will discuss "ADA Compliance: Implications for Owners and Managers When Acquiring or Developing New Lodging Facilities." 
 

Court of Appeals Rules NLRB Notice Posting Violates Employer Free Speech Rights

By Adam C. Abrahms and Steven M. Swirsky

In another major defeat for President Obama’s appointees to the National Labor Relations Board (NLRB or Board), the US Court of Appeals for the DC Circuit found that the Board lacked the authority to issue a 2011 rule which would have required all employers covered by the National Labor Relations Act (the “Act”), including those whose employees are not unionized, to post a workplace notice to employees. The putative Notice, called a “Notification of Employee Rights Under the National Labor Relations Act,” is intended to ostensibly inform employees of their rights to join and be represented by unions and to engage in other activity protected by the Act. The rule would also have made it an unfair labor practice for an employer to fail to post the required notice and such failure also could be considered proof of anti-union animus in other Board proceedings.

Although proposed in 2011 and scheduled to become effective on April 30, 2012, the requirement has yet been put into effect. As we discussed previously, last year, the US District Court for the District of Columbia had held that the Board lacked the authority to make it an unfair labor practice for an employer to fail to post the notice, holding that this exceeded the Board’s authority under the Act. Just prior to the rule going into effect, the DC Court of Appeals issued an emergency injunction in support of the District Court’s opinion and the NLRB opted to not enforce the rule pending the appeal.

Perhaps what is most noteworthy about the Court’s recent opinion, authored by Senior Circuit Judge Randolph, is the Court’s reliance on employers’ free speech rights which are protected by Section 8(c) of the Act. That section of the Act ensures employers the right to communicate their views concerning unions to their employees. The Court noted that while Section 8(c) “precludes the Board from finding non coercive employer speech to be an unfair labor practice, or evidence of an unfair labor practice, the Board’s rule does both.” That is because under the rule an employer’s failure to post the required notice would constitute an unfair labor practice and the Board’s rule would have allowed the Board to “consider an employer’s ‘knowing and willful’ noncompliance to be ‘evidence of anti union animus in cases in which unlawful motive [is] an element of an unfair labor practice.”

The Court focused on the question of the right of employers to “free speech,” under both Section 8(c) of the Act and under the First Amendment to the Constitution, noting that the rule would have required employers to disseminate information and that “the right to disseminate another’s speech necessarily includes the right to decide not to disseminate it,” relying on analysis from prior Supreme Court and appellate court decisions which it referred to as “compelled speech” cases.

Interestingly, the Court’s conclusion that the Board’s rule violates Section 8(c) because it makes an employer’s failure to post the Board’s notice an unfair labor practice, and because it treats such a failure as evidence of anti-union animus, suggests the Board might be able to find an alternate route to a notice posting requirement if it did not seek to create such a remedy for an employer’s failure to post the notice. However, the Court refused to leave the portion of the Board’s rule requiring the Notice posting in effect even without the enforcement and remedial provisions, because they were an inherent part of the Board’s purpose in adopting the rule. For now the beleaguered Board will need to decide whether it wishes to appeal this decision to the Supreme Court, attempt to craft a new rule with the currently constituted Board that this same Court of Appeals has ruled was unconstitutionally appointed in its Noel Canning decision or postpone any action until a new Board is confirmed by the Senate.

The NLRB--Organizing by Pop-Up Unions in Break-Out Units

By: Allen B. Roberts

I wrote the February 2013 version of Take 5 Views You Can Use, a newsletter published by the Labor and Employment practice of Epstein Becker Green. In it, I discuss an alternative view of five topics that are likely to impact hospitality employers in 2013 and beyond. One topic involved the potential for labor organizing by pop-up unions in break-out units.  

Despite some perceptions of cohesiveness and political acumen, influence and wherewithal following the 2012 election cycle, labor unions represent only about 7.3 percent of the private sector workforce in the United States, and only 6.6 percent of workers are actually union members. When concentrations in certain industries and geographic areas are factored, that leaves entire swaths entirely union-free, or substantially so.

Foreseeably for the next four years, unions will continue to benefit from a National Labor Relations Board ("NLRB") that has innovated changes in substantive law and introduced procedures during the past four years that facilitate organizing and restrict the time for responsive employer communications. That advantage has not yet translated into material membership gains by "Big Labor"—although it may still.

However, together with other breakthroughs by way of social media and electronic and physical access to employer premises and communications systems, expanded interpretations of protected concerted activity, and such movements as Occupy Wall Street and grass roots organizations, conventional unions may be eclipsed, if not displaced, by one-off, special purpose organizations formed solely to serve discrete affinity groupings of employees in new bargaining units. If this occurs, it will be enabled by two bedrock principles of the National Labor Relations Act ("NLRA"), aided by a recent interpretation in case law.

First, notwithstanding the attention given by supporters and critics alike to large, well-financed conventional unions with institutionalized structures and processes, the NLRA defines a "labor organization," capable of winning certification as the exclusive representative of employees, to mean any body that exists, in whole or in part, for the purpose of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work. This means that an outside force, planning and funding offsite meetings and campaigns, is not necessary; something as simple as a homegrown pairing or grouping of workers having common interests or worries could qualify as a labor organization.

Second, with respect to the NLRB's formulation of a unit appropriate for collective bargaining purposes, it is not necessary that the unit be the most appropriate or that it conform to management's organizational structure. Historically, the NLRB has been mindful of its authority to make determinations of the unit appropriate for purposes of collective bargaining, consistent with legislative policy assuring that employees have the "fullest freedom" in exercising statutory rights to organize. If it survives Circuit Court of Appeals challenge on review, an NLRB standard adopted in 2011 could lead to a proliferation of small, fractionated bargaining units; it would place the burden on an employer contesting the appropriateness of a labor organization's preferred bargaining unit to show that employees excluded from the unit sought by the petitioning labor organization share an "overwhelming community of interest" with another readily identifiable group. If a readily identifiable group exists based on such factors as job classification, department, function, work location, and skills, and the NLRB finds that the employees in the group share a community of interest, the petitioned-for unit will be an appropriate unit, despite an employer's contention that employees in the unit could be placed in a larger unit that also would be appropriate—or even more appropriate.

Much as the NLRB's approach has been perceived to benefit large, established unions, it may not be surprising if employee groups, newly aware of the NLRB's outreach and enlargement of rights to engage in protected concerted activity through social media and other means, realize also that they are capable of becoming homegrown, single-purpose labor organizations with authorization from the NLRB to define a bargaining unit by its lowest common denominator—or to invade and fractionate existing bargaining units currently represented by Big Labor.

For more Take 5 Views You Can Use, read the full version here.

Five Actions Hospitality Employers Should Consider Taking to Comply with the Affordable Care Act

By Greta Ravitsky

I wrote the January 2013 edition of Take 5: Views You Can Use, a newsletter published by the Labor and Employment practice of Epstein Becker Green.

In it, I summarize five actions that hospitality employers should consider taking in 2013 as the DOL steps up its audit efforts under the leadership of the reenergized Obama administration,

  1. Assess the Workforce
  2. Choose Whether to “Pay” or to “Play”
  3. Evaluate Existing Wellness Programs and/or Implement New Wellness Programs to Enhance Employees’ Health Profiles and to Avoid or Minimize the “Cadillac Tax”
  4. Understand and Be Ready to Comply with New Tax-Related Changes and Requirements
  5. Conduct Self-Audits to Ensure Compliance

The following is an excerpt:

With the U.S. presidential election behind us, it is clear that the Patient Protection and Affordable Care Act (“Affordable Care Act”) is likely here to stay, having survived a U.S. Supreme Court case challenge last June. While affected employers can avoid facing penalties until 2014 for not making health care coverage available to their workforce, the U.S. Department of Labor (“DOL”) has begun auditing employers’ group health plans for compliance with other requirements of the law that are already in effect. As the DOL steps up its audit efforts under the leadership of the reenergized Obama administration, below are five actions that employers should consider taking in 2013.

Read the full version on EBGlaw.com.

IRS Releases New Affordable Care Act Guidance on the Employer Mandate

By: Kara M. Maciel, Adam Solander, Brandon Ge and Philo Hall

As we blogged about previously, the Affordable Care Act provides unique compliance obligations for hospitality employers, many of whom employ large numbers of part-time and seasonal employees.  On December 28, 2012, the Internal Revenue Service (“IRS”) released a Notice of Proposed Rulemaking (“NPRM”) on Shared Responsibility for Employers Regarding Health Coverage (the “Employer Mandate”) under the Affordable Care Act (“ACA”). The NPRM largely incorporates previously released guidance on the subject (IRS Notices 2011-36, 2011-73, 2012-17, and 2012-58).  Employers may rely on these proposed regulations for guidance until final regulations are issued.

Comments on the NPRM are due to the IRS by March 18, 2013.  The IRS has also scheduled a public hearing on April 23, 2013 to receive feedback on these issues. The Employer Mandate requirements under the NPRM take effect on January 1, 2014.

Overview

The Employer Mandate provides that employers with 50 or more full-time employees (including full-time equivalent employees) will be penalized if any full-time employee receives a premium tax credit or cost-sharing reduction to purchase health coverage through an Affordable Health Insurance Exchange (“Exchange”). Generally, an employee is eligible for a cost-sharing subsidy if: (1) an employer does not offer its full-time employees the opportunity to enroll in coverage; or (2) an employer offers its employees the opportunity to enroll in coverage, but the coverage is “unaffordable” or does not provide “minimum value.”

Applicable Large Employers

Under ACA, employers are considered to be “applicable large employers” and, therefore, subject to the Employer Mandate if they employ 50 or more “full-time” employees or a combination of “full-time” and part-time employees that equals 50 “full-time” equivalent employees.  

A full-time employee is an employee (including seasonal employees) who provides an average of 30 hours of service per week.  To calculate the number of “full-time equivalent” employees, an employer must aggregate the number of hours worked by all part-time employees (including seasonal employees) and divide this figure by 120.  The average monthly number of full-time employees plus “full-time equivalents” for the preceding calendar year determines whether an employer is an “applicable large employer.”

There is a seasonable employee exception, which applies when an employer’s workforce exceeds 50 full-time employees for no more than 120 days or four calendar months (which need not be consecutive) during a calendar year if the employees in excess of 50 during that period were seasonal employees. Employers may use a reasonable, good faith interpretation of the term seasonal worker until the IRS issues further guidance.

For purposes of determining whether an employer employs at least 50 full-time employees, companies that have common ownership or are otherwise related (such as certain franchises) will be combined using a test codified at Section 414 of the Internal Revenue Code.  However, this aggregation rule will not be applied to companies for the purposes of determining potential liability and payment amount under the Employer Mandate.

Full-Time Employees

An employee’s hours of service include each hour for which the employee is paid for performance of services, or entitled to payment even when no work is performed (for example, due to vacation, illness, or leave of absence).

Previous guidance proposed, and the NPRM adopted, a “look-back stability safe harbor method” for determining whether employees worked the requisite average of 30 hours per week to be considered full-time. Generally, under this approach, employers are allowed to select a period of time between three months and one year to use as a “measurement period” to determine if an employee worked an average of 30 hours a week.  If an employee provided 30 hours of service per week during the “measurement period,” then the employer must treat the employee as a full-time employee for a corresponding “stability period” regardless of the number of hours of service the individual works over that time period. Generally, an employer must use the same look-back period for all employees but may use different periods for certain categories of employees.

Offer of Coverage/Dependent Coverage

The Employer Mandate imposes liability on employers who do not offer their full-time employees the opportunity to enroll in minimum essential coverage. One of the more controversial aspects of the NPRM is that it requires employers to offer coverage to not only full-time employees, but their dependents as well. The NPRM defines dependents as children up to age 26, but does not include spouses in the definition.

To provide employers sufficient time to implement these changes, the NPRM provides a transition relief period with respect to dependent coverage for 2014. Under this relief, any employer that takes steps in 2014 to fulfill its obligations to offer coverage to dependents of full-time employees will not be liable for any tax payment under the law solely on account of failing to offer coverage to dependents in plan year 2014.

Determination of Affordability and Minimum Value

If an employer offers full-time employees the opportunity to enroll in minimum essential coverage, the employer will still be liable if the coverage is either “unaffordable” or does not provide “minimum value.” Coverage is affordable if the employee’s premium obligation for self-only coverage does not exceed 9.5 percent of the employee’s household modified adjusted gross income. Because, household income is not readily known to employers, the NPRM provides three safe harbors that provide more certainty with regard to the affordability of coverage.

The minimum value standard will be further addressed in subsequent guidance. A calculator will be available that will be similar to the actuarial value calculator provided by the U.S. Department of Health and Human Services. A plan will be deemed to provide minimum value if it covers at least 60 percent of the total allowed cost of benefits that the plan is expected to incur.

Calculation of the Penalty

If an applicable large employer does not offer coverage or offers coverage to less than 95 percent of its full-time employees, it must pay a penalty of $2,000 for each full-time employee (minus the first 30) if any employee receives a premium tax credit.

For employers that offer coverage for some months but not others during a calendar year, the penalty will be computed separately for each month in which the employer did not offer coverage.

This penalty will be equal to 1/12th of $2,000 for each full-time employee employed for the month (minus up to the first 30 depending on whether the employer is related to other employers).

If an employer offers coverage to 95 percent or more of its full-time employees, it must nonetheless pay the tax penalty if one or more full-time employees receive a premium tax credit on the basis of the coverage not being “affordable” or not providing “minimum value.” This penalty will be equal to 1/12th of $3,000 for each full-time employee who received a premium tax credit for the month.  The NPRM provides that the amount paid under this scenario cannot exceed the amount the employer would have had to pay if it did not offer coverage.

EBG counsels clients on ACA implementation requirements and will continue to track developments in the area.

Pool Lifts Must Comply With ADA Regulations By End of January

By Kara Maciel and Jordan Schwartz  

As a reminder, January 31, 2013 is the deadline for hotels and other places of public accommodation to comply with the Americans with Disabilities Act’s (“ADA”) requirements set forth in the 2010 Standards for Accessible Design (“2010 Standards”) related to the provision of accessible entry and exit to existing swimming pools, wading pools and spas (including pool lifts). 

As we explained here, although the effective date for the 2010 Standards was March 15, 2012, in response to public comments and concerns, the U.S. Department of Justice (“DOJ”) provided a 10-month grace period for compliance. This grace period will end on January 31, 2013. Our recent blog post explains the 2010 Standards’ requirements and sets forth what pool and spa owners and operators must do to ensure compliance with the law.

There are substantial risks of non-compliance with the 2010 Standards. Indeed, the DOJ may obtain civil penalties of up to $55,000 for just one ADA violation, and penalties up to $110,000 for any subsequent violation. Furthermore, a lack of compliance greatly increases the risk that a “drive-by” plaintiff will commence a costly lawsuit against your property. 

Hurricane Sandy Is About to Blow Our Way: Wage & Hour Implications for the Hospitality Industry

By: Kara Maciel

Hurricane Sandy is approaching this weekend, so hospitality employers along the East Coast should refresh themselves on the wage and hour issues arising from the possibility of missed work days in the wake of the storm.

A few brief points that all employers should be mindful of under the FLSA:

  • A non-exempt employee generally does not have to be paid for weather-related absences. An employer may allow (or require) non-exempt employees to use vacation or personal leave days for such absences. But, if the employer has a collective bargaining agreement or handbook policies, the employer may obligate itself to pay through such policies.
  • An exempt employee generally must be paid for absences caused by office closures due to weather, if he/she performs work in that week. The Department of Labor has stated that an employer may not dock a salaried employee for full days when the business is closed because of weather. Partial day deductions for weather related absences are not permitted.
  • If certain employees are required to be on-call (such as public safety, IT, or other essential personnel) during the storm, and the employee cannot use the time effectively for his or her own purpose, the on-call time is compensable and the employee must be paid. However, if the employee is simply at home and available to be reached by company officials, then the time is not working time and an employer does not have to pay for that time.

Policies and procedures to keep in place:

  • Decide whether your company will offer “weather days” for non-exempt workers who are absent because of disasters.
  • Ensure that your payroll systems are prepared for employees working from home, longer shifts, or not taking lunches.
  • Decide whether employees absent because of weather will be allowed / required to use vacation or PTO time.
  • Ensure safety of payroll records and ability to process payroll from alternate location if needed.

Natural disasters pose a myriad of employment and HR issues from wage-hour to FMLA leave and the WARN Act. The best protection is to have a plan in place in advance to ensure your employees are paid and well taken care of during a difficult time. Our reference tool contains answers to common questions, and while aimed at employers in the Gulf Coast, if you have operations anywhere along the East Coast, you should find it helpful.

NLRB Deflates Hotel Bel-Air's Severance Agreements to Union Employees

By Paul Burmeister

The National Labor Relations Board (“NLRB”) has ruled that negotiations between the Hotel Bel-Air and UNITE HERE Local 11 were not at impasse when the employer implemented its last, best final offer, which included severance payments to union employees. Hotel Bel-Air, 358 NLRB 152 (September 27, 2012). The NLRB upheld the ALJ’s order for the employer to bargain with the Union and to rescind all the signed severance agreements containing a waiver of future employment with the Hotel Bel-Air.

The Hotel Bel-Air is a luxury hotel located in Los Angeles. The Hotel Bel-Air (“Employer”) has a lengthy collective bargaining history with the Union. The last collective bargaining agreement between the parties had expired on September 30, 2009.  Shortly before the expiration of that contract, the Union sent a notice to the employer to bargain a successor contract. However, the Employer responded that the Hotel was scheduled to close for a period of two years for renovation, and that the parties should meet to bargain the effects of the closure.

Over a six month period following the expiration of the contract, the parties met on several occasions, but were unable to hammer out a successor agreement or a culmination of effects bargaining. On April 9, 2010 the parties met across the table and were unable to come to a fruitful conclusion of the bargaining. The Employer declared the April 9, 2010 proposal as its last, best and final offer and stated it would deem negotiations at impasse if the offer was not accepted in a week. Not only did the deadline for acceptance get extended, but the parties continued ‘off the record’ discussions to resolve the collective bargaining agreement and the effects bargaining.

Despite the continued ‘off the record’ discussions, the parties were unable to come to an agreement, and the Employer eventually implemented its April 9, 2010 last, best and final offer on July 7, 2010. As part of the implementation, the Employer sent each of the union employees a severance agreement and a general release offering payment in exchange for a waiver of any recall right to employment following the reopening of the Hotel Bel-Air.

The Union filed an unfair labor practice charge alleging the Employer implemented its offer without bargaining to an impasse and for dealing directly with the employees. In both instances, the NLRB ruled in favor of the Union.

The NLRB decided that the parties were not at impasse. Since the parties continued meeting after April 9, 2010, albeit ‘off the record’, those meetings were considered in whether impasse was reached. As there was evidence of continued bargaining and in some instances, agreement, the possibility of a fruitful discussion between the parties would have broken any impasse.

Second, without a valid impasse, the letter sent on July 7, 2010 offering terms of severance directly to the employees circumvented the union and was considered direct dealing. Further providing evidence of direct dealing, the cover letters to the employees stated that the Employer was “very happy to give you the opportunity to decide for yourself whether you want to accept this offer.” The Employer’s arguments that the employees no longer worked for the Hotel also fell flat. The employees were informed in the letter that they were waiving their recall rights, obviously evidencing the possibility of a return to work. Accordingly, the severance packets sent to employees were direct dealing and ordered rescinded by the NLRB. The Board allowed the Employer to negotiate the recoupment of severance payments already made instead of barring the Employer from such a request.

When negotiating with labor unions, hospitality employers should keep the following tips in mind: 

  • Management should use ‘off the record’ discussions during bargaining with trepidation. While it may be a tool in advancing bargaining, they are considered to be part and parcel with the negotiations. If there is an impasse, even off the record discussions discussing settlement likely will break the impasse.
  • Management should consider whether an impasse exists or not prior to communicating changes to terms and conditions of work directly to employees.

*Posted by permission from the Management Memo blog.

Timeline of Highlights for Employer Group Health Plan Compliance with the Affordable Care Act

Now that the Supreme Court of the United States has upheld essentially all of the provisions of the Obama administration's Affordable Care Act ("ACA"), hospitality employers are faced with looming deadlines to bring their group health plans into compliance with the ACA's numerous new requirements. We have prepared for employers a timeline of the highlights of the upcoming deadlines for compliance with the ACA that apply to non-grandfathered group health plans.

Click here to access a copy of the timeline.

 

Tip Pools: Challenging DOL's Amended Rule on Employee Participation

By:  Kara M. Maciel

In April of 2011, the U.S. Department of Labor (“DOL”) changed its rule defining the general characteristics of tips in an attempt to overrule the U.S. Court of Appeals for the Ninth Circuit’s decision in Cumbie v. Woody Woo, Inc. ruling that the FLSA does not impose any restrictions on the kinds of employees who may participate in a valid tip pool where the employer does not claim the “tip credit.”

DOL’s Recent Position on Tip Pool Participation

The DOL’s amended rule provides that tips are the property of the employees, and may not be used by the employer for any purpose other than as a tip credit or in furtherance of a valid tip pool, regardless of whether the employer actually uses the “tip credit.”  Accordingly, the DOL will now find a tip pool to be invalid if it includes employees who do not “customarily and regularly receive tips” – a requirement that the DOL generally interprets to limit tip pools to employees who provide direct service to customers.

Earlier this year, the DOL issued a memorandum stating that it would be enforcing its new rules on tip pools uniformly throughout the country.  Accordingly, employers who have established mandatory tip pools but who do not use the tip credit may find themselves faced with DOL enforcement actions if they permit employees who do not provide direct service to participate in the tip pools.  Those businesses faced with such enforcement actions may find it in their interest to challenge the validity of the DOL’s position on tip pools and argue that it conflicts with the plain language of the FLSA. 

Legal Arguments to Challenge DOL’s Interpretation on Tip Pools

For those businesses seeking to challenge the DOL’s new rule on tip pooling, the Ninth Circuit’s opinion in Woody Woo, provides useful guidance.  Specifically, the Court concluded that that the plain language of Section 203(m) of the FLSA imposes limitations on mandatory tip pools only when the employer takes a “tip credit,” and does not state freestanding requirements for all tip pools.  Further, under the U.S. Supreme Court precedent, when a federal statute addresses a particular issue, courts must apply the plain language of the statute and may not rely on a federal agency’s interpretation of the law, particularly if the agency’s interpretation conflicts with the plain language of the statute.  Based on this case law, an employer could argue that the DOL’s position on tip pools is invalid because it conflicts with the plain language of Section 203(m) of the FLSA.  Specifically, the DOL has attempted to extend to all tip pools a restriction that Congress clearly limited to tip pools involving workers for whom the employer claims the “tip credit.” 

The DOL has attempted to get around this argument by claiming that Section 203(m) of the FLSA left a “gap” in the statutory scheme regarding the treatment of tips which the DOL may fill through its interpretation of the law.  Under Woody Woo, the problem with the DOL’s argument is that it mischaracterizes Congress’ clear intent to limit the FLSA’s restrictions on mandatory tip pools to those involving employees for whom the employer claims the “tip credit” as “silence” on the issue of whether those same restrictions apply to other kinds of tip pools.  However, a legislative decision to limit a particular rule’s application to one situation does not create a “gap” for a federal agency, like the DOL, to then apply that rule to other situations.  Indeed such an expansion of the rule would conflict with the limitations on its application that were expressly established by Congress.

While a federal agency, like the DOL, can fill “gaps” left by a statute it enforces, the agency does not have the power to simply make new law.  To the extent that the FLSA is “silent” about the restrictions on mandatory tip pools in situations in which the employer does not claim the “tip credit,” that is because the statute does not address the subject matter at all.  Rather, as the Ninth Circuit noted in Woody Woo, it regulates tip pools only to the extent that they are comprised of employees for whom the employer claims the “tip credit.”  A rule or enforcement position that imposes restrictions on such tip pools does not fill a “gap” left by Congress; it is nothing more than an attempt to create new law – something the DOL cannot do.

Review Tip Pool Practices

In light of the DOL’s enforcement efforts, all hospitality employers should review their tip pooling practices to ensure compliance with both federal (and state) laws.  While the safest approach to administering a tip pool may be to comply with the DOL’s current interpretation, and restrict participation to non-management employees who provide direct service to customers, hospitality businesses that are faced with enforcement actions based on their past practices may find it useful to raise these challenges to the DOL’s position.  A successful challenge to the DOL’s enforcement position can allow hospitality businesses to avoid significant monetary penalties and preserve valid tip pool arrangements that promote cooperation and harmony among their employees.

Texas Roadhouse, Inc. Settles Its Beef With Wait Staff For $5 Million

By  Kara Maciel and Casey Cosentino

The restaurant and hospitality industries are no strangers to the tidal wave of wage and hour class action lawsuits. Restaurants and hotel operators located in states with employee-friendly laws like Massachusetts, New York, and California, are particularly vulnerable. This vulnerability was recently confirmed on April 30, 2012, when Texas Roadhouse, Inc. agreed to pay $5 million to settle a putative class action suit filed by wait staff employees from nine restaurants in Massachusetts.

In Crenshaw, et. al, v. Texas Roadhouse, Inc. (No. 11-10549-JLT), the plaintiffs alleged that Texas Roadhouse violated Massachusetts Tips Law by retaining and distributing proceeds from their gratuities to managers and other non-wait staff employees, including hosts/hostesses. Additionally, because the plaintiffs did not receive all of their gratuities, they asserted that Texas Roadhouse improperly claimed the tip credit against the minimum wage in violation of Massachusetts Minimum Wage Law. As such, Texas Roadhouse allegedly paid the plaintiffs less than minimum wage. The plaintiffs, therefore, argued that they were entitled to full minimum wage for all hours worked.

Under Massachusetts law, employees who receive at least $20 per month in gratuities may be paid $2.63 per hour (“tip credit”), provided that the gratuities and hourly pay rate when added together are equal to or greater than the state minimum wage of $8.00. If the employee does not receive the equivalent of the minimum hourly wage with his or her tips, the restaurant or hotel must pay the difference. Although restaurants and hotel operators are prohibited from retaining employees’ gratuities, they may distribute properly pooled tips. Accordingly, when the tip credit is claimed to satisfy the minimum wage, only employees who customarily and regularly receive tips are eligible to participate in the tip pool. These employees include wait staff employees (e.g., banquet servers and bussers); service employees (e.g. baggage handlers and bellhops); and bartenders. Conversely, employees not eligible for tip pool arrangements include kitchen staff, cooks, chefs, dishwashers, and janitors. Also, under no circumstances are employers, owners, managers, or supervisors permitted to share in the tip pool.  

The Texas Roadhouse settlement illustrates the importance of adhering to state and federal minimum wage laws. A violation of a tip pool arrangement can lead to high exposure for restaurants and hotels, not only with respect to money wrongfully withheld from employees, but also with potential tip credit violations. With the flood of class action suits, restaurants and hotel operators must continue to make compliance with wage and hour laws a top priority. As a best practice, restaurants and hotel operators should conduct regular self-audits of their wage and hour practices, in consultation with legal counsel. Identifying and correcting wage and hour mishaps before plaintiffs collectively seek action is the first defense to preventing class action suits and reducing legal liability.

D.C. Circuit Limits OSHA's Recordkeeping "Madness"

By Eric J. Conn and Casey M. Cosentino

In what has been good news for hospitality employers, the past month has been a rough stretch for OSHA in terms of Injury and Illness Recordkeeping enforcement.  As we reported last month on the OSHA Law Update Blog, in March, the Seventh Circuit beat back OSHA’s attempt to expand the meaning of “work related” for purposes of determining whether an injury or illnesses is recordable.  Then last month, the District of Columbia Circuit further and dramatically limited OSHA’s authority to cite Recordkeeping violations, by insisting that the injury that is the subject of the recordable case actually have occurred within 6-months and 8 days of the citation. 

In this most recent development, the U.S. Court of Appeals for the D.C. Circuit strictly applied the 6-month statute of limitations for issuing violations under the Occupational Safety and Health Act (“OSH Act”). See AKM LLC, d/b/a Volks Constructors v. Sec’y of Labor, No. 11-1106 (D.C. Cir. Apr. 6, 2012).  By way of background, the OSH Act states that “[n]o citation may be issued . . . after the expiration of six months following the occurrence of any violation.” 29 U.S.C. § 658(c).  The OSH Act further provides that “[e]ach employer shall make, keep and preserve” records of workplace injuries and illnesses “as the Secretary . . . may prescribe by regulation.” 29 U.S.C. § 657(c)(1).  Pursuant to this delegated authority, the Secretary of Labor has issued regulations that require employers to:

1.      Record work-related injuries and illnesses on OSHA’s 300 Log and 301 Report “within seven (7) calendar days of receiving information that a recordable injury or illness has occurred;”

2.      Prepare a year-end summary report of all recordable injuries during the calendar year on OSHA’s 300A Summary Form; and

3.      Maintain or save the 300 Logs, 301 Reports, and 300A Summary Forms for 5 years.

In the Volks case, OSHA issued Volks Constructors (“Volks”) citations on November 8, 2006, for allegedly failing to maintain complete injury and illness records from 2002 through 2006.  Volks was not cited, however, for failing to save the logs and forms for the requisite 5 years.  Rather, the violations related to Volks not recording or not properly recording individual recordable injuries or illnesses on the 300 Log.

Volks moved to dismiss the citations as untimely because none of the referenced injuries occurred within the 6 months preceding the citations.  In opposition, OSHA contended that Volks’ duty to maintain injury and illness logs and forms for 5 years tolled the 6-month statute of limitations.  The administrative law judge assigned to the case sided with OSHA, and the Occupational Safety and Health Review Commission (“OSHRC”) later affirmed the ALJ’s decision. OSHRC concluded that because of the duty to preserve the log for 5 years, Volks’ failure to record the employee injuries and illnesses constituted “continuing violations,” which extended the 6-month statute of limitations until six months after the end of the 5-year retention period.

On appeal, the D.C. Circuit reversed and vacated the citations. In doing so, the D.C. Circuit found that the OSH Act’s express language rendered the citations untimely because every alleged failure-to-record violation and every workplace injury that gave rise to the violations “occurred” more than 6 months before the citations were issued.  The Court stated that, under the Secretary’s argument, “the statute of limitations Congress included in the Act could be expanded [infinitely] if, for example, the Secretary promulgated a regulation requiring that a record be kept of every violation for as long as the Secretary would like to be able to bring an action based on that violation. There is truly no end to such madness.”  The Court further noted that “[n]othing in the statute suggests Congress sought to endow this bureaucracy with the power to hold a discrete record-making violation over employers for years, and then cite the employer long after the opportunity to actually improve the workplace has passed.”

Under the Volks decision, OSHA may only cite employers for failing to record a work-related injury from the 8th day after an unrecorded injury occurred until 6-months and 8 days after the injury.  The precedential value of the Volks decision is significant because the decision was issued by the D.C. Circuit, which has jurisdiction to hear any case appealed from the OSH Review Commission.

The timing of the decision is also noteworthy because it coincided with the expiration of OSHA’s two and a half year long Recordkeeping National Emphasis Program, an enforcement program that resulted in hundreds of Recordkeeping-focused inspections.  Alleged Recordkeeping violations were found and cited by federal OSHA in two-thirds of the inspections carried out under the Recordkeeping National Emphasis Program, and yielded nearly 1,000 total Recordkeeping violations.  At the time the inspections were conducted and citations issued, OSHA was continuing its practice of citing employers for Recordkeeping issues as old as five years.  We understood that OSHA had intended to renew the Recordkeeping NEP.  Perhaps the Volks decision lead to an early retirement (or temporary hold) on that program.

Regardless of the expiration of the NEP and this new time crunch imposed by the Volks decision, hospitality employers should expect OSHA to find new ways to continue citing Recordkeeping violations, such as by amending its regulations or requiring electronic submission of Injury and Illness records to OSHA.

New HazCom Standard: The Most Frequently Cited Standard in the Hospitality Industry Gets a Facelift

By Eric J. Conn and Casey M. Cosentino

For years, OSHA’s Hazard Communication Standard (“HazCom”) has been the standard most frequently cited against hotel and other hospitality employers.

In FY 2011 37 hotel companies were cited for violations of the HazCom Standard, including, primarily, alleged failures to:

(1) maintain a written Hazard Communication Program;

(2) ensure each container of hazardous chemicals (such as cleaning agents) is labeled, tagged, or marked;

(3) maintain a complete set of Material Safety Data Sheets (“MSDS’s”) for each hazardous chemical at the workplace; and

(4) train employees in the written program and how to use MSDS’s

This important OSHA Standard, that has long impacted hospitality employers, received a major facelift last month. On March 26, 2012, OSHA issued a final rule that integrates the United Nations’ Globally Harmonized System of Classification and Labeling of Chemicals (“GHS”) into OSHA’s Hazard Communication Standard (“HazCom”). 

The new HazCom Standard requires employers to classify chemicals according to their health and physical hazards, and to adopt new, consistent formats for labels and Safety Data Sheets (“SDS’s”) for all chemicals manufactured or imported in the United States. According to Assistant Secretary Michaels, “OSHA's 1983 Hazard Communication Standard gave workers the right to know . . . this update will give them the right to understand.”

In preparing to implement the new HazCom Standard, below is a list of 10 important things employers need to know about the final rule. Look out for our article coming soon in EHS Today Magazine for a more detailed review of these 10 issues.

1.       Hazard Classification: The new HazCom Standard has specific criteria for classifying health and physical hazards into a hazard class and hazard category. The hazard class indicates the nature of hazard (e.g. flammability) and the hazard category is the degree of severity within each hazard class (e.g. four levels of flammability).

2.       Mixtures: Evaluating health hazards of mixtures is based on data for the mixture as a whole. If data on the mixture as a whole is not available, importers and manufacturers may extrapolate from data on ingredients and similar mixtures. 

3.       New Label Requirements: For each hazard class and category, chemical manufacturers and importers are required to provide common signal words, pictograms with red borders, hazard statements and precautionary statements. Product identifiers and supplier information are also required.  

4.       Safety Data Sheets: SDS’s replace MSDS’s, and the new Standard requires a standardized 16-section format for all SDSs to provide a consistent sequence for organizing the information.          

5.       Non-Mandatory Threshold Limit Values in SDSs: Employers are required to include in SDS’s the non-mandatory threshold limit values (TLV’s) developed by the American Conference of Governmental Industrial Hygienists, in addition to OSHA’s mandatory permissible exposure limits (“PEL’s”).

6.        Information and Training: Employers are required to train employees on the new label elements (e.g. signal words, pictograms, and hazard statements) and SDS format by December 1, 2013. 

7.       Other Effective Dates:  The table below shows the rolling effective dates of the new Standard:

Effective Date

Requirement(s)

Who

December 1, 2013

Train employees on the new label elements and SDS format.

Employers

June 1, 2015

December 1, 2015

Compliance with all modified provisions of the final rule, except:

The Distributor shall not ship containers labeled by the chemical manufacturer or importer unless it is a GHS label.

Chemical manufacturers, importers, distributors, and employers

June 1, 2016

Update alternative workplace labeling and hazard communication program as necessary, and provide additional employee training for newly identified physical or health hazards.

Employers

Transition Period to the Effective Dates Noted Above

Comply with the current HazCom Standard, the amended HazCom Standard, or both.

Chemical manufacturers, importers, distributors, and employers

 

8.       Hazards Not Otherwise Classified: Hazards covered under the old HazCom Standard but not addressed by GHS are covered under a separate category called “Hazards Not Otherwise Classified” (“HNOC”). HNOC’s need only be disclosed on the SDS and not on labels.Notably, pyrophoric gases, simple asphyxiants, and combustible dust are not classified under the HNOC category. Rather, these chemicals are addressed individually in the new Standard. 

9.       No Preemption of State Tort Laws: The new HazCom Standard does not preempt state tort laws, which means that it will not limit personal injury lawsuits regarding chemical exposures, inadequate warnings on labels, and/or failure to warn. 

10.    Combustible Dust:  The final rule added combustible dust to the definition of “hazardous chemicals,” and thus, combustible dust hazards must be addressed on labels and SDSs. Although the new HazCom Standard expressly states that combustible dust is covered, OSHA failed to define combustible dust, which will likely create substantial confusion and uncertainty for employers.

 

Are Employer Social Networking Accounts Protectable Trade Secrets?

By: Kara M. Maciel and Matthew Sorensen

Social media has become an increasingly important tool for businesses to market their products and services. As the use of social media in business continues to grow, companies will face new challenges with respect to the protection of their confidential information and business goodwill, as several recent federal district court decisions demonstrate.  

Christou v. Beatport, LLC (D. Colo. 2012), Ardis Health, LLC v. Nankivell (S.D. N.Y. 2011), and PhoneDog v. Kravitz (N.D. Cal. 2011) each involved former employees who took the login credentials for their employers’ business social media accounts when they left their employment. In each case, the companies alleged that the removal of the login credentials for their social media accounts by their former employees had significant negative consequences on their ability to effectively compete and market their products and services.

Earlier this year, the U.S. District Court for the District of Colorado addressed whether a nightclub owner’s MySpace page and its connections could constitute a protectable trade secret. In Christou v. Beatport, LLC, Bradley Roulier, a former partner in a business that ran two Denver nightclubs kept the login credentials for the clubs’ MySpace pages when he left the partnership to start his own competing nightclub. According to the complaint, the nightclubs’ MySpace pages each had over 10,000 “friends.” After leaving to start his own competing club, Mr. Roulier used the login credentials that he had taken to post updates to his former partner’s MySpace pages promoting his new night club. His former partner then sued him for misappropriation of its trade secrets – namely the login credentials for its MySpace pages and the “friend” connections for those pages. On Mr. Roulier’s motion to dismiss, the court found that the MySpace login credentials and the “friend” connections could constitute protectable trade secrets. The court concluded that the MySpace pages were password protected, that the “friend” connections for the clubs’ MySpace pages were more than just lists of potential customers, they also provided personal information about the “friends” and their preferences, and the clubs’ lists of “friends” could not be duplicated without a substantial amount of effort and expense.

In a similar case, Ardis Health, a former employee effectively froze her former employer out of its business social media websites by taking the login credentials for the accounts and refusing to return them to the former employer. The employee had formerly been responsible for creating and updating the company’s social media websites and was in sole possession of the login credentials for those websites at the time her employment was terminated.  Accordingly, when she refused to return the login credentials after her termination, the employer could no longer access or update its websites. The employer was ultimately able to obtain a preliminary injunction requiring the former employee to return the login credentials for its social media websites based on the theory that the former employee’s unauthorized retention of that information constituted conversion. In finding that the company owned the rights to the login credentials for its social media sites, the court noted that the former employee had entered an agreement in which she had agreed that any work she created or developed during her employment would be the property of the company.

Finally, in PhoneDog, a former employee who had been responsible for establishing and operating a Twitter account for his employer that was designed to increase traffic to his employer’s website kept the login credentials for the account after he terminated his employment with the company, renamed the account, and kept its Twitter following. PhoneDog alleged its Twitter following was the equivalent of a proprietary customer list. PhoneDog also alleged that, by taking the account, the employee effectively decreased the number of visitors to the company’s website and thereby reduced the number of advertisers who were willing to purchase space on its website. On the former employee’s motion to dismiss, the U.S. District Court for the Northern District of California held that the Twitter account, its login credentials, and its followers could potentially constitute protectable trade secrets and that the unauthorized taking of the account and its login credentials constituted misappropriation. 

It should be noted that the courts in both PhoneDog and Christou did not find that the plaintiffs had established that their social media accounts were trade secrets. Rather, the courts simply held that they had alleged sufficient facts to state a claim that those accounts were trade secrets. The question of whether the employers will be able to prove the facts necessary to prevail on their claims was left open and both plaintiffs may very well encounter difficulties in proving the facts necessary to prevail on their trade secrets claims later in their respective cases.

These cases demonstrate the importance of careful planning to protect a company’s social media presence and its business connections. Employers should ensure that they maintain a log of their social media account login credentials and that the log is appropriately updated. Further, companies are well advised to require employees who establish and maintain such accounts on behalf of the company to enter agreements that provide that the accounts and their login credentials are the sole property of the company. Departing employees should also be interviewed in connection with their exit to ensure that all company social media login credentials to which they had access have been returned. Finally, in the event that an employee takes the login credentials for the employer’s social media accounts when he or she leaves the company, it is essential for the employer to take prompt action to recover the information. Delay can result in the loss of legal protections for the accounts and any connections that they hold.

5 Ways to Avoid a $55,000 Fine from the DOJ

By:  Kara M. Maciel

Today, March 15, marks the effective date of the 2010 ADA Standards for hotels, restaurants, retailers, spas, golf clubs and other places of public accomodation.  As we have written about previously, there are several new requirements and obligations that the hospitality industry must implement in order to ensure their properties are compliant with the new regulations.  Below are five steps every hospitality owner and operator should consider to avoid costly fines and lawsuits:

1.  Implement new reservation policies for blocking off rooms and ensuring staff communicates effectively with guests as to the accessible elements within the Hotel.

2.  Know what you can and cannot say to individuals with a service animal.

3.  Got a pool, hot tub, sauna, or fitness room?  Understand your new obligations for modifying those areas which are not covered by the 2010 ADA Standards' safe harbor.

4.  Train staff members (including reservations agents, concierge, front desk, restaurant staff) on accessible elements within your property and how to communicate and interact with guests with disabilities. 

5.  Conduct an walk-through inspection of your property with legal counsel to review compliance efforts and recommendations for improving compliance.

In light of increased penalties from the DOJ ($55,000 for the first violation and $110,000 for each subsequent violation) and the tidal wave of recent professional plaintiff lawsuits, we expect enforcement efforts within the hospitality industry to significantly rise.  As the old adage goes, an ounce of prevention is worth a pound of cure.  Reviewing policies and procedures, training staff members, and conducting an inspection protected by the attorney-client privilege will go a long way to ensure your property and facility does not face costly compliance issues. 

 

 

Hotel Operators and Managers Remain Vulnerable to Wage and Hour Class Actions

By:  Casey Cosentino

A hotel management company was recently hit with a putative class action in federal court for allegedly failing to compensate hotel employees overtime pay at one and one-half times their regular rate of pay for all hours worked over 40 hours in a workweek. As the chief engineer, the lead plaintiff was classified as an executive employee and, thus, was exempt from overtime requirements under the Fair Labor Standards Act (“FLSA”). The lead plaintiff asserts, however, that he was misclassified under the Executive exemption because he “regularly and routinely performed non-exempt tasks . . . including but not limited to, upkeep of the hotel and its grounds, and building and property maintenance; and supervised no more than one other employee.” As such, the complaint contends, among other things, that he and other similarly situated employees unlawfully worked between 50 and 60 hours per week without receiving overtime pay. 

As evidenced by this case, a constant issue challenging the hospitality industry is the proper classification of employees as exempt under the Executive exemption when those employees regularly and routinely perform non-exempt duties. By way of background, the FLSA requires employers to pay employees at one and one-half times their regular rate of pay for hours worked in excess of 40 hours; however, there are exemptions from overtime pay for an employee employed as bona fide executive, professional, administrative, outside Sales, and computer professional. Specifically, to qualify for the Executive exemption, employees must meet all of the following requirements:

1.              The employee must be compensated on a salary basis at a rate not less than $455 per week;

2.              The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;

3.              The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and

4.              The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

A “primary duty” under the Executive exemption is the “principal, main, major or most important duty that the employee performs.” 29 C.F.R. § 541.700(a). Notably, an executive employee is not precluded from exempt status for performing non-exempt work when his/her primary duty is to perform managerial duties such as interviewing, directing work, appraising work performance, and delegating assignments. Determination of an employee’s primary duty is based on all the facts in a particular case, and not solely on the amount of time spent on a particular aspect of the employee’s job. Indeed, “[e]mployees spending less than fifty percent of their time on managerial aspects can nonetheless satisfy the primary duty requirement under other relevant facts of the case,” including:   

·         Importance of exempt duties as compared with other types of duties;

·         Amount of time spent performing exempt work;

·         Employee’s relative freedom from direct supervision; and

·         Relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee.

29 C.F.R. § 541.700(b).

Most industries have experienced the tidal wave of wage and hour class action suits with respect to misclassifying exempt employees, and the hospitality industry is no exception. Because it is common for exempt employees in the hospitality industry to perform non-exempt duties, hotels classifying or planning to classify employees under the Executive exemption should ensure that their primary duty is managerial functions. Moreover, as a best practice, prudent hotel operators should regularly review their wage and hour practices to ensure compliance with federal and state laws. In doing so, hotel operators should: (1) review and update employee classifications and job descriptions; (2) audit their payroll practices with an emphasis on overtime calculation, meal and rest break periods, and salary deductions; and (3) determine whether “preliminary” and “postliminary” job tasks are compensable work time. Identifying and correcting wage and hour mistakes before plaintiffs collectively march to the courthouse is vital to defending class action wage and hour suits and reducing legal liability.

Mandatory Employee Arbitration Agreements: The NLRB Throws a Wrench into Their Enforceability

By:  Forrest G. Read, IV

Arbitration agreements can be an effective way for employers in the hospitality industry to streamline and isolate an employee’s potential claims on an individual basis and protect themselves from a proliferation of lawsuits with many plaintiffs or claimants. But the National Labor Relations Board’s (“Board”) January 6, 2012 decision in D.R. Horton, Inc. and Michael Cuda, notably finalized by two Board Members on departing Member Craig Becker’s final day, has caused significant confusion as to how employers can enforce such arbitration agreements with their employees over employment claims, including wage and hour disputes. 

In D.R. Horton, the Board concluded that an employer commits an unfair labor practice under the National Labor Relations Act (“NLRA”) when it requires, as a condition of employment, its employees to sign an arbitration agreement that precludes them from filing, in any forum, any class or collective claims addressing their wages, hours or other working conditions against the employer. However, the Board’s decision in D.R. Horton appears to be inconsistent with, if not directly contradicts, a recent U.S. Supreme Court decision upholding the validity of class action waiver provisions in consumer arbitration agreements under the Federal Arbitration Act, which many employers and members of the labor and employment bar interpreted as extending to waiver provisions in employment-related agreements.

Notwithstanding the Supreme Court’s unmistakable and consistent pro-arbitration stance, the Board in D.R. Horton directly concluded that Supreme Court precedent regarding arbitration agreements did not apply to the employment context.  The Board’s decision is controversial because it was issued by two Members leaving employers left to question its validity and confused as to which precedent to follow.  In addition, it represents another example of the Board’s willingness to insert itself into matters outside the traditional unionized workplace and find NLRA violations outside the labor-management realm.

D.R. Horton is also controversial because it places courts at an intersection of whether to follow and apply Board or Supreme Court precedent.  Indeed, since the Board’s ruling in D.R. Horton, at least one court in New York weighed in on the issue and, in following Supreme Court precedent, tentatively ruled that D.R. Horton does not apply in the wage-hour context where the employee had voluntarily entered into an arbitration agreement not as a condition of employment. But the court noted that D.R. Horton may have applied and led to a different conclusion if the argument had been made that the arbitration agreement had been presented to the employee in a confusing fashion or had operated through compulsion by the employer (even if presented voluntarily).

In short, the question of whether employment-related arbitration agreements are enforceable will remain a murky one until D.R. Horton, currently a hindrance to hospitality employers that seek to compel individual arbitration of wage and hour claims with their employees, is appealed and decided upon by an appellate court. In the meantime, employers should be cautious about the application of such agreements. Any current arbitration agreements (particularly those that include class action waivers) should be reviewed for enforceability, and perhaps suspended depending on how the waiver provisions were worded and the circumstances under which they were agreed to. In addition, hospitality employers should carefully consider whether and how to present new arbitration agreements to employees and scrutinize the agreement’s waiver provisions before they are executed.

NLRB Recess Appointments Challenged -- Could Further Postpone Notice Posting

By:  Evan Rosen

As Hospitalty Labor and Employment Law Blog readers are aware, on August 30, 2011, the National Labor Relations Board (the “Board”) issued a rule requiring employers to post notices informing employees of their right to join or form a union.  We blogged about the impact of the notice and its requirements on hospitality employers here.  The rule was originally supposed to go into effect in November, but was subsequently pushed back to January 31, 2012 as a result of mounting criticism against the rule.  Indeed, several lawsuits have been filed by business groups alleging that the Board overstepped its discretion in imposing the rule on employers.  A federal judge in one of the cases recently asked the Board to further postpone the posting requirement so that the legal challenges could be heard, and the Board agreed, this time postponing the rule’s implementation to April 30, 2012

The rule's implementation could be further complicated by President Obama's recent recess appointments to the Board.  On January 5, 2011, three new members were appointed to the NLRB bringing it up to its full compliment of 5 members.  Because the recess appointments were appointed while the Senate conducted pro forma sessions -- and thus was not technically in recess -- several business groups and Congressional leaders have criticized the appointments.  In the lawsuit filed by the National Federation of Independent Business challenging the NLRB's posting requirement, the NFIB, last week, filed an amended complaint asserting new claims that the recess appointments were unconstitutional and illegal.  If the claims are successful, the Board could lose its three recess appointments, leaving it down to only 2 members which would fall below quorum and prevent the Board from issuing any rules or decisions. 

Whether the recess appointments stand and the notice posting is implemented remains to be seen but it brings a lot of uncertainly to hospitaity employers with respect to NLRB compliance.  This is particularly true where unions have been aggressively seeking new hospitality employers to organize.  Stay tuned! 

ADA Update: New Swimming Pool Regulations Take Effect Soon!

By: Kara M. Maciel

As hoteliers and hospitality employers know, the upcoming March 15, 2012 deadline for the 2010 ADA Standards will have significant impact on hotel operations. Some of the regulations involve new features that previously had not been regulated by the ADA, including swimming pools, spas, exercise facilities, golf and sauna and steam rooms.  All newly constructed recreational facilities built after March 15, 2012 must comply with the new standards; whereas, existing facilities must meet the new standards as soon as readily achievable.  For hoteliers, some of the most common elements that will affect operations immediately will be pools & spas.   

Pools & Spas Compliance Standards

The new standards require access which mandates either adding a pool lift or renovating the swimming pool and spa entirely depending on the size of the pool:

·         For pools less than 300 feet, there must be at least one means of access with either a sloped entry or a lift.

·         For pools 300 feet or longer, there must be two means of access with the primary means of access either a sloped entry or a lift. 

·         A wading pool must have a sloped entry. 

If the hotel opts for a pool lift, that also must meet specific requirements under the ADA 2010 Standards on elements such as seat height and width, foot and arm rests, controls, lifting capacity and submerged depth. 

For spas, the regulations are similar and the spa equally must be accessible with at least one required means of access through either a sloped entry or a lift. If the resort has more than one spa, then at least 5 percent of the total number should be accessible.     

Questions for Compliance

The cost of compliance could be expensive for hotel owners, especially in a difficult economy. For those hoteliers that already have pools & spas, the owners must remove the access barriers only to the extent they are readily achievable. Readily achievable means easily accomplishable and able to be carried out without much difficulty or expense. Thus, if your property has the resources to make the necessary modifications, such as purchasing a pool lift, then such modifications should be accomplished by the March 15 deadline. 

If the cost of compliance is not readily achievable, hoteliers would be prudent to budget and plan for updating its access barriers as soon as possible. Of course, that does not relieve the entity from exploring other ways to provide access to guests with disabilities, such as providing staff assistance. 

Risks of Non - Compliance

Failing to comply can be costly for the hotel owner and operator. Not only is there an increased threat of lawsuits and complaints from the overzealous plaintiffs’ bar, but the Department of Justice has raised the stakes for violations, in the amount of $55,000 for the first violation and $110,000 for any subsequent violation. 

Stay tuned for additional articles on compliance questions under the ADA. 

Top Legal Issues for the Hospitality Industry to Watch in 2012

by:  Matthew Sorensen

 1.      Deadline For Compliance With New ADA Accessibility Rules Approaching:

 On March 15, 2012, hospitality establishments will be required to be in compliance with the standards for accessibility set by the Department of Justice’s final regulations under Title III of the ADA (2010 ADA Standards). The regulations made significant changes to the requirements for accessible facilities, and will require additional training of staff on updated policies and procedures in response to inquiries from guests with disabilities. Among the most significant changes for hospitality businesses are:           

·         New structural and communication-related requirements for automatic teller machines (“ATMs”);

·         Accessible means of entry for pools and spas – for pools, a sloped entry or a pool lift is required for the primary method of entry, and for spas, the means of entry may be a pool lift, transfer wall, or transfer system;

·         At least 60% of public entrances must be accessible as compared with 50% under the former standards;

·         A new requirement to modify hotel policies to ensure that individuals with disabilities can make reservations for accessible guest rooms during the same hours and in the same manner as individuals who do not need accessible rooms;

·         Golf facilities must have either an accessible route or golf cart passages with a minimum width of 48 inches connecting accessible spaces of the golf course.

2.      Tip Credit and Tip Pooling Lawsuits Remain The Lawsuit Du Jour:

 In recent years, the number of individual and collective action lawsuits involving allegations of tip credit and tip-pooling violations by hospitality businesses has significantly increased. Given the ever changing web of state, federal and local laws regarding tip credit and tip pooling arrangements, it is important that hospitality employers with tipped employees periodically audit their pay practices to ensure compliance with all applicable rules. To minimize the risk of tip credit and tip pooling violations employers should ensure that:

·         They inform tipped employees of any tip credit claimed against their wages;

·         Employees report their tips and that proper records of tips are maintained; and

·         Management and other categories of workers who are precluded from participating in tip pools by federal, state or local law do not participate in such pools.

3.      Increase In Organizing Efforts By UNITE HERE:

The NLRB’s new rule amending the procedures for union election cases introduces a number of union-friendly changes to the election process, including the elimination of the right to seek NLRB review of regional directors’ pre-election rulings. These changes increase the risk that unions will seek approval of smaller units for elections that are based on the extent to which employees in such units support union representation. 

In addition, the NLRB has also announced that its new rule requiring employers to post a notice describing employee rights under the NLRA will go into effect on April 30, 2012. The notice has the potential of generating more discussion of unionization among employees as well as more employee and union-initiated representation campaigns. 

It is anticipated that groups like UNITE HERE will likely attempt to capitalize on these recent changes to increase unionization in the hospitality sector.

4.      Social Media Remains A Hot Topic With The NLRB:

As the use of social media has steadily grown among restaurants and hoteliers, so too has the NLRB’s interest in cases involving social media policies and social media-related discipline. While employees do not receive protection under the NLRA merely by posting a work-related complaint on a social media website, under some circumstances employee complaints made using social media may be found to constitute protected concerted activity. 

As such, hospitality employers need to remain cautious when crafting social media policies and any time they contemplate taking adverse action against an employee for social media activity. 

5.      U.S. Supreme Court to Address The Patient Protection and Affordable Care Act (PPACA):

The U.S. Supreme Court is scheduled to address the challenges to the constitutionality of PPACA in 2012 and it is possible that the Court will issue an opinion on the matter before its June break. If the statute, or at least the portion of the statute that applies to employers and insurance companies, is found to be constitutional, hospitality employers with more than 50 employees will be required to provide certain mandated levels of healthcare coverage to all employees who regularly work more than 30 hours per week by 2014, or face penalties. 

Lessons Learned: 

In light of these issues, it is important that hospitality employers take action to evaluate their policies and practices, including those related to pay, social media, employee handbooks, and health insurance to ensure that they are compliant with applicable legal requirements. It is equally important that they plan proactively to address the potential business challenges posed by the NLRB’s new union-friendly election and notice rules and PPACA.

Is the ATM in Your Hotel Lobby Ready to Comply with the new ADA 2010 Standards?

By:      Forrest Read

The new Americans with Disabilities Act (“ADA”) standards (the “2010 Standards”), set to take effect on March 15, 2012, create new compliance obligations and contain technical specifications impacting what have become fixtures in most hotel lobbies or common areas: automatic teller machines (“ATMs”).  As is customary when new standards are set to take effect and become enforceable, hotels with existing ATMs want to know whether and how their ATMs will be impacted by the 2010 Standards and whether they will be afforded any safe harbor protections for compliance with currently effective requirements.  The answer, not surprisingly, is not a hard-and-fast rule, and any safe harbor protection will apply on an element-by-element basis.

It is helpful to view the 2010 Standards as separating the new requirements impacting ATMs into two categories – structural elements that impact the physical accessibility of ATMs and communication-related elements that relate to the customer’s interactive or communicative experience at ATMs. The Department of Justice (“DOJ”) has stated, specifically relating to ATMs, that structural elements are distinct from communication-related elements, and thus safe harbor protection would likely apply to those structural elements. This means that new requirements addressing height and reach, or accessible path and floor space, would be entitled to the safe harbor protection, and thus compliance with the currently applicable ADA 1991 Standards (the “1991 Standards”) is sufficient. Hotels should be aware, though, that any new alterations made to existing ATMs on or after March 15, 2012 means that they lose the safe harbor protection with respect to structural elements and must ensure that they comply with the 2010 Standards.

However, the DOJ takes a different approach with respect to communication-related elements of ATMs, which it defines as “auxiliary aids and services.”  While the DOJ has not provided a specific list of which new requirements would be considered “communication-related,” it is safe to assume that they would include requirements regarding voice guidance, speech output (including audible tones for security purposes and devices capable of providing audible balance inquiry information), and Braille instructions for initiating speech mode and features. The safe harbor will not apply to these communication-related elements, and only if hotels can meet the demanding threshold of showing that compliance with the new communication-related elements would impose an undue burden on them can they avoid making modifications. Accordingly, existing ATMs that comport only with the 1991 Standards must be modified or retrofitted to comply with the communication-related requirements contained in 2010 Standards by March 15, 2012.

The absence of an enumerated list providing which new requirements in the 2010 Standards are considered to be “communication-related” creates some confusion for hotels operating ATMs. While some elements are clearly communication-related, other components defy easy categorization, and, in turn, may create confusion for hotels as to their obligations. Because the DOJ and disability rights groups will likely initiate efforts to monitor compliance with and enforce the 2010 Standards, and in light of potential civil liability and hefty fines and penalties, hotels should assess their existing ATMs and take steps to comply. If, after a thorough assessment, there is any question or confusion about which ATM features are communication-related, hotels should consider them as such and should modify them to comply with the applicable 2010 Standards by March 15, 2012. 

Congress Accuses OSHA of Inserting Itself Into Hotel Labor Disputes

By:  Amanda Strainis-Walker

OSHA’s recent string of hotel inspections in response to formal safety and health complaints filed by UNITE-HERE and others on behalf of hotel housekeepers is under serious scrutiny from the House of Representatives Subcommittee that oversees OSHA’s operations.  OSHA leadership is defending its decision to inspect hotels, and is signaling that OSHA will not shy away from inspecting employers in the midst of organizing campaigns and/or contentious bargaining over labor agreements.

Over the last year, OSHA received a number of formal, written complaints alleging that employees at Hyatt Hotels were exposed to various hazards, including musculoskeletal injuries, and exposures to hazardous chemicals and potentially infectious materials. The Complaints also alleged that injury and illness records were inadequate. OSHA has already conducted detailed workplace inspections in response to these Complaints at hotels in Illinois, Texas, Indiana and elsewhere.  OSHA has dedicated substantial agency resources (700+ hours on just two inspections of the same employer in the same city) to its first wave of inspections in response to these coordinated multi-city OSHA Complaints.

Industry and the House Subcommittee on Education and the Workforce have called into question the appropriateness of these inspections. Specifically, Representative John Kline (R-MN), Chairman of the Committee on Education and the Workforce, forwarded an oversight request to the Assistant Secretary of Labor for OSHA, David Michaels, in July of this year.  In his request, Rep. Kline expressed concern that OSHA was getting involved in a labor dispute, contrary to OSHA’s longstanding written policy stating that “under no circumstances are [OSHA compliance officers] to become involved in an onsite dispute involving labor-management issues . . . [and] make every effort to ensure that their actions are not interpreted as supporting either party to the labor dispute.”

The Department of Labor is standing its ground, and in an August 22, 2011 letter back to the Subcommittee, responded that “whether there are ongoing labor disputes at any of the properties . . . is entirely irrelevant to OSHA’s decision to conduct an inspection.”  This response represents a significant departure from OSHA’s past practice, and the agency’s own written policy.  More importantly for hotel operators and employers across all industries, this response signals an invitation for organized labor to either directly use OSHA to its advantage during labor disputes, or at the very least to threaten employers that it will do so, which threats now have to be taken seriously.

Employers in the hospitality industry and otherwise, should take the following steps to reduce or mitigate the risk of an OSHA inspection and enforcement action:

1.      Conduct regular self-inspections at each location, document findings, and take and document corrective actions;

2.      Enforce safety policies and procedures through discipline;

3.      Regularly review and update key policies related to the following OSHA standards:

·         Injury & illness recordkeeping;

·         Hazard communication;

·         Bloodborne pathogens;

·         Emergency action plans;

·         Lockout/Tagout; and

·         Personal Protective Equipment.

4.       Train employees regarding OSHA standards and ergonomic hazards.

Wage & Hour Division Continues Enforcement Actions against Virginia Hotels

By:  Kara M. Maciel

The Department of Labor’s Wage and Hour Division in Norfolk, Virginia has announced that it will be stepping up its compliance audits and enforcement efforts against area hotels. In the past few years, the DOL stated it found violations at about 60% of local hotels. According to the DOL, the agency recently made spot checks at 10 area hotels since April. This is just one part of the agency’s nationwide enforcement program and its “Plan/Prevent/Protect” initiative against the hospitality industry. Common violations assessed by the DOL include:

·         Payment of overtime. Under the FLSA, employees are entitled to overtime for any hours worked over 40 per week. For employers who have multiple hotels or facilities, when employees work at different locations in a work week, it is imperative that the employer coordinate its payroll systems to aggregate the employee’s time worked at both jobs in order to ensure that proper overtime is being paid. The DOL is finding that when an employee works at one hotel 20 hours per week, and 25 hours at another hotel, the employee is not paid overtime.   

·         Unlawful deductions. Many hospitality employers require employees to reimburse the hotel for a uniform through payroll deductions. However, an employer may not lawfully deduct from an employee’s wages for the cost of a uniform if it reduces the employee’s hourly wage below the minimum wage. Thus, for employees who are paid the minimum wage or tipped employees for whom the employer takes the tip credit, the hotel cannot deduct for a uniform if it drops the employee below the minimum wage.     

·         Working through meal breaks. Another common violation in the hospitality industry relates to workplaces in which the employer voluntarily provides a meal break. Under the FLSA, if an employer allows an employee to take at least a 30 minute meal break, the employee must be completely relieved of duty and the break must be uninterrupted. If an employee clocks out for lunch, and then is asked to clock back in to perform some work, the employee must be paid for the entire meal break, and not just for the time back on the clock. For many employers who automatically deduct for meal breaks or who fail to pay for the full meal period when it is interrupted, this could represent a significant liability. 

Now, more than ever, employers in the hospitality industry should be vigilant in their wage and hour compliance with federal and state law. Especially in light of the DOL’s recent roll-out of its Smartphone “app,” which allows workers to track their hours and evaluate the amount of overtime earned, workers are being armed with ample resources to bring claims of unpaid wage against the employers. 

As part of our Hospitality Employment and Labor Law Outreach (HELLO), we are familiar with these recent enforcement efforts against the hospitality industry and have been working with our hotel and restaurant clients to minimize costly exposure raised by these claims. Through regular self-audits of payroll practices and procedures, conducted under the attorney-client privilege, a hotel can significantly limit exposure from a DOL investigation or private class action. 

Hospitality Immigration Alert

By:  Robert S. Groban, Jr.

Missouri Man Convicted in Scheme to Place Undocumented Workers in Hotels

On October 28, 2010, a Missouri man was convicted by the U.S. District Court in Missouri for his role in a racketeering scheme that involved placing undocumented workers at hotels in 14 states, including several hotels in the Kansas City, Missouri, area. United States v. Dougherty, No. 4:09-CR-00143 (W.D. Mo. Oct. 10, 2010). Beth Phillips, the U.S. Attorney for the Western District of Missouri, indicated that “Mr. Kristin Dougherty was found guilty of racketeering, participating in a Racketeering Influenced and Corrupt Organizations Act (‘RICO’) conspiracy and wire fraud.  He faces a possible sentence of up to 60 years in federal prison without parole, plus a fine up to $75,000.”

Ms. Phillips added that this was not an isolated criminal enterprise. The federal RICO indictment alleged . . .

an extensive and profitable criminal enterprise in which hundreds of illegal aliens were employed at hotels and other businesses across the country.  Participants in the scheme used false information to acquire fraudulent work visas for the illegal workers, many of whom were recruited with false promises related to the terms, conditions and nature of employment.  Once workers entered the United States, participants in the scheme kept control of the workers through threats of deportation and other adverse immigration consequences.

We have previously noted our concerns about hospitality employers that use the H-2B program to supplement seasonal staffing shortages. The Dougherty prosecution is another reminder of the serious consequences that can arise from fraudulent schemes or other unlawful activities in this area.

Fourth Circuit Court Approves Probation Term Barring Participant in H-2B Visa Scheme from HR Work

The recent decision by the U.S. Court of Appeals for the Fourth Circuit in United States v. Starkes, No. 09-5051 (4th Cir. Nov. 3, 2010)(unpublished), underscores the dangers inherent in the H-2B program. In Starkes, the Fourth Circuit upheld a special condition of probation for an HR manager, who was convicted as part of an H-2Bvisa fraud scheme, that barred her from working in any position that involved access to labor contracts.

The Starkes decision involved the former HR manager at a major hotel in Williamsburg, Virginia. In 2007, Ms. Starkes encountered a member of a criminal organization who asked her to submit fraudulent documentation for H-2B visas that overstated the number of temporary workers the hotel required. In exchange, Ms. Starkes received a $200 gift card and was promised 10 - 15 cents per man-hour for each H-2B employee who worked at the hotel. The government discovered the scheme before Ms. Starkes could profit from the illegal arrangement. Ms. Starkes pled guilty to one count of mail fraud for her participation, and was sentenced to three years' probation, with the special condition that she was prohibited from engaging in any aspect of the HR business or any similar occupation where she would have access to labor contracts.

The Starkes prosecution is part of a growing trend to ferret out fraud committed by management of hospitality employers involved in the H-2B worker program. Every hospitality employer that participates in the H-2B program would be well advised to review its policies and procedures for these employees to ensure that both the organization and its management are satisfying all legal requirements.

Hotel Housekeepers File OSHA Complaints Nationwide

By: Jay P. Krupin and Kara M. Maciel

Last week, on November 9, 2010, housekeepers employed by Hyatt Hotels filed complaints with OSHA alleging injuries sustained on the job. The complaints were filed in eight cities across the country, including Chicago, Los Angeles, San Francisco, Long Beach, San Antonio, Honolulu and Indianapolis.  Similar OSHA actions may occur in Boston, NYC, DC, Atlanta, Las Vegas, Miami, and Orlando with higher concentrations of hotel properties. This is the first time that employees of a single private employer have filed multi-city OSHA complaints, and it appears to be a coordinated effort with organized labor, UNITE HERE.

The housekeepers allege injuries arising from their daily room quotas and argue that cleaning rooms and lifting heavy mattresses lead to accidents and workplace injuries. The complaints allege that workers are discouraged from reporting injuries due to fear of retaliation and that monetary rewards for having a safe workplace discourages complaints. The housekeepers recommend several solutions, including changes to fitted sheets, mops and other equipment used to clean a room, as well as a cap on their daily room quota.

Hospitality employers must be on alert of similar OSHA complaints at its properties. OSHA has begun an aggressive enforcement campaign against employers when it unveiled its “Severe Violator Enforcement Program” (“SVEP”) earlier this year. Under SVEP, OSHA will target those employers who disregard their obligations through willful, repeated, or multiple violations. This will lead to a significant increase in OSHA inspections at workplaces that not only have a history of health and safety violations, but also allows for nationwide inspections of related workplaces. Thus, if OSHA believes that the violation at a particular hotel is indicative of a pattern of non-compliance, then it will launch investigations into other hotels owned or operated by the same company. This company “profiling” should put all hotels on high alert.

In light of the significant penalties and the new focus on enforcement from the government and labor unions, it is important for hotels to take worker safety issues seriously and to have a plan in place should OSHA launch an investigation into their respective properties. Additionally, because OSHA investigators are more likely to approach local managers at each property, it is important that these managers receive proper training on OSHA regulations and how to comply with an OSHA investigation.

Accordingly, hotels should take the necessary steps now to ensure compliance with applicable federal and state requirements through attorney-client self-audits.

GAO Report on H-2B Program Portends Added Scrutiny for Hospitality Employers

By:      Robert S. Groban, Jr.

 

On November 2, 2010, the Government Accountability Office (GAO) released a Report on the H-2B nonimmigrant program (Report).   This Report examines fraud and abuse by examining 10 criminal prosecutions of recruiters and employers participating in the H-2B program. This program allows employers in the hospitality and other industries with a onetime occurrence, peak load, seasonal or intermittent employment needs to supplement their domestic workforce with foreign workers whenever U.S. workers cannot be located for the positions.

The Report found significant fraud and abuse of the H-2B program by both employers and recruiters in the prosecutions that were examined.   These illegal activities included: (a) failing to pay the legally required wage; (b) charging the foreign workers excessive fees; (c) facilitating the submission of fraudulent documentation to the government to fraudulently secure H-2B visa approvals; and (d) abusing the H-2B workers by confiscating their passports, failing to pay overtime, charging excessive amounts for rent and threatening to turn them into the authorities if they complained.

Several of the cases the GAO examined involved employers in the hospitality industry and the publication of this Report strongly suggests that this industry will remain in the investigative cross-hairs of Immigration Customs Enforcement (ICE), the agency within the Department of Homeland Security that is responsible for worksite enforcement. Already, ICE investigators are looking closely at employers and recruiters in the hospitality industry who deliberately misuse the H-2B program for a competitive advantage. At the same time, the Report notes that employers in the hospitality industry have provided false or misleading information to recruiters to assist in the procurement of new employees under the H-2B program.

This conclusion promises to add fuel to the investigative fire that threatens to consume the H-2B program. Organized labor objects to the H-2B program because they claim that it takes jobs from Americans and gives them to foreign workers. In this regard, Labor argues that hospitality employers inflate their needs for foreign labor and misrepresent their inability to locate qualified Americans to assist recruiters in securing H-2B workers. While we have not seen deliberate misconduct, we have observed lower level hospitality employees who do not understand the H-2B program and unwittingly provide inaccurate information at the behest of less than scrupulous recruiters.

The Report was issued immediately before the November election and thus was not available sufficiently prior to the change of control in Congress. Now that the Republicans control Congress, however, this Report could provide added impetus for ICE to more vigorously investigate the hospitality industry as the new Congress seeks to show the electorate that it is tough on immigration. So far, criminal prosecutions have been directed at the recruiters and hospitality employers to deliberately violated the law. We are concerned now that the Report will lead to more in depth investigations that will focus on the hospitality employees who either participated or who unwittingly supplied false or misleading information that supported the H-2B nonimmigrant applications. 

In the current anti-immigration environment, hospitality employers should take additional steps to manage the risks associated with continued use of the H-2Bp program. This might include developing and implementing more strenuous immigration policies, training staff about the H-2B program and advising staff about Form I-9 compliance and the various government agencies that are active in workforce compliance.

 

Newly Proposed Wage Order Merges Restaurant and Hotel Industry Wage and Hour Requirements

By: Amy J. Traub

The New York State Department of Labor recently issued a proposed rule which would combine the current wage orders for the restaurant and hotel industries to form a single Minimum Wage Order for the Hospitality Industry.  If adopted, the Wage Order would affect requirements related to the minimum wage, tip credits and pooling, customer service charges, allowances, overtime calculations, and other common issues within the restaurant and hotel industries.  Additionally, the Wage Order would provide helpful guidance for traditionally ambiguous wage issues such as the handling of service charges and the definition of an employee uniform for purposes of a laundry allowance.  Highlights of the Wage Order include:

·         Minimum Wage (Effective January 1, 2011) 

o       Food service workers would need to receive at least $5.00 per hour and no more than $2.25 per hour in tip credits; however, the total of tips they receive plus their hourly wages would need to amount to $7.25 per hour

o       Service employees (at non-resort hotels) would need to receive at least $5.65 per hour and no more than $1.60 per hour in tip credits; however, the total of tips they receive plus their hourly wages would need to amount to $7.25 per hour

o       Service employees (resort hotel employees) would need to receive at least $4.90 per hour and no more than $2.35 per hour in tip credits; however their weekly average for tips would need to be at least $4.10 per hour 

·         Notifications to Employees and Customers 

o       Prior to beginning employment, employers now would need to notify employees that they are taking a tip credit from their wages

o       Employers would need to notify employees of any changes to their hourly rate of pay

o       Employers would need to notify customers of any charge that is neither for food/beverage nor a gratuity to a service employee; for example, a banquet or special function charge 

·         No More Set-Off of Wages Paid in Excess of Minimum Wage 

o       Employers would need to pay an additional hour at the rate of minimum wage for each hour the employee works beyond 10 hours per day, regardless of whether the rate of pay for the first 10 hours is above the minimum wage 

·         No More Salary for Non-Exempt Employees 

o       Currently, a non-exempt employee can still be paid a salary so long as he/she is paid one and one-half times the regular rate of pay for hours worked beyond 40 hours during the week

o       If adopted, the Wage Order would require that all non-exempt workers (except commissioned salespersons) are paid on an hourly basis 

·         Tip Pooling 

o       Employers could require food service workers to join a tip pool

o       This would not apply to employees who do not provide direct food service to customers (however, a host/hostess who seats guests would be considered a direct food service employee and therefore eligible to participate in a tip pool) 

·         Increased Guidance 

o       Employers would be able to retain service charges if, and only if, they clearly explain to customers that such charges are not distributed to service employees

o       The Wage Order would exclude from the definition of “uniform” any clothing that may be worn as part of an employee’s wardrobe outside of work

o       Employers would not need to reimburse employees for the laundry expenses of any uniform clothing that can be washed with the employee’s non-uniform clothing; for example, a uniform that does not require dry cleaning

The new Wage Order signifies the New York State Department of Labor’s attempt to simplify the wage and hour rules for the restaurant and hotel industries while stepping up its enforcement of overtime and deduction violations, particularly with respect to non-exempt employees who are currently paid a salary as opposed to an hourly wage.   Of course, these highlighted changes are only a portion of the changes that would come into effect in the event the Wage Order is adopted in its entirety.

EBG Workshop for Hospitality Employers in NY on Oct. 28

EBG is holding its annual NY briefing for clients and friends on Oct. 28. This full-day program will feature a special, two-hour workshop just for employers in the hospitality and retail industries, updating the many recent and significant labor and employment law developments affecting the industry. We will provide real-world guidance on how to manage the risks your company faces from increasingly aggressive plaintiffs' lawyers and government investigators who have openly and unabashedly targeted the industry.

Topics on the workshop agenda include:
 

  • Wage and hour class actions and government investigations: The prime targets are the misclassification of employees, the failure to provide or pay for meal and rest periods, tip pooling, and the failure to reimburse for business expenses, including uniforms. These pitfalls are eminently avoidable - learn how.
  • Union organizing: UNITE HERE, SEIU, and other unions are continuing to aggressively target employees in the hospitality industry and they are newly emboldened by an increasingly union-friendly legal and political environment. Understanding why employees reach out for, or are receptive to, a union is the key to remaining union-free.
  • Leave laws and other hot-button issues: ADA and FMLA requests – and, often, legal action – tend to increase during tough economic times, as do discrimination and retaliation charges.  We will address the most common issues faced by hospitality employers in these and a host of other areas, including OSHA and immigration.
     

Come for the workshop; stay for the day! The workshop for hospitality employers is part of a day-long briefing covering a wide range of labor and employment challenges all employers are facing these days. We invite you to view the full agenda and join us for the entire program.  
 

Training Hotel Employees To Comply With New ADA Regulations In Making Room Reservations

By Aaron Olsen

Hotel managers that have the responsibility for training employees who take room reservations should pay particular attention to the new regulations announced by the Department of Justice implementing Title II and III of the Americans with Disabilities Act (ADA).  While many of the new regulations address design features to make premises more accessible, the new Department of Justice regulations also provide specific requirements that hotels must follow when reserving rooms.  Hotels will need to properly train their employees and ensure that their electronic reservation systems comply with these new regulations.

As part of the regulations announced on September 15, 2010 by the Department of Justice, hotels must:

  •  Modify their policies, practices, or procedures to ensure that individuals with disabilities can make reservations for accessible guest rooms during the same hours and in the same manner as individuals who do not need accessible rooms.
  • Identify and describe accessible features in the hotels and guest rooms offered through their reservations service in enough detail to reasonably permit individuals with disabilities to assess independently whether a given hotel or guest room meets his or her accessibility needs.
  • Ensure that accessible guest rooms are held for use by individuals with disabilities until all other guest rooms of that type have been rented and the accessible room requested is the only remaining room of that type; and,
  • Prevent accessible guest rooms from being double booked.

As a practical matter, this will require many hotel operators to revise their electronic reservations systems and to train employees who take reservations so that they understand the features of accessible rooms.  In light of the substantial changes that some hotel operators will need to make to their reservations systems, these regulations will not go into effect until March 15, 2012.  The majority of the other ADA regulations announced on September 15, 2010 go into effect on March 15, 2011.

Fact Sheets published by the Department of Justice highlighting the new regulations can be found here and here.

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