Duff on Hospitality Law

Service charges, administrative charges, surcharges, house fees—whatever you call those charges assessed for food and beverage service in restaurants and in hotels—the rules about how they need to be disclosed to guests and how they must be allocated are propagating. More and more cities, municipalities and other local legal bodies are taking on service charges in detailed laws, and we expect more to come.

Interest in this issue at all levels of lawmaking seems to be increasing as living wage/minimum wage raise efforts become more and more popular throughout the country. Many such efforts result in laws that also affect how service charges may be collected, distributed and how they must be disclosed to consumers. In other words, the locus for relevant law in this area has shifted significantly from the state to the county or city level.

Hospitality industry stakeholders who host sites for online reviews or rely on review sites such as Yelp, Trip Advisor, Urban Spoon, or Oyster, may take comfort in the recent Ninth Circuit decision regarding the liability of the publishers of those reviews. See Kimzey v. Yelp! Inc., No. 2:13-cv-01734 (U.S.D.C. Wash. Sept. 12, 2016). But, there is an argument to be made that the protections afforded under Section 230 of the Communications Decency Act (“CDA”) may be wearing thin. As the industry looks for more ways to leverage data harvested  from online reviews, it is slipping out from the protective umbrella afforded to “passive hosts” of user generated content.

On Monday, July 25, 2016, the Seattle City Council unanimously voted to place Initiative 124 (“I-124”), entitled the “Seattle Hotel Employees Health and Safety Initiative,” on the November 2016 ballot. Many voters will likely not even bother to look beyond the title before casting their vote. But they should. There is much more to this initiative than the title suggests.

I-124 is comprised of five substantive parts, plus definitions and a “miscellaneous” section (containing perhaps the most important piece of the entire initiative – more on that in the following paragraph). Each of these parts has an admirable statement of purpose (e.g., “Protecting Hotel Employees from Violent Assault and Sexual Harassment”), and a slew of requirements that are allegedly aimed at achieving that purpose. But, as with the title of the entire initiative, each part contains language that prompts countervailing concerns.

Brexit, the United Kingdom’s (UK) decision to leave the European Union (EU), is headline news. Brexit is already impacting trademark rights in Europe, including in the hospitality industry.

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

One big trend in the restaurant industry is no-tipping policies, replacing the optional gratuity line on the bill with a “service included” mandatory charge or higher menu prices. After a number of successful restaurants having tried and failed to transition successfully to this model, the service-included model is not necessarily the future of the industry.

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

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

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

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

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

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

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