Duff on Hospitality Law

Please welcome new author and GSB attorney, Julia Holden-Davis, to the Duff on Hospitality blog! She has over 15 years of experience in the legal aspects of design and construction and works out of our new office in Anchorage, Alaska. Welcome, Julia, and thank you for today’s recommendations on selecting an appropriate contractor. – Greg 

Selecting the “right” contractor is one of several key steps in ensuring a hotel project has a strong likelihood of success. At times, the selection of the contractor might seem obvious – for example, a developer entering a new geographical market might bring with it a contractor with whom it already has extensive experience in other markets. However, contractor selection should consider a broader number of criteria, tailored to the particular needs of the project, to maximize the likelihood of success.

1) Pick the right people to make the selection

Consider first with whom to place the responsibility of making the selection, recognizing that within the typical hotel ownership and management structure, not to mention other project participants such as an architect or designer, not everyone has the same priorities, experience, or end goals. For example, one person (e.g. franchisor) might care the most for the aesthetic-related capabilities of a contractor. Another might prioritize timely performance (e.g. operator), yet another lowest cost (e.g. owner/developer). An outside architect may have a relationship (be it good or bad) with certain contractors. Selecting an individual or a team who understands the needs of the facility, the critical points, and the overall goals can lead to a much better evaluation process – and ultimately, identification of the most suitable contractor.

2) Consider industry dialogue

Consider discussing the project or portions of the project with a variety of contractors or other industry professionals before actually evaluating or selecting a contractor. The information gleaned in early discussions can play a significant role in defining realistic expectations, developing innovative ideas, selecting new products, and improving the overall quality of the project. For example, a franchised property whose intended aesthetic is cutting edge, top of the line, with new and fresh ideas may want to carefully consider the use of new materials which may not yet have a proven service record. Similarly, contractors with a depth of building experience with the chosen brand may have good suggestions to the design, phasing, or to other aspects of the project that could improve the overall quality or decrease the time or cost of construction.

In December 2012, the U.S. Department of Justice (DOJ) settled a case with Lesley University, requiring Lesley University to take significant, comprehensive measures to accommodate the needs of students with serious food allergies. Details on the settlement can be found here. DOJ took the position that food allergies may constitute a disability under the ADA, and that the many steps required in the settlement were mandated by the ADA’s requirement that public accommodations make reasonable modifications to their policies, practices, and procedures that are necessary to ensure that individuals with disabilities have access to their goods and services.

However, the ADA does not require a public accommodation to engage in any measures that would “fundamentally alter the nature of the goods, services, facilities, privileges, advantages, or accommodations” offered.  Perhaps Lesley University could have relied on that defense if it had litigated, rather than settled with DOJ, but it is impossible to predict what the outcome would have been and no one can blame Lesley University for declining to find out.

The DOJ – Lesley University settlement has had many of us worrying that restaurants are already or will soon be in DOJ’s sights for examination of allergy-free items and allergen-free facilities. While we are still concerned about the potential impacts of the DOJ - Lesley University settlement, we have not yet seen evidence of increased investigations by the DOJ. Even more encouraging, a technical assistance document released by the DOJ after the settlement with Lesley University gives some hope that DOJ is taking a reasonable approach that is consistent with the ADA. The technical assistance document confirms that “a restaurant may have to take some reasonable steps to accommodate individuals with” food allergies, such as “omitting or substituting certain ingredients upon request if the restaurant normally does this for other customers.” However, DOJ confirmed that the ADA does not require restaurants to change their menus to offer gluten or allergen-free foods. DOJ also emphasized that Lesley University’s situation was unique because it involved mandatory meal plans.

We will continue to monitor this issue along with other ADA public accommodation issues, but for the moment we wanted to pass along some good news on this issue.

Please contact me if you have any questions.

Published in Northwest Meetings + Events  Magazine, summer 2013.

HOSPITALITY ATTORNEY GREG DUFF has noticed a paradigm shift in the sales contracts his clients send him. The founder of Garvey Schubert Barer's national Hospitality, Travel & Tourism practice, he says, "Either the contracts have more terms or conditions than I have seen in the past, or those terms that have been somewhat common in the past have been revised to be more difficult." Duff shared the pros and cons of some of the newer provisions he's seeing...

Pleas contact me if you have any questions regarding venue or sales contracts.

In the recent decision, Friends of Hood River v. City of Hood River, the Oregon Land Use Board of Appeals (LUBA) remanded the City of Hood River’s decision to grant a conditional use and preliminary site approval for, among other things, a 45,000 square foot, four story, 88 room hotel on the waterfront near the mouth of the Hood River. LUBA’s decision was based on the City’s failure to find compliance with its comprehensive plan.

LUBA determined that a finding of compliance with the City’s comprehensive plan was required under state law regardless of whether the local code only requires consistency with the plan. Here, LUBA found that the City’s decision did not analyze whether flooding policies, strategies, and standards found in the plan constitute mandatory standards that the application must meet. If so, the City will have to identify whether the standards are satisfied.

LUBA explained that, in practice, the language of comprehensive plans and land use regulations rarely rule the plan out as a potential source of approval criteria for permit decisions. Although LUBA recognized that comprehensive plan policies will constitute approval criteria if they are expressed in mandatory terms, it qualified this hard line approach with citation to its precedent. A project proponent cannot rely solely on the code language when it applies for land use approval, but must also consider those applicable elements of the comprehensive plan.

In addition, LUBA found the City had erred procedurally when it refused to allow Friends of Hood River, an Oregon group preserving public access and recreation in Nichols Basin, to respond to new evidence submitted by the applicant after the initial public hearing. LUBA determined that information the Friends may submit could shed light on whether the comprehensive plan policies regarding flooding are mandatory standards. When it comes to public process, applicants should expect appeals by members of the public who feel they did not have the full opportunity to comment on an application.

The practical lesson here is that land use applications require extensive due diligence early in the process to identify and address all potential state and local approval criteria, and that public participation is sacrosanct in Oregon land use decision making.  Welcome to hotel development in the great Northwest. Please contact Greg Duff if you have questions or need assistance to obtain entitlements for your next hotel development.

Thank you to Benjamin Lambiotte, technology and transportation attorney at Garvey Schubert Barer, for providing our readers with the latest and greatest on mobile payment technology and its uses in the travel and tourism industry.  - Greg

Jared Van Kirk is a member of Garvey Schubert Barer’s Labor and Employment group and previous blog contributor. Jared has been following City Council discussions surrounding the newly enacted Job Assistance Bill for some time. Thank you, Jared, for this timely and very important update for all hospitality industry employers in Seattle.  – Greg

Tip Pooling Update

Catch up on Joy's previous tip pooling update here and continue reading for the latest ruling.

On June 7, 2013, a federal judge in Oregon ruled that the Department of Labor went beyond its authority when it issued regulations in 2011 prohibiting the use of tips by an employer even when the employer does not take a tip credit. Judge Michael Mosman held that Congress had intended to impose conditions on employers that take a tip credit but did not intend to impose a freestanding requirement pertaining to all tipped employees. Consequently, the 2011 tip pooling regulations are not valid in the Ninth Circuit. The decision may be appealed, so employers aren't out of the woods yet, but for now this is a big win for the restaurant industry.

For businesses that use social media to vet job applicants or to monitor employees, change is afoot. On Tuesday, May 21, Governor Inslee signed into law a bill that makes it illegal for any employer in Washington State to require an employee or applicant to provide access to his or her social media account. This law covers any employer with one or more employees, and it goes into effect July 28, 2013. Here’s the scoop:

The law prohibits employers from requesting, requiring, or coercing a current employee or job applicant into doing any of the following:

• • Giving the employer the login information to a private social media account
  • “Friending” a manager or other third person so the employer can view the individual’s account
  • Requiring that the employee change his or her privacy settings to make the account publicly available
  • Logging into the account in the employer’s presence so as to enable the employer to view the content

The law also expressly prohibits employers from taking any “adverse action” against an employee for refusing to engage in any of these prohibited acts. This means firing, refusing to hire, or disciplining the employee or applicant, or threatening to do so.

There is a narrow exception to the law for when access to an account is necessary for the company to make a factual determination during a workplace investigation. This applies only if the employer has information that leads it to believe (1) that some content on the employee’s account might violate the law, regulatory requirements, or prohibitions against employee misconduct, or (2) that the employee has disclosed the employer’s confidential information on the account. Even under these circumstances, however, the employer still may only ask to view the account – it may not request the employee’s password.

This law does not apply to a work-focused technology platform primarily intended to facilitate communications and collaboration among employees, such as an in-house intranet or social network. It also does not prevent the employer from requesting login information for an account, service, or device the employer provides or pays for or that is only provided by virtue of the employment relationship. The law also will not apply if the employer unintentionally learns an employee’s login information, such as through a company mobile device or program monitoring the employer’s network, so long as the employer does not use the login information to access the employee’s social networking account.

Violations of this law can have serious ramifications.  Employees may bring a civil action against employers who violate the law and, if they win, will be entitled to a $500 statutory penalty, any actual damages suffered, and – importantly – reasonable attorney’s fees and costs. An employer who is sued for a violation but prevails will only be able to recover attorney's fees if it can prove the action was frivolous.

Eleven states have now enacted laws of this nature, and similar legislation is being considered in over thirty more. If you have any questions about this development or how this law impacts your business, please don’t hesitate to contact Diana Shukis or Greg Duff.

Don Scaramastra has provided an update for our readers on the status of the class-action involving online distributors and certain hotel operators with regards to antitrust laws related to online distribution. Catch up on the original post here and continue reading for an update on this topic. – Greg 

On May 1, 2013, plaintiffs filed a consolidated amended complaint in the OTC/Hotel Booking Antitrust Litigation. The amended complaint formally consolidates the many different complaints that were consolidated before the federal district court in Dallas last December.

But the amended complaint does more; it names a number of additional defendants. Most are hotel companies: Wyndham Hotel Group, Carlson Hotel Group, Best Western, Choice Hotels, and Hyatt Hotels. But one notable new defendant, EyeforTravel, Ltd., is not. EyeforTravel describes itself as a global media company specializing in business intelligence for the travel and tourism industry. This post will focus on the allegations against EyeforTravel because they highlight issues and dangers different from those I covered in my last post regarding this case.

According to the amended complaint, EyeforTravel annually sponsored industry conferences that “became a forum where [unlawful] agreements were confirmed” and discussed. The amended complaint refers to brochures and announcements regarding these conferences, which indicate that topics discussed included “revenue management and price,” “rate parity,” “strategies for restriction of free pricing,” “how large travel suppliers are dealing with pricing pressures attributed to third party distributors,” “why rate parity is necessary,” “best practices for managing revenue in a down market and avoid rate erosion,” and the “dangers of chasing demand by lowering your prices.”

Those of you following the challenge to the Department of Labor (“DOL”) tip pooling regulations interpreting the Fair Labor Standards Act (“FLSA”) may recall the events below. You may also want to view our past updates and insights on the tip pooling topic in the following articles: DOL Restrictions, Tip Pooling Remains a Hot Topic, Tip Pooling - Update, Tip Pooling in Oregon and Washington.

• • In 2010, in a case called Cumbie v. Woody Woo 596 F.3d 577 (9^th Cir. 2010), the Ninth Circuit (with jurisdiction over Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington) ruled that the FLSA did not prohibit employer-mandated tip-pooling arrangements if the employer did not take a tip credit. This meant it was lawful for employers in the Ninth Circuit to require that their tipped employees share tips with non-tipped employees (bussers, dishwashers and cooks, for example), just so long as all employees got paid minimum wage and the restaurant did not take a tip credit. (Seven states – Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington – do not allow a tip credit.)
  • The DOL then issued regulations in April 2011 addressing ownership of employee tips, in conflict with the ruling of Cumbie v. Woody Woo. The regulations created legal uncertainty for any employers who were engaging in mandatory tip-pooling with back-of-the-house employees.
  • In February 2012, the DOL issued a field assistance bulletin to its staff, declaring ”the employer is prohibited from using an employee’s tips, whether or not it has taken a tip credit …” and the DOL would “enforce nationwide the 2011 final rule explaining that a tip is the sole property of the tipped employee regardless of whether the employer takes a tip credit[.]” The field assistance made clear on no uncertain terms that that the DOL considered it a violation of the FLSA for an employer to institute a tip pool that required sharing tips with back-of-the-house employees, even if the employer did not take a tip credit.
  • In July 2012, restaurant industry associations and others filed a lawsuit in Oregon federal court, contending that the DOL regulations unlawfully prohibit back-of-the-house kitchen workers from sharing in tips left by customers when the employer does not take a tip credit against minimum wage. See Oregon Restaurant and Lodging Association v. Solis et al., Case No. 3:12-cv-01261 (D. Or.).