Five Key Labor And Employment Issues Hospitality Employers Need To Be Aware Of This Quarter

1. OSHA to Continue Aggressive Workplace Inspections in 2011

2. OFCCP Sets Aggressive Regulatory Agenda for 2011

3. IWW’s Union Organizing Campaign against Jimmy John’s: The End or a Beginning for More Fast Food and Restaurant Organizing?

4. Key Hospitality Wage-Hour Decisions in the Past Year

Wage and hour litigation is one of the fastest growing areas of employment law, and the hospitality industry has been struck hard. From tip pooling to class actions, we look back at three of the key hospitality wage and hour decisions from the last year.

5. Bed Bugs Attack: Infestations and Clean-Up Create Risks for Hospitality Companies

Bed bugs have increasingly become a worrisome issue for the hospitality industry. An infestation or the appearance of an infestation in a hotel or a movie theatre, for example, can be disastrous for business. The failure to take proper action to prevent an infestation and, when bedbugs are discovered, eradicate them in a safe, professional manner can further lead to litigation from both guests and employees.

1. OSHA to Continue Aggressive Workplace Inspections in 2011

2010 was a busy year for the Occupational Safety & Health Administration (OSHA). If 2010 could be summed up in two words, they would be enforcement and enforcement. OSHA largely stripped funding from its cooperative compliance programs in favor of more money for enforcement, hiring more compliance officers, initiating numerous enforcement initiatives and increasing the fines issued for violations. In 2010, OSHA initiated its recordkeeping special emphasis program to ensure that employers are properly and accurately recording workplace injuries. OSHA also started its native language policy to ensure that non-English-speaking employees are being trained in a language that they understand, and, for the first time in years, OSHA began issuing citations and penalties for alleged ergonomic hazards. OSHA also announced the implementation of its severe violators program, targeting employers that have similar violations at multiple establishments, including employers in the hospitality industry. Finally, OSHA dramatically increased whistleblower complaints and is aggressively pursuing new whistleblower investigations.

With all of these changes, we anticipate 2011 to be another very active year for OSHA. We expect OSHA to continue aggressive workplace inspections, resulting in more citations and higher penalties. Employers can also anticipate that OSHA will not be willing to negotiate resolutions to high-gravity citations, such as “repeat” or “willful” citations, without payment of a significant penalty and agreement to implement workplace safety initiatives that go well beyond those required by the OSHA standards. Following upon a theme from 2010, OSHA will continue to target large employers that have significant name recognition in an effort to get the biggest bang out of its enforcement buck by issuing high-penalty citations against high-profile employers and using press releases and PR campaigns against these employers as a warning to other employers in the same industry. For more about OSHA’s “Regulation by Shaming” practice of issuing press releases of the alleged hazards uncovered during inspections and the citations issued before employers even have the opportunity to meet with OSHA and contest the results, click here.

In order to stay off of OSHA’s radar in 2011, hospitality employers should ensure that their safety and health policies are current, that employee training is up to date (with special emphasis on hazard communication and non-English-speaking employees), and that ergonomic hazards and injuries are being addressed through training and equipment that lessens ergonomic stressors. Further, unionized employers should be highly sensitive to the increased propensity of unions to use safety complaints to OSHA as a means of generating leverage in negotiations. If not handled correctly, such complaints and the subsequent OSHA investigations can significantly disrupt the workplace.

2. OFCCP Sets Aggressive Regulatory Agenda for 2011

Until recently, federal contractors and subcontractors were able to pay minimal attention to the Office of Federal Contract Compliance Programs (OFCCP) or the equal employment opportunity and affirmative action mandates and regulations that OFCCP enforces, while suffering little or no negative consequences. That is no longer the case. Under the Obama administration, OFCCP is well-funded, well-staffed, strategic in its efforts, and planning an aggressive regulatory agenda for 2011. Under the guidance of Director Patricia Shiu, a former employment litigator with the Legal Aid Society - Employment Law Center in San Francisco, OFCCP is more thoroughly auditing contractors, investigating potential discrimination, and seeking remedies for aggrieved applicants or employees. As a result, federal contractors and subcontractors need to reaffirm their commitments to affirmative action and compliance.

Contractors should pay particular attention to the specific areas of focus for OFCCP: adverse impact analysis and perceived discriminatory employment practices (particularly with respect to hiring), compensation and pay equity, outreach to covered veterans and disabled individuals (as well as women and minorities), and overall affirmative action compliance. Based on the agency’s strategic plan for fiscal years 2010 through 2016, the recently published 2011 regulatory agenda, and audit activity in 2010 and early 2011, it is apparent that focus on these areas will continue. OFCCP is taking an aggressive approach to evaluating contractors in these areas during audits. The agency also plans to revise and strengthen its regulations applicable to veterans and disabled individuals, and to create a new compensation data collection tool to identify contractors who may have pay inequities. At the same time, OFCCP has taken steps to rescind its prior standards and guidelines for conducting compensation analysis, although OFCCP has not articulated the specific approach(es) contractors should take instead.

In this environment, it is critical that federal contractors take a proactive approach to compliance. In addition to creating affirmative action programs and conducting mandatory analyses, contractors should:

Investigate and be able to defend any adverse impact findings and implement proactive steps to meet any placement goals.
Consider conducting compensation analysis under attorney-client privilege to take a meaningful look at pay equity issues, bearing in mind that OFCCP, the Equal Employment Opportunity Commission and the Department of Justice have been tasked with developing consistent methodologies for analyzing compensation, and OFCCP is a thought leader in that arena.
Develop meaningful relationships with outreach partners to undertake good faith efforts to recruit qualified veterans and disabled individuals to apply for open job positions.
Ensure that all required jobs are posted with the appropriate state employment delivery service, analyze the effectiveness of procedures for accommodating applicants and employees with disabilities, and evaluate existing leave policies for employees’ health conditions or military service.
Consider internal auditing to ensure overall affirmative action compliance long before a location is selected for an OFCCP audit.

If you have questions about OFCCP, federal contractor affirmative action obligations, or assessing current compliance efforts, please contact the Seyfarth hospitality attorney with whom you work or any member of our OFCCP & Affirmative Action Compliance Team.

3. IWW’s Union Organizing Campaign against Jimmy John’s: The End or a Beginning for More Fast Food and Restaurant Organizing?

Many restaurant employers, in particular owners of fast-food restaurants, rarely think about the possibility of unionization these days. While the National Labor Relations Board (NLRB) is using rulemaking and case precedent to make it easier for employees to organize, the Employee Free Choice Act (EFCA) legislation is basically dead. UNITE HERE, the big player in the restaurant arena, is coming off of a difficult divorce between warring factions, is mired in never-ending hotel negotiations, and seems more focused on organizing larger locations pursuant to neutrality/card check agreements. The percentage of the workforce that is unionized in the private sector is at an all-time low, and while the number of representation petitions against restaurants has increased in the past few years, the numbers are still extremely low in any given year. That being said, fast food restaurant owners and operators should take heed of the recent organizing campaign in Minneapolis against ten Jimmy John’s locations. The Wobblies are at it again.

The Industrial Workers of the World (IWW), also known as the Wobblies, a union you may have read about in history class, has never gone away. In 2004, they started organizing baristas at Starbucks, created the IWW Starbucks Workers Union, and have had run-ins with Starbucks at locations in places such as New York City, Chicago, Minneapolis, Grand Rapids, Maryland, and even Omaha. The Wobblies have filed representation petitions and do represent employees in bargaining units in other industries, but usually claim that, because the election system is flawed, they prefer a solidarity unionism model in order to represent its members.

What is “solidarity unionism?” The IWW defines it as a model of labor organizing in which the workers themselves formulate strategy and take action against the company directly without mediation from government or paid union representatives. That is certainly part of it, but based on the IWW’s writings, their approach is much broader. Most notably, the Wobblies are in favor of actively practicing minority unionism and addressing issues from a broader, more global perspective. They see solidarity as drawing the boundary of the “struggle” of the working class as widely as possible. Moreover, the IWW is not a fan of the National Labor Relations Act, traditional organizing or bargaining. They do not care for traditional collective bargaining agreements because they purportedly cede too much power to employers in the form of no-strike provisions and management rights clauses.

The union does not have problems filing unfair labor practice charges, some of which have led to publicized settlement agreements. The union also has no problem taking credit when it allegedly improves benefits for employees by subjecting employers to its solidarity unionism. Most recently the union has claimed that its three year “campaign” for overtime pay on the Martin Luther King Day holiday is the reason Starbucks baristas recently began to receive overtime on that holiday. The Wobblies have a web page for their Starbucks Workers Union that makes for interesting – albeit one-sided – reading.

Last fall the Wobblies, following a model similar to its Starbucks campaign, moved into fast food. They filed a petition to represent employees at ten Jimmy John’s sandwich stores in the Minneapolis area. They also formed an IWW Jimmy John’s Workers Union, and set up the obligatory web page. This time, however, the Wobblies actually pursued a representation petition to an election, and lost by only two votes, 87-85 (or a tie if the two challenged ballots were counted). The Wobblies filed election objections as well as unfair labor practice charges, 21 of which the NLRB Regional Office found had sufficient merit to issue a complaint. On January 10, 2011, the NLRB approved a settlement agreement between the parties. The election will be set aside, while the employer did not admit to any wrongdoing. In addition to having to post a required notice about the case and employees’ rights to organize, the employer will have to hold mandatory meetings with its employees in which an NLRB representative will read the notice in the presence of the franchise owners, or an owner will himself read the notice. If the union decides to file a new petition within 18 months of the settlement agreement, the employer also has agreed to hold the election within 30 days.

On the one hand, the Wobblies lost the election – an election that would have never happened had the EFCA been passed, as the union reportedly had authorization cards from a majority of employees. On the other hand, they are still around, have claimed a victory, and are now asking the franchise owners subject to the petition to negotiate over a “10 Point Program for Justice at Jimmy John’s,” a program which they assert will bring “dignity, respect and justice” to the fast-food workplace. The 10 point program (with many sub-points) includes such issues as: job security; guaranteed hours; paid sick days; overtime pay for working holidays, late shifts, delivering in hazardous weather; pay increases; improved non-harassment policies; affordable health care; parental leave; etc.

If they follow their Starbucks approach, the Wobblies will be organizing (in their own way) Jimmy John’s locations nationwide for years to come, even if they never file another representation petition.

The Wobblies have declared their campaign to be the first union-organizing campaign against a fast-food chain in U.S. history. It likely will not be the last. A similar campaign could have been started against any fast-food restaurant chain or fast-food operator in the country. All a restaurant needs is one disgruntled employee with internet access or a friend in a union and the Wobblies, UNITE HERE or any one of a number of other unions will be knocking at its front door. Given that these tough economic times have limited upward mobility in the job market, many fast-food employees have worked in the industry for longer than they had anticipated. Consequently, they are primed to take their frustration out on their employers instead of the economy.

Restaurants, just like any other employers, must assume its employees are always subject to union organizing, and take steps to prevent the commission of unfair labor practices by human resources personnel, supervisors or managers who, without proper training, will not know how to respond when confronted with this situation. In that regard, it is crucially important that handbooks and other employment policies be fully compliant with the National Labor Relations Act. Many of the allegations the Wobblies have raised that have resulted in settlement agreements involve such issues as bulletin board usage, employees discussing their pay and benefits, off-duty employee access issues, union buttons, etc. These are all items UNITE HERE has been raising within the hotel industry for years. Violations over such issues can lead to overturned elections, bad press, and give the union the ability to claim victories that could sway employees in an organizing campaign. Supervisors and other management personnel should be trained in understanding what rights employees and unions have under the National Labor Relations Act, and what employers can lawfully do and not do in the event of organizing. Last, and certainly not least, employers, and, importantly, the supervisors who represent them, must practice positive employee relations at all times. Pay and benefits should be as competitive as practical, working conditions safe, harassment policies in place and strictly enforced, and employee views and opinions respected.

While the odds of union organizing in the restaurant industry and, in particular, the fast-food sector may currently be low, the best way of keeping them low and keeping the Wobblies and other unions at bay is to take steps now to insure employees have no reason or desire to organize.

4. Key Hospitality Wage-Hour Decisions in the Past Year

Tip Pooling with Kitchen Staff Approved Where No Tip Credit Is Taken

In Cumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010), the Ninth Circuit held that a restaurant’s tip-pooling arrangement, which included non-customarily and regularly tipped employees, did not violate the Fair Labor Standards Act (FLSA) since the restaurant did not claim a tip credit. Woo paid its servers a cash wage at or exceeding Oregon’s minimum wage and $2 more than the federal minimum wage. In addition to this cash wage, the servers received a portion of their daily tips. Woo required its servers to contribute their tips to a “tip pool” that was redistributed to all non-managerial restaurant employees. The largest portion of the tip pool went to kitchen staff, who are not customarily tipped in the restaurant industry. The remainder was returned to the servers in proportion to their hours worked. The court found that the inclusion of employees who are not customarily and regularly tipped employees did not invalidate the tip pooling arrangement. Instead, it meant only that Woo was not entitled to take a tip credit, which the employer did not do. Finally, the court also found that tip pooling did not constitute an improper deduction from wages for two reasons. First, the tips only became wages for the plaintiff when they were distributed to her from the tip pool. Second, the plaintiff’s contributions to the pool did not reduce her wages below the statutory minimum.

DOL Taking a More Activist Role in Wage and Hour Litigation

In Fast v. Applebee’s International, No. 10-1275 (8th Cir.), on appeal from Fast v. Applebee’s International, No. 06-4146 (W.D. Mo.), current and former servers and bartenders filed a lawsuit claiming that Applebee’s failed to properly pay them minimum wage and overtime pay in violation of the FLSA. The basis of the Plaintiffs’ claim is that Applebee’s took a tip-credit to offset the minimum wage even though Plaintiffs spent a portion of their time performing nontip-producing duties. In accordance with the FLSA, an employer is permitted to apply a tip credit to the minimum wage as long as the employees only “occasionally” perform nontipped duties. The district court granted summary judgment in Plaintiffs’ favor, relying on the Department of Labor’s Wage and Hour Division’s Field Operations Handbook interpretation that provides that an employer cannot take a tip credit for employees who spend more than 20% of their time on nontip-producing duties. Applebee’s appealed to the Eighth Circuit Court of Appeals. On appeal, the Department of Labor (DOL) filed an amicus brief and was permitted to participate in oral arguments in support of the Plaintiffs’ position. Although the DOL acknowledged that the Field Operations Handbook, in which the twenty percent directive is found, is meant only as a guideline for government personnel, the DOL argued that this interpretation was entitled to deference and urged the Appellate Court to uphold the district court’s decision. A decision is pending.

No Categorical Prohibition Against “Combined” FLSA Collective & Rule 23 Class Actions

In January 2011, the Seventh Circuit ruled in Ervin v. OS Restaurant Services, Inc., Case No. 09-3029, a tip-pooling practices case, that “there is no categorical rule against certifying a Rule 23(b)(3) state-law class action in a proceeding that also includes a collective action brought under the FLSA.” The Seventh Circuit held that FLSA’s opt-in procedure, as distinguished from Rule 23’s opt-out mechanism, does not necessarily “rule out any chance of finding that class treatment under Rule 23(b)(3) is a superior way to structure the case.” This decision raises the stakes in litigating wage and hour cases. Previously, a few courts had rejected the idea of plaintiffs bringing both state and federal law claims, given the FLSA requires plaintiffs to affirmatively opt into the suit, and in-state law class actions class members usually are part of the case unless they opt out. Plaintiffs were sometimes forced to choose between a state-wide case, in which the remedies may be less, but at least all class members within the state are parties; or a national-federal case with greater possible remedies and plaintiff-reach, but with the possibility that only a few potential plaintiffs might opt to join. Now, it will be easier to bring both at the same time.

These decisions serve as a reminder to employers of the importance of compliance with both Federal and applicable state wage and hour laws. Wage and hour cases will continue to increase against hospitality employers in 2011. Hospitality industry employers, particularly those doing business across multiple states with varying wage and hour laws, should audit their practices to ensure compliance with not only the FLSA, but state wage and hour laws.

To keep up with current wage and hour developments, please visit Seyfarth Shaw’s Wage & Hour Litigation Blog, where we discuss recent court decisions, legislative updates, and Department of Labor compliance, rule-making and enforcement activities.

5. Bed Bugs Attack: Infestations and Clean-Up Create Risks for Hospitality Companies

In recent rulings surrounding the issue of bed bugs, courts have found that the hospitality industry must be proactive in preventing infestations. Additionally, courts have demanded that an abatement of the infestation must occur promptly. Besides running afoul of various state health and safety laws and local hotel licensing ordinances, the hospitality industry also risks litigation from guests. Hotel guests have brought numerous claims over bedbugs, including but not limited to: negligence, gross negligence, premises liability through negligence or permitting a dangerous condition to exist on property, fraudulent concealment, violation of the special duty of innkeepers, breach of implied warranty of habitability, negligent and/or intentional infliction of emotional distress and loss of consortium. In an extreme situation, a court even granted punitive damages to a hotel resident who was bitten as a result of a mattress infested with the bugs. In this decision, the court found that a hotel manager knew that certain rooms were infested, initially noted that they were not to be made available, and then allowed the rooms to be rented after the hotel reached capacity.

Moreover, while the two primary methods of treating bed bugs – heating the infested areas at a temperature above 144 degrees and freezing them – will likely not create hazards, cases have been brought by guests alleging injuries from the exposure to the chemicals used to treat bed bug infestations. Consequently, hospitality companies must also be aware that bed bugs and any chemicals used to treat for bed bugs may also create workplace hazards for employees, and potential OSHA and workers’ compensation liability for employers that fail to protect against these hazards. Hospitality companies should have a policy in place that instructs employees on how to protect themselves from potential bed bug infestations and on the hazards of any chemicals used to control bed bugs. OSHA can, and will, issue citations and penalties if OSHA determines that the employer has not taken the appropriate steps to protect employees from such hazards.

The result of the proliferation of bed bugs and certain court rulings has heightened the measures residential buildings and hotels should be taking to minimize the infestation and liability. The following are some examples:

Including in the day-to-day cleaning careful vacuuming of the rooms with particular care in vacuuming along baseboards using a crevice attachment. Further, sealing the vacuum cleaner bag in a plastic bag before discarding.
Inspecting beds, bedding, furniture and headboards in the rooms.
Not permitting the discarding of any bedding or furniture without following a strict protocol.
Training management and staff to inspect the areas where bed bugs are typically present, their identification and the steps to take if discovered.
Retaining a reputable extermination company to inspect and abate on a scheduled basis. Many of the companies use dogs which are trained to successfully detect their presence.
Training employees how to protect themselves from health hazards created by bed bugs and any chemicals used in the workplace to control bed bugs. This problem is manageable, but setting in place a protocol for maintaining and inspecting the property and educating and training the staff is critical to success.