Newsletter
Sep 10, 2010
Five Key Labor And Employment Issues Hospitality Employers Need To Be Aware Of This Quarter
1. Final and Proposed ADA Title III Regulations Impact the Hospitality Industry
3. Double-Time: Two Wage-Hour Issues of Note
4. DOL Continues to Scrutinize Independent Contractor Status
5. Employee Labor Rights Notice Rule Creates Confusion
1. Final and Proposed ADA Title III Regulations Impact the Hospitality Industry
In conjunction with the 20th anniversary of the Americans with Disabilities Act (ADA), the U.S. Department of Justice recently unveiled two major regulatory actions that will significantly impact the hospitality industry.
The first of the regulatory actions is the issuance of a Final Rule that revises the existing regulations for Title III of the ADA governing public accommodations and commercial facilities. The Final Rule becomes effective six months after its publication in the Federal Register (September 15, 2010 is the expected publication date) and makes changes to the law in a number of key areas.
The second major regulatory action concerns two Advanced Notices of Proposed Rulemaking (ANPRM) that were issued under Title III of the ADA covering public accommodation websites, equipment and furniture. In one ANPRM, issued on July 26, 2010, the Department expressed its intent to issue regulations requiring websites of public accommodations to be accessible and posed 19 questions for public comment. These regulations, when finalized, will have an especially dramatic impact on hospitality companies that typically have complex websites and furnish electronic and technology equipment (e.g., self-check-in and check-out machines, ticketing machine and point of sale devices in retail space), furniture and exercise equipment for customer use. The American Hotel & Lodging Association (AH&LA) is working with Seyfarth Shaw to draft comments in response to these ANPRMs. The comment deadline for both ANPRMs is January 24, 2011.
2. It’s a FACT: More Restrictions Imposed on Employers Who Provide Information to Background Check Companies Through the FACT Act, Which Updates the Fair Credit Reporting Act, and New and Pending Laws Limiting Credit Checks
Many hospitality employees not only have access to large sums of money, but also have access to customer and guest credit card information and, in the case of lodging employers, access to guest rooms and personal effects. Given this, many employers subject applicants, and in some cases current employees, to background checks. As such, employers should be aware that Illinois has joined several other states in limiting an employer’s use of credit information.
Additionally, there is a new rule under the FACT Act that requires certain provisions be in effect for employers who provide information to background check companies about former or current employees (i.e., when giving employment verification information).
FACT Act
The Fair and Accurate Credit Transactions Act (FACT Act) recently updated the Fair Credit Reporting Act (FCRA) to require that companies have a policy in place to verify the “accuracy” and “integrity” of information - including employee information - they provide to Consumer Reporting Agencies (CRAs). This will not apply when an employer is requesting a background check on an applicant or an employee; rather, it will apply when an employer is furnishing or providing information about a applicant or employee to a third party. A common example of this practice is when an employer is providing an employment verification or reference. Additionally, the rule states that companies must also have a specific policy stating that an individual can dispute information that is provided directly with the company, and gives specific parameters as to what investigation an employer must undergo.
Any hospitality company that provides information to a CRA regarding a customer, supplier or vendor is covered. Employers who do not have a policy compliant with the FACT Act should do so immediately.
Editor’s note: Seyfarth Shaw has prepared a model policy compliant with the FACT Act which, for a fixed fee, we will customize for hospitality employers. Please contact your Seyfarth attorney or Pam Devata for more information.
Illinois Joins Three Other States in Restricting the Use of Credit Information; California May Be Next
Effective January 1, 2011, the Illinois Employee Credit Privacy Act: (i) restricts many employers from using an applicant’s or employee’s credit history or other credit information as a factor in any employment decision (e.g., hire, discharge, terms of employment); (ii) restricts employers from inquiring into an applicant’s or employee’s credit history or obtaining a credit history report from a consumer reporting agency and (iii) restricts use of a broad range of credit information regardless of the source of such information. There are certain exceptions, however, for specific positions such as instances where the information is related to a “bona fide occupational requirement” for a particular position or group of employees. Illinois joins Oregon (effective July 1, 2010), Washington, and Hawaii in restricting the use of credit information. On August 31, 2010, the California Assembly approved a similar bill restricting the use of credit reports on employees conducting background checks unless such information is substantially job related for an employee who has access to company money or assets, trade secrets, or other confidential information. Governor Schwarzenegger has vetoed two similar bills in the past, so this bill may not become law.
Hospitality employers with facilities in states with these laws need to take steps to insure that their background check processes comply. Click here to read a more detailed management alert on this new Illinois law.
3. Double-Time: Two Wage-Hour Issues of Note
In the past quarter there have been a number of key updates and decisions in the wage-hour arena. The following two topics are of particular concern to hospitality employers.
Employees Fight Over Mandatory Service Charges
The hospitality industry has seen a surge in the number of wage-hour class actions filed against employers alleging improper pay practices related to service charges collected from customers. Under the Fair Labor Standards Act (FLSA), a mandatory service charge is not considered a “tip” because customers are not given the discretion to determine whether to pay it or how much to provide to the server. Consequently, under federal law, a hotel or restaurant may retain all of these service charges or distribute a portion to its employees. Nevertheless, there has been a recent spike in the following two types of cases in which employee plaintiffs attempt to circumvent the FLSA.
- Plaintiffs allege that their employers – who retain some or all of the collected service charges – have interfered with a purported business relationship between the plaintiffs and their employers’ customers. Generally, the plaintiffs in these types of cases allege that their employers misrepresented to their customers that the service charges were gratuities that would be paid solely to the plaintiffs.
- Plaintiffs also allege that their employers’ compensation method violates the overtime provisions of the FLSA. In these cases, the plaintiffs contend that the service charges they receive are gratuities and do not qualify as commissions under the retail sales and service establishment exception, 29 USC § 207(i) (known as the “7(i)” exemption), by which the employers classify them as overtime-exempt employees. In a recent decision in the Southern District of Florida, Seyfarth successfully convinced the court that service charge payments are commissions for purposes of 7(i) and, consequently, banquet servers are overtime exempt employees.
In response to both types of cases, hospitality employers should review the supplemental payments they receive to ensure that they are properly characterized as mandatory service charges under the FLSA.
| In Nascembeni v. Quayside Place, 2010 U.S. Dist. LEXIS 58707 (S.D. Fla. June 11, 2010), a hotel banquet server alleged that the service charge distributions she received were gratuities, rather than wages, and could not be considered in determining whether employees were paid the state and federal minimum wage. The court held that mandatory service charges are not tips and, thus, must be included in the employee’s wages for minimum wage compliance calculations. Additionally, the court held that the hotel properly classified the banquet server as an overtime-exempt employee because the service charge payments were commissions for purposes of the retail sales and service establishment exception, 29 USC § 207(i) (known as the “7(i)” exemption). |
Guidance Issues on Nursing Mother Amendment to FLSA
As part of the Patient Protection and Affordable Care Act (PPACA), Congress amended the FLSA to provide breaks for nursing mothers. Pursuant to the PPACA, certain employers must provide a “reasonable break time” for an employee to express breast milk for her nursing child. The requirement applies for one year after the child’s birth. Employers with fewer than 50 employees may be exempt if the requirements would create an undue hardship. Many hospitality industry employers, especially those who lack locations for mothers to express milk in private, have been awaiting guidance as to how the new law will work.
The DOL recently issued guidance that clarifies the agency’s position on several ambiguous points in the PPACA. First, the PPACA expressly requires that the employer provide a place where the employee can express breast milk, and it states that the place must (i) be somewhere other than a bathroom, and (ii) be “shielded from view and free from intrusion from coworkers and the public.” The DOL’s guidance echoes this point, stressing that even private bathrooms are unacceptable. However, the DOL also takes the position that a temporary space is sufficient, so long as it is functional as a space for expressing breast milk, it is available when needed, it is shielded from view, and it is free from intrusion.
The DOL’s new guidance on the PPACA also states that employees expressing breast milk are entitled to breaks of varying frequencies and durations. In short, covered employers must allow nursing mothers to take as many breaks as they need to, and for as long as they need to, so long as the breaks are “reasonable.” However, these breaks are not compensable unless the employer already provides paid breaks and the employee uses one of those paid breaks to express breast milk. Likewise, the employee must be paid for the break if she is not completely relieved of duty during that time. To review the actual guidance, click here.
Given that this law took effect March 23, 2010, hospitality employers should develop policies compliant with the new law as well as the many state laws addressing this issue, and train management so that employees are not accidently denied their rights in this area.
4. DOL Continues to Scrutinize Independent Contractor Status
The Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) continues to focus significant investigative resources on FLSA issues related to the employment relationship, including independent contractor status, joint employment, and the franchise relationship.
Depending on a number of factors, employees of contractors who provide cleaning, back office, kitchen, grounds keeping, housekeeping, parking valet and other services, as well as workers on cleaning crews or servers, bartenders, and hosts who have been brought in by a staffing agency to assist with a one-time event may be employees not only of the third-party, but of the hospitality company as well. Moreover, recent reports from the field indicate that the WHD has been asking detailed questions about the franchise relationship, including purchase price, financing terms, and franchising agreements.
Employers in the hospitality industry should take time to ensure that the individuals performing work at their facilities are properly classified under the FLSA. With the WHD also seeking to expand local investigations into corporate-wide enforcement actions, FLSA compliance is at a premium. Seyfarth has recently started having a series of webinars on the status of independent contractors and what steps employer can take to limit their legal risks. Click here to listen to the webinar. Click here for corresponding materials.
5. Employee Labor Rights Notice Rule Creates Confusion
On June 19, 2010, a new U.S. Department of Labor (DOL) rule took effect which implemented President Obama’s Executive Order 13496 that requires certain Federal Government contractors and subcontractors to post a notice alerting employees of their rights under federal labor laws.
This new “Employee Labor Rights Notice” advises employees of their right to organize and bargain collectively with their employers and of their protection from certain types of employer and union misconduct. The rule requires that covered federal contractors and subcontractors post the notice both physically and electronically so that it can be readily seen by employees covered by the National Labor Relations Act (NLRA). The Notice may even need to be posted in a foreign language depending upon the numbers of foreign speaking employees. Failure to post the Notice may result in sanctions, including the suspension or cancellation of the contract and the debarring the contractor from future federal contracts. Seyfarth published alerts both on the issuance of the final rule as well as the OFCCP’s enforcement of the rule in its compliance evaluations, which provide important details about the new Notice.
Some hospitality employers have not realized that they may be a federal contractor covered by the new posting obligations. Moreover, many hospitality employers who are not subject to this are errantly being told by their employees (and unions) that the notice must be posted. This new rule applies to all Federal Government solicitations issued on or after June 19 for $100,000 (the Simplified Acquisition threshold) or more. The Rule also requires all covered federal contractors to incorporate the notice posting requirement into any subcontracts of $10,000 or more.
Thus, if a hospitality employer has a contract with the federal government for $100,000 or more, or is a $10,000 or more subcontractor to a contractor that does, the notice most be posted. The federal contracts and subcontracts meeting the threshold should specify that the notice must be posted. Should you have any questions, please do not hesitate to contact your Seyfarth hospitality attorney.
Recent Hospitality Publications and Speeches by Seyfarth Lawyers
John Meyers of our Atlanta office gave a presentation to a major hotel chain’s human resources team. He covered updates to the Americans with Disabilities Amendments Act (ADAAA), the Genetic Information Nondiscrimination Act (GINA), immigration, social networking, what to expect in 2010 and more.
Erin Foley of our Chicago office provided a day long training session on recent labor and employment developments and how to conduct a proper investigation to a major hotel chain’s human resources managers.
Minh Vu wrote the article, “Coping with Shifts in ADA Regulations, “which was published in the July 22, 2010 issue of Lodging Hospitality.
Mark Lies, Jim Curtis and Meagan Newman of our Chicago office presented the webinar, “What the Hospitality Industry Should Expect from the Occupational Safety & Health Administration in 2010 and Beyond” on June 17, 2010. Missed it?
Taron Murakami of our Washington D.C. office wrote the article, “Case Comment on McCullum v. McAllister’s Corp. of Miss.” which was published in the July 1, 2010 issue of Hospitality Law.
Jennifer Kraft and Ronald Kramer of our Chicago office and Kristin McGurn of our Boston office were quoted in the May 20, 2010 Hotel News Now article, “Hotels and Health Care: Just the Facts.”
We Want to Hear From You!
Do you want to know more about these or any other topics? Want to see something reported on? Have an idea for an article or webinar? Looking for a speaker for your group? Please feel free to contact your Seyfarth attorney or any Labor & Employment attorney on our website.