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Posts from September 2013.

I’m happy to see my quote in the recent Bloomberg article showcasing examples of private equity firms taking advantage of the rising hotel market. It’s an article worth reading!

Blackstone Seeks IPOs as Hotel Sales Climb: Real Estate

“In a nine-inning game, we’re probably in the sixth inning,” said Greg Duff, chairman of the hospitality, travel and tourism practice of Seattle-based law firm Garvey Schubert Barer. “On many levels and in many different markets in terms of occupancy, we have met or exceeded where we were pre-recession.”

The Seattle Office of Civil Rights has recently issued proposed rules to implement the Job Assistance Ordinance, which limits the consideration of criminal history information in hiring and employment decisions within the City of Seattle. See my previous post on the topic HERE, and the proposed rules can be accessed HERE.  The Office of Civil Rights is seeking public comment on these proposed rules, which can be submitted electronically by Friday, September 20 to rulecomment@seattle.gov.

In many ways the proposed rules hew closely to the language of the ordinance and do not significantly alter the law or compliance burden.  However, in a few areas the proposed rules differ from the ordinance in ways that are important to the hospitality industry.

The first area of concern relates to the exemption of positions whose job duties include “security” services, which are not covered by the ordinance.  For example, questions have been raised about various positions in a hotel that have security functions and whether they would be considered exempt, such as night managers who are directly responsible for managing security situations in hours of lean staffing.  The proposed rules take a strict view of a “security” position that would not cover non-traditional security employees.  Specifically, the proposed rules state that “security” includes any person who is required to be licensed as a “security guard” under Washington State law and who would typically be referred to as a security officer or guard, patrol service officer or guard, armed escort or bodyguard, armored vehicle guard, burglar alarm response runner, or crowd control officer or guard (these terms and the State licensing requirement come from the Washington statute RCW 18.170).  This narrow definition would render the “security” exemption inapplicable to many if not most hotel employees who might be thought to perform security functions.

The second area of concern is the proposed rule’s definition of “verifiable information” of rehabilitation or good conduct that an employer should consider before deciding it has a “legitimate business reason” to make an adverse employment decision based on criminal history information.  The term “verifiable information,” though vague, seemed to refer to information that could be checked—like work experience, certificates, diplomas and the like—and not to mere statements from an applicant or employee.  However, the Office of Civil Rights believes differently.  The proposed definition of “verifiable information” includes “any” information produced by the applicant or employee related to rehabilitation or good conduct, and specifically lists as examples “a written or oral statement” from the applicant, law enforcement or probation officer, member of the clergy, counselor, therapist, social worker, or member of a community or volunteer organization.  Thus, under the proposed rules an employer would generally have to consider all applicant or employee statements of good conduct and rehabilitation when determining whether it had a “legitimate business reason” to make an adverse employment decision based on criminal history information.

The third issue is that the proposed rules make a technical change to the definition of “legitimate business reason” that requires the consideration of individualized factors in all circumstances prior to an adverse employment decision.  Under the ordinance, a “legitimate business reason” was one of two things:

  1. a good faith belief that the criminal conduct would have a negative impact on the applicant or employee’s fitness or ability to perform the position or
  2. a good faith belief that the criminal conduct will harm or cause injury to people, property, or business assets, after considering specified individualized information about the criminal history and the applicant or employee.

Under the proposed rules, however, the definition of “legitimate business reason” has been changed to require consideration of individualized information before reaching either type good faith belief.  In other words, under the proposed rules an employer cannot reach a good faith belief that the criminal conduct would have a negative impact on the applicant or employee’s fitness or ability to perform the position without first considering individualized information.  Although it is generally good practice to consider individualized factors in all cases, regardless of the technical requirements of the ordinance, the proposed rules would now require this individualized consideration in all cases.

Finally, the proposed rules are disappointing in what they do not do.  Specifically, the proposed rules to not attempt to further define or explain the contours of the two types of “legitimate business reason” noted above.  What is a “negative impact” on “fitness or ability to perform the position”? What does it mean to believe that past criminal conduct will “harm or cause injury to” people, property, or business assets?  What are “business assets” in this context?  Does that term include assets other than physical property, such as public good will?  These questions and others remain unanswered in the proposed rules.

Please contact me or Greg if you have questions.

Tomorrow, Floyd “Money” Mayweather and Saúl “Canelo” Álvarez (“El Canelo”) will fight a much-anticipated title bout at the MGM Grand in Las Vegas, bringing in what Showtime certainly hopes will be record-breaking pay-per-view revenues.  

Today, after a week of difficult negotiations with huge telecommunications companies on behalf of my hotel clients, a week of wondering what to write for this blog, and a challenging sparring session on Wednesday, it occurred to me to write a bit about boxing.   A lot of people hate lawyers and a lot of people think boxing is a violent, brutish sport that should be shunned in a civilized society.  I’m a lawyer and I box.  Full disclosure: I'm taking boxing lessons at Cappy’s Boxing Gym in Seattle, and the gym is a client of the firm. The thoughts in this post are my own and not our client’s. Finally, and for the record, I have never punched anyone or anything at work. I promise.

Vintage Boxing GlovesThe analogy between lawyering and boxing is obvious: fight with words, fight with fists, both within a structure of rules, standards and strategies governing how and when to attack, how and when to defend and how and when to take a hit or two in order to set up a stronger or more important punch. In amateur boxing, the point is not to leave your opponent bleeding and broken on the canvas for a 10 count; it’s about being skilled—agile, flexible, strong, focused. My experience getting in the ring occurs when I spar with a partner, rather than compete with an opponent.  At my gym and my level of ability, sparring is learning to apply fundamentals (punches, stance, body position, cover, blocks and parries) in a version of the “real world”—fluid and often unpredictable and, most importantly, a real world that contains a partner, a coach, noise, lights, and a lot of other stimuli. At the gym where I box, sparring is also about helping my partner improve her own skills, which requires me to listen, observe and focus even more carefully.

The same can be said for negotiating an agreement on behalf of a client. It’s less sweaty (although sometimes no less exhausting) but the goal is still the same—a mutually beneficial solution, where each party feels as though it’s taken a few punches, defended well against a few, and landed a few. At the end, we touch gloves and leave the ring with respect and dignity and an arrangement that probably looks different than either party imagined at the outset.  After all, contracts are only negotiated when both parties want something good to happen between them.  My role is to advance my client’s interests as vigorously as possible, while always keeping my cover up and defending them from exposure to significant risk.  The negotiations themselves are always fluid and shifting;  I’ve learned over the years and in the ring how to better “think on my feet,” to listen and adjust my angle of attack or defense, or just step back and wait the other side out.

And just as I’ve left the ring with my nose throbbing and my sides aching after sparring with a more skilled partner, I’ve left my office feeling brutalized after a negotiation with a potential provider who is brawnier, bigger and far more powerful than I am or my client is (see, e.g. gigantic telecommunications companies).  It’s less satisfying than sparring with a more evenly matched partner, but I always manage to get a few good licks in.

As anyone who reads this blog can see, the Hospitality, Travel & Tourism group keeps up on legal developments, attends conferences, and writes for journals—we do legal theory and legal knowledge. We also have years and years of cumulative practical experience, bringing that theory out into the world of our clients.  Being a good lawyer is a constant dance (pun intended) between the “right” and the “practical,” taking on the desires of my client as my own, advising that same client of the risks they’re undertaking, and, of course, getting in the ring with the other side and working each other out.

None of this is to say that negotiating contracts for my clients is a game with no real consequences, nor is it to say that when I negotiate deals for my clients that I am thinking only of myself. Quite the opposite—my clients’ interests are paramount in any negotiation.  They are, to force the analogy a bit, the most fundamental of fundamentals.  The sparring comes in presenting and defending those interests, staying focused on the ultimate goal and removing my ego and my pride from the equation.  In other words, sometimes those pretty flicking jabs are totally useless and, well, you just can’t take those right hooks that feel like they came all the way from Oklahoma personally.  It’s all part of the movement and flow of negotiation—just don’t let them get you on the ropes, right?

To Pay or Not to Pay?

As the school year begins again, it is a great time for hoteliers to think about their unpaid internship programs.  Unpaid internships can be great symbiotic relationships.  College students or individuals trying out new fields are willing to work for free in exchange for real-life work experience and something to add to their resumes. However before accepting free labor, employers must be aware of the potential consequences of this relationship and take steps to ensure their internship program complies with the law.

Ballet dancers.

The Fair Labor Standards Act (FLSA) is a federal statute that requires companies to pay all employees a minimum wage and overtime. Who counts as an “employee” is a tricky question and some companies who thought they had unpaid “interns” found out the hard way that they actually had “employees” they were not paying. A recent New York case that is getting a lot of attention is Glatt v. Fox Searchlight Pictures, Inc. In that case, unpaid interns who worked on the movie Black Swan brought a lawsuit claiming that they actually were employees and, as such, should have been paid minimum wage and overtime for their 50-hour weeks. The interns had performed routine administrative tasks such as making photocopies, running errands, ordering lunch, and getting people coffee.

Sounds like typical intern work, right? Wrong. The Federal District Court held these individuals did not categorize in the FLSA exception for interns because their work was purely routine and did not further their education in the way a true internship should. The court also found it was the employer, not the interns, who got the better deal, deriving the most benefit from the relationship. Significantly, the court also held the interns performed work that otherwise would have been done by regular employees, thereby permitting the employer to get the same amount of work done with fewer paid workers. Even though the interns had agreed to serve without pay, the court found overall that the interns were employees and should have been paid wages and overtime. This case is not a fluke — there have been a number of similar intern-related cases lately.

In ruling in favor of the interns, the Glatt court followed a Fact Sheet from the Department of Labor (DOL) detailing a test for whether an internship is exempt from minimum wage laws. To see if your internship program is kosher under the DOL guidance, check out these requirements for a legal unpaid internship:

  • Must be educational. The internship, even though it includes actual work for the company, must be similar to training that would be given in an educational environment. This factor is often satisfied when the program is for course credit and when there is a degree of oversight by the intern’s educational institution.

  • Must benefit the intern, not the company. This is key. The internship experience must be set up for the primary benefit of the intern. The company must not derive immediate advantage from the activities of the intern; in fact, its operations should potentially be impeded by the intern’s presence.

  • Must not displace regular employees. Interns cannot be used to displace or substitute regular employees or to supplement the workforce during times when the company would otherwise hire more employees or ask existing employees to work longer hours.

  • Must not be a job interview. The intern cannot necessarily be entitled to a job at the conclusion of the internship. The internship should be for a fixed period of time, established prior to the outset of the internship, with no expectation that it will lead to a permanent position.

  • There must be no expectation of wages. Both the employer and the intern must understand that the intern is not entitled to wages for the time spent in the internship.

In short, based on the above federal guidelines (which Washington state closely follows), it is fine for a company to have an unpaid intern, provided the intern — not the company — is the primary beneficiary of the program. To ensure the company is not deriving benefits from or depending on the intern’s work, the company should ensure the intern’s duties don’t regularly include routine operational tasks, such as janitorial work, clerical work, or work that other employees would normally perform. The company should also make sure the intern is closely supervised, receiving more supervision than regular employees, and should give the intern plenty of training opportunities. If the intern is doing operational work, the company should ensure he or she is learning skills that would be transferable to another company, rather than skills that are specific to the company’s own operations. Finally, the company should consider requiring the intern to sign a document expressly stating that he or she is an intern and not an employee, that the internship is unpaid, and that the intern is not entitled to a job at the conclusion of the internship.

For more information, please contact meGreg, or other attorneys in the GSB’s Employment Group.

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Greg Duff, Editor
Greg Duff founded and chairs GSB’s national Hospitality, Travel & Tourism group. His practice largely focuses on operations-oriented matters faced by hospitality industry members, including sales and marketing, distribution and e-commerce, procurement and technology. Greg also serves as counsel and legal advisor to many of the hospitality industry’s associations and trade groups, including AH&LA, HFTP and HSMAI.

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