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Posts from June 2014.

California employers are currently scratching their heads over how to interpret “suitable seating” that is required under California Wage Orders.  Nancy Cooper, member of our Labor and Employment Group and Hospitality, Travel and Tourism practice team, discusses how that term is defined will affect your business.  Thank you for today’s post, Nancy! - Greg

Section 1198 of the Labor Code of California states that the “employment of any employee for longer hours than those fixed by the order or under conditions of labor prohibited by the order is unlawful.

References to the “order” refer to California Wage Orders, which are issued from time to time by the California Industrial Welfare Commission and establish wages and working conditions for a number of industries within California. Section 14 of the majority of the California Wage Orders say that an employer must provide “all working employees” with “suitable seats when the nature of the work reasonably permits the use of seats.” What each Wage Order does not say is what this means.

Even though these Wage Orders have been around for decades, they are only now the focus of many lawsuits.  So why now?  Well, that is also hard to answer.  These laws were originally focused on allowing employees who worked on certain equipment or in other jobs that were essentially stationary to sit down as they performed their work.  There used to be many more “suitable seating” laws across the nation.  They appear to have originated in the 1950s and were focused on the increasing number of females in the workplace.  They have either remained on the books (though neutralized to be gender neutral) or taken off the books altogether.  The California laws came to life with the passage of the Private Attorney General Act (PAGA).  Under PAGA (which was deemed to apply to the suitable seating laws) an employee can seek up to a year of civil penalties and attorney fees, including a civil penalty of $100 for each aggrieved employee per pay period for the initial violation and $200 for each aggrieved employee per pay period for each subsequent violation.  So, now there is real money tied to the law.  Where there is real money – lawyers will follow.

Two of the more notable suits involving suitable seating are class actions that are currently on appeal with the Ninth Circuit Court of Appeals.  As the Ninth Circuit was trying to interpret the law and make a ruling in these cases, the Court discovered that there was not clear interpretation of the law in California state court.  There was not sufficient guidance from state courts to inform the Ninth Circuit what was intended under the law.  Thus, the Ninth Circuit said that rather than substitute its own judgment in the interpretation of California law, it asked the Supreme Court of California to clarify three specific questions.

They first asked the California Supreme Court to clarify whether the term “nature of the work” refers to individual tasks that an employee performs during the day, or whether it should be read “holistically” to cover a full range of duties.  As a sub-part to this question, if the courts should construe the “nature of the work” requirement holistically, should they then consider the entire range of an employee’s duties if more than half of the employee’s time is spent performing tasks that reasonably allow the use of a seat?

The second question the California Supreme Court was been asked to clarify is whether an employer's business judgment should be considered in determining whether the nature of the work “reasonably permits” the use of a seat, as well as the physical layout of the workplace and the employee’s physical characteristics.

The third and final question posed to the California Supreme Court was to clarify whether the employee must prove what would constitute a “suitable seat” in order to prevail.

So, what does this mean to the California hospitality industry?  It could change the way in which operations are designed and how job expectations are defined.  What if a sous chef wants a stool as he does prep work?  Can the kitchen design handle the arrangement?  How does that reconcile with the hazards of the kitchen workplace?  Can it be set up in the often narrow passage ways of the kitchen?

How does the hostess position effectively use a seat and still present a welcoming atmosphere to the clientele?  What about the wait staff?  If they are given a seated area for use when the floor is not busy – what happens if someone is sitting down when they really should be tending to tables or cleaning the stations?

What about the reception desks at hotels and the spas?  Do they give the same image if they are sitting down – even if on a high stool?  More importantly, do you now have to change the lay-out of the reception area?  Is there enough room for the employees to be seated or use a stool?  Is a stool even considered “suitable seating”?

If a job or worksite has been modified as an accommodation to an individual in a wheelchair, does that mean that it is now considered to be a job that automatically can be performed when seated – even when it historically has not been?

It is not known when the California Supreme Court will provide answers to the questions posed by the Ninth Circuit.  Any guidance offered by the Court will still be open to interpretation and lead to more suits.  The answers will not be specific to any given industry.  The Court is unlikely to provide guidance on the interplay with other laws (e.g. workplace safety, OSHA, etc.) as well as define who has the burden to prove the violations exist and that the solutions are or are not reasonable.

Some of the early California cases regarding suitable seating suggest that there may be some considerations available to employers.  If a company can demonstrate that there is a genuine customer-service rationale for requiring the employees to stand, the company may have an argument.  Depending on the nature of the service provided by the employee, it is acceptable for a Company right to be concerned with efficiency – and the appearance of efficiency – of the delivered service.  These early cases have expressed concern not only about safety, but also about the employee’s ability to project a “ready-to-assist attitude” to the clientele.  It is not clear that these arguments will survive the California Supreme Court’s analysis.  It is anticipated that the answers will only create more questions, so it is well advised to start looking at your facilities as well as your job descriptions now so you can be prepared to take steps to not become the next lawsuit target.

On June 2, the Seattle City Council voted unanimously to approve a $15 minimum wage ordinance. Mayor Ed Murray signed it the next day. The ordinance provides that all employers will be required to reach the $15 per hour wage over a period of years, depending on their number of employees. Very generally speaking, and subject to a number of specifics touched on below, employers with 500 or fewer employees will be required to pay $10.00 an hour starting on April 1, 2015, and will make annual increases culminating in $15.00 an hour in 2021. Employers with more than 500 employers will need to pay $11.00 an hour starting in April 2015, and will reach $15.00 an hour in 2017 (2018 for employers who contribute to employee health insurance premiums).

Employers are grappling not only with how to manage the logistics of the increased wage, but with how to read the ordinance’s many definitions and exceptions. In the coming months we expect to see rule making and legal challenges that will hopefully clarify the impacts of the ordinance, so stay tuned. This blog post addresses a few of the questions we’ve been hearing so far.

Am I a Schedule 1 or Schedule 2 Employer?

Schedule 1 employers generally have more than 500 employees, while Schedule 2 employers generally have 500 or fewer employees. But it’s not that easy. If you’re a franchisee, as defined in the ordinance, you need to count all the employees employed by any other associated franchisee anywhere in the U.S.

Why does it matter which schedule I’m in?

Whether you are regarded as a Schedule 1 or Schedule 2 employer is important for two primary reasons: it determines how long you have to reach the minimum wage, and it determines whether you can consider tips and employer-paid healthcare premiums as part of the wage.

Schedule 1 employers reach the minimum wage of $15.00 more quickly, and while their contribution to health insurance premiums can delay the $15.00 minimum wage by a year (from 2017 to 2018) neither such contributions, nor tips, can be used to offset Schedule 1 employers’ obligations.

Schedule 2 employers have longer to reach the $15.00 minimum wage (seven years, by 2021), and prior to reaching that number, they can use a combination of wages and tips and/or premium contributions to meet their obligations.

Some of my employees work occasionally in Seattle. Are they covered?

Hours in Seattle are covered if the employee works at least two hours in Seattle during each two-week period. If you have employees who do any work in Seattle, you should carefully monitor the amount of such work and be prepared to pay the applicable minimum wage for hours spent in Seattle.

The ordinance does provide that time spent in Seattle solely for the purpose of traveling through Seattle from a point outside Seattle to a destination outside Seattle (for instance, a drive on I-5 from Renton to Bothell) will not be considered work in Seattle so long as there are “no employment-related or commercial stops in Seattle except for refueling or the employee’s personal meals or errands.”

 If two or more businesses are related, will their employees be counted together or separately?

The ordinance provides that for non-franchise employers (franchises are addressed in more detail below), separate entities may be regarded as an “integrated enterprise” for the purposes of counting employees and determining whether an employer is covered by Schedule 1 or Schedule 2. The concept of “integrated enterprise,” with similar (or identical) multi-factor tests, exists in other employment laws, including Seattle’s own Sick and Safe Leave ordinance and the federal Family and Medical Leave Act (FMLA). The ordinance also contains an important exception:

“There shall be a presumption that separate legal entities, which may share some degree of interrelated operations and common management with one another, shall be considered separate employers for purposes of this section as long as (1) separate legal entities operate substantially in separate physical locations from one another, and (2) each separate legal entity has partially different ultimate ownership.”

This exception invites creative thinking about structuring (or restructuring) ownership and operations.

Is my business a “franchisee”?

The ordinance defines a franchise as a certain kind of written agreement providing benefits (including association with a trademark) in exchange for payment of a “franchise fee.” Many employers know if they have a franchise agreement, but others may have business arrangements that are not called “franchise agreements,” (for instance “management agreements”) that might qualify under the ordinance. If you determine that you are a franchisee, you will need to learn how many employees are employed by associated franchisees anywhere in the U.S. If that number is more than 500, you will be considered a Schedule 1 Employer regardless of how many employees you employ.

 

Is hotel rebranding the latest 2014 trend? Claire Hawkins, Chair of Garvey Schubert Barer's Intellectual Property Practice and new author to Duff on Hospitality, weighs in on the topic and offers her insights on the intellectual property elements you'll need to consider.  Thank you for today's post, Claire! - Greg  

Is hotel rebranding trending, and is that a further sign of the recovering lodging industry? There have been a number of announced changes in hotel names and brands in the last few months, and while this may or may not signify an economic uptick, you can be assured that there has been a lot of work behind the scenes to get to this point for all of these venues.

A recent article noted there are many intellectual property issues involved in hotel rebranding, as well as the considerations of public opinion, current trends, and bottom line financials.

All of these factors are compounded given the general nature of hotels: large scale, significant reputation considerations, the considerable costs of the accompanying renovation (and usually updating) and replacing old inventory items that have the old brand, as well as the economic consequences of the time it takes (sometimes up to a year) for the unbranding and rebranding phases as well as reincorporating into the referral, booking, and online channels with the new name.

With all these issues already demanding time and resources, it makes sense to be very sure that the new brand to be adopted is available and that it will be a strong brand. Every company relies on trademark laws to communicate to consumers and to protect the reputation of its business. Making sure your new brand is not too similar to any other existing brand or trademark (including trade dress or other protectable elements), and then registering and managing your rights and responsibilities worldwide and online prevents your marketing and advertising resources and goals from being wasted. Examples of learning these lessons the hard way include instances when Hard Rock Café sued Hard Rock Hotel for trademark infringement; Hershey Entertainment & Resorts Company sued Radisson for calling its hotel Radisson Harrisburg Hershey; Barley Swine restaurant in Austin sued Barley & Swine restaurant in Florida; and Seacrets hotel in Maryland stopped use of SECRET SPOT as a name for restaurant services.

The benefit of a strong brand, if adopting a new one, is that you will be able to use the brand to refer to your business and reputation in a broad, confident manner, prevent others from using similar marks, and build up value and credibility with much more ease than with a mark that already has other similar users out there, and clearing the mark first can help prevent those schedule-interrupting cease and desist letters from third parties.

If you are instead switching to an existing brand, being aware of the strength of the brand’s intellectual property portfolio (worldwide trademark registrations, domain names, franchise or service agreements, web use, trade dress protections, etc.) as part of the initial due diligence can inform you of issues or hurdles or ongoing problems that will need to be considered or managed as the brand is adopted. For example, if the brand has had to send numerous cease and desist letters to others because the name is fairly descriptive, it would be important to include that aspect into future budgets. On the other hand, determining that the brand to be adopted has a strong portfolio of established rights and registrations would be an indication that the change would indeed bring value and stability to your endeavor.

Takeaway: For any of the many reasons to shift, update, adopt, or change a brand, evaluating the strength of the trademarks, trade dress, domain names, and other intellectual property elements should be included in the list of to-do items before proceeding. If you’re going to go with this trend, if it is one, you might as well go with confidence!

If you have any questions about trademark or other intellectual property rights associated with an upcoming branding or re-branding of your hotel or restaurant, please contact me or Claire Hawkins.

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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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