Experts highlight five legal pitfalls hoteliers face
Experts highlight five legal pitfalls hoteliers face
17 MAY 2019 8:13 AM

A panel of attorneys from Jeffer Mangels Butler & Mitchell at Meet the Money 2019 explain what hoteliers should know about neutrality agreements, posting rates on-property, the California Consumer Privacy Act, ADA website compliance and on-property cannabis use.

LOS ANGELES—The ways in which hoteliers can find themselves in hot water legally continues to change and expand.

During the “Legal hotspots: The essentials every hotelier should know” session at Meet the Money 2019, attorneys from hosting law firm Jeffer Mangels Butler & Mitchell gave overviews of five areas in which hoteliers need to tread carefully.

Neutrality agreements
Organized labor continues to be savvy in its approach to getting local governments to impose “so-called neutrality agreements” or labor peace agreements on hotel owners and operators, Partner Marta Fernandez said.

“This is the largest tool the unions currently have to organize,” she said.

In the process of working with a city government on a new hotel, it’s likely hoteliers will see a labor peace agreement put before them before they get to any entitlements, credit enhancements, financing, historical preservation rights and liquor licenses, she said.

“It’s a myth that it’s a requirement,” she said. “You can negotiate it.”

Many local ordinances require increasing minimum wage, housekeeping quotes and the carrying of panic buttons, she said. All of these ordinances have a waiver clause that allows hoteliers to work around these restrictions if they sign a labor neutrality or peace agreement.

A recent case involving Boeing at the National Labor Relations Board requires neutral wording about unions in an employee handbook, Fernandez said. On their face, the rules are neutral, but the NLRB said they have the potential to interfere with protected concerted activity. Handbooks cannot prohibit the sharing of information about salaries, wages and bonuses, she said. Companies can’t prohibit the sharing of handbooks with third parties.

“This is something to keep in mind in the review of your policies and procedures to avoid red-flagging properties,” she said.

Posting room rates
California codified common law in the late 1800s to prevent the gouging of travelers by innkeepers, Partner Mark Adams said. Every state has similar laws in place, he said. In California, the law requires the posting of the highest possible rate for a room type in both the bedroom of a guestroom and in a public space.

Violating the statute requires a payment of $100 or three times the difference between what the guest was charged and what the highest rate should have been, he said.

Not many hotels post the rates on the back of the guestroom door, Adams said. Some post the rates in the guestroom closet, but he questioned whether that counts as being in the bedroom. Adams also said he couldn’t recall if he’s ever seen room rates posted in a hotel’s lobby. In California, the law is conjunctive, meaning it has to be in both places.

The courts don’t count it as posted if it’s not in a conspicuous place in the guestroom and lobby, he said. It’s an easy fix: Post the highest possible room rate in the lobby of the hotel.

“It doesn’t matter how high that rate is,” he said. “You just can’t exceed it.”

For class action lawsuits, plaintiffs’ attorneys will say their client stayed there and gave 30 days’ notice, but the hotel staff didn’t fix it. Now it’s not just the individual plaintiff but the entire class of guests who stayed at that hotel during the 30-day period, he said.

“That’s the entire amount paid for 30 days plus interest plus attorneys’ fees because of the Consumer Legal Remedies Act,” he said.

The takeaway is to fix it, Adams said. It will be the easiest fix to make. There are defenses for this, but rather than mount a defense, it’s better to head it off at the pass, he said.

California Consumer Privacy Act of 2018
Contrary to popular belief, the hotel business is not just about heads in beds, Partner Bob Braun said.

“We are in fact data collectors, data processors, data seller and data buyers,” he said.

The California Consumer Privacy Act of 2018 addresses the rights and responsibilities of those who collect, process, buy and sell data, he said. Some hoteliers believe that’s not a problem because the franchisor owns the data or they themselves own the data.

“That is by now an anachronism,” he said. “The individual owns the data. We hold it in trust and are obligated to protect it. This is going to end up affecting just about everyone.”

Hotel companies that are not subject to the privacy act will still need to comply, Braun said. There are a list of qualifications to determine whether a company must comply, but if a company is working with a vendor or customers in the supply line who are subject to it, the hotel company will be, too. The only way to comply with it is to have everyone in the supply chain comply with it, he said.

For the first time, the law also authorizes enforcement action by the attorney general and private rights of action by individuals when there is a data breach and they say they were affected by the failure to stop the breach, he said.

There’s no question there are a bunch of Californian class action lawyers ready to be the first to file suit, particularly when they know the minimum damage per affected record is $750, he said. That means hoteliers cannot wait to hire an attorney to help them come into compliance with the law. It requires a 12-month look back, and that cannot start when the law goes into effect in December, he said.

“You have to start long ahead of that,” Braun said. “You have to map your data. Who has access to it? What data do you collect? Develop new policies and procedures. Create another privacy statement. None can be done quickly.”

ADA claims
There are only two types of hotels, according to partner Marty Orlick.

“Those sued for ADA violations and those going to be sued,” he said.

Everyone is aware of the Americans with Disabilities Act’s architectural barriers and standards that apply. There have been more than 26,000 ADA lawsuits filed in the last 15 years, Orlick said. One plaintiff made more than $2.8 million in damage claims over the last four years through nearly 900 ADA lawsuits, many of which were against hotels.

The ADA landscape is changing, Orlick said. The emerging area is ADA website compliance, and there are two subsets of complaint types. One type is whether the website is designed with the ability to capture screen reader software so a visually impaired person can navigate a website and book a room. The other is whether someone who is mobility-impaired can book a room online in the same manner as anyone else who doesn’t need an accessible room. That means the site has to identify amenities and accommodations designed for them, he said, and it has to allow them to firmly book that room during the reservation process.

Hoteliers who have launched a website in the last seven years since this became a law and have not focused on making it accessible and making elements of your hotel accessible need to speak with an attorney, because it’s only a matter of time before someone files a claim, Orlick said.

“The website accessibility space will affect all of you,” he said. “This is good for business and will keep you out of litigation.”

Marijuana use
Marijuana tourism used to be restricted to Amsterdam, but there are many U.S. states now where people can enjoy it recreationally, associate Seena Max Samimi said. As a result, there are some boutique hotels trying to cater to the marijuana tourism phenomena. The demographic breakdown shows most of these tourists are baby boomers, he said.

Before jumping into this area, there are some factors to consider first, Samimi said. At the federal level, marijuana is still classified as a Schedule 1 drug and is illegal. At the state level, it’s a different story, with a mix of states that have legalized recreational and/or medicinal use.

“I would argue the most important level of regulation applicable to your business is at the local level,” he said. “Those vary widely. Even next-door cities have different regulations. At the enforcement level, the highest risk is violating local laws, then state and federal is least likely.”

There are things of which the hospitality industry specifically should be aware, Samimi said. Some cannabis-friendly hotels have adopted cannabis-friendly rooms, but there are still restrictions on where guests can use it and how they can use it. Some localities have restrictions on public spaces, while others allow use on balconies.

There are ancillary costs and issues, such as cleaning odors from rooms, he said. Hoteliers will need to triple- and quadruple-check with their insurance carriers on allowing cannabis use in their hotels. There are brokers who specialize in this area to help them find coverage, but because it’s still illegal at the federal level, there are banking concerns, he said.

There’s some misconception over cannabidiol oil, or CBD oil, because of the passage of the recent Farming Bill, Samimi said. CBD oil derived from hemp is no longer illegal, he said, but there’s a lot of misinformation out there about it, so hoteliers will need to be careful in its use.

1 Comment

  • Paul Parashar May 18, 2019 9:48 PM Reply

    Super good piece.

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