Return to business brings potential legal liability
 
Return to business brings potential legal liability
18 JUNE 2020 7:34 AM

While hoteliers are likely eager to return to business, there are several legal issues they need to consider as they reopen and ramp up operations.

There are several legal issues hoteliers must be mindful of as they ramp up operations.

As customers return, hotel owners and operators will need to rebuild their workforces, presumably by recalling furloughed employees—a process that must be handled with care.

Likewise, hotel employers are obligated to do what they can to ensure the health and safety of their workers, requiring meaningful workplace policies and protocols. In addition to these personnel matters, hoteliers will likely face an onslaught of contractual problems linked to the coronavirus, particularly ones involving large booking and event cancellations.

Surely, the possibility of legal exposure is very real as the pandemic comes under a modicum of control and hotel doors are reopened to employees and guests. Here, we answer questions that hoteliers may have about how best to minimize the specter of liability.

What should hotel employers be thinking about in terms of recalling employees from furlough to avoid class action or other employment-related claims?

Hotels from coast-to-coast have had to furlough or otherwise lay off employees as a result of hospitality coming to a screeching halt. On the plus side, some, if not many, of the affected employees may be subject to recall as occupancy rates recover over time. That being said, hotel employers should consider all of the following to avoid or minimize the risk of litigation when deciding what workers to bring back:

  • Workers asked to return to their jobs must be selected in a way that is fair, non-discriminatory and ideally based on identifiable business needs.
  • If there are multiple employees in line for an available position, the selection process must be based on non-discriminatory criteria, such as tenure—e.g., recalling those with the most seniority first.
  • Favoritism when recalling employees must be avoided at all costs, and legal counsel should review all hiring (or return-to-work) decisions.
  • Should managerial employees be asked to handle non-managerial duties upon their return to the workplace, they may lose their exempt status; in such an instance, hoteliers must ensure that these employees are properly classified in light of their altered duties so as to prevent misclassification or wage and hour lawsuits.
  • Layoffs due to COVID-19 should not be used as a means to dismiss problematic employees in the absence of reasonable grounds for termination.

How does the WARN Act factor into a hotelier’s decision-making regarding employees furloughed or laid off because of COVID-19?

The federal Worker Adjustment and Retraining Notification (WARN) Act requires employers to provide written notice at least 60 calendar days ahead of a mass layoff—one involving 50 full-time employees and at least 33% of the active full-time employees at a single employment site, unless the layoff impacts 500-plus employees, in which case the one-third requirement does not apply.

The amount of notice is subject to certain exceptions. Suffice to say that violations of the law can be quite costly. Covered employers that order mass layoffs without following the mandates of the WARN Act may be on the hook for back pay to affected employees for each day of violation, as well as civil penalties, and the cost of health insurance benefits.

WARN notification is only required for employees (1) laid off for more than six months or (2) who have had their hours reduced 50% or more in any six-month period as a result of a mass layoff. Thus, the takeaway for hoteliers is all about timing and numbers. As most furloughs associated with the coronavirus began in mid-March, the WARN Act could be triggered in these cases if furloughed employees fail to be recalled by mid-September (depending, of course, on the total number of workers involved).

Of note, a handful of states, including California, Illinois and New York, have enacted their own mini-WARN statutes. As such, hotel employers should always check state law when dealing with the potential of a mass layoff. They should also keep in mind modifications to existing laws given the extraordinary circumstances presented by the COVID-19 pandemic.

Hotel owners and operators would be wise to consult with legal counsel when staring down the barrel of a potential mass layoff. It may be recommended that hotel management provide a form of WARN notification to minimize the potential for related litigation.

Regarding employee health and safety, what should be on hoteliers’ radar screens as the risk of COVID-19 persists?

It is nearly impossible to implement consistent companywide health and safety protocols that reflect varying federal, state and local guidelines. One constant is the general duty clause of the Occupational Safety and Health Act (OSHA), which mandates that employers provide their employees with a “workplace free from recognized hazards likely to cause death or serious physical harm.” Prior to the onset of the coronavirus, this obligation was rather straightforward, but how the requirement will be interpreted as a legal standard in the face of a highly contagious virus remains unclear.

Hotel management should engage in a top-down review to determine how, and if, they can make their workplaces safer for employees upon their inevitable return. Among things to be considered is whether greater social distancing is possible given the design and operations of an existing property. Toward that end, staggered work hours, or having different teams reporting to work on different days to facilitate social distancing could be a good solution.

On par with social distancing is the need for hoteliers to ensure that their workforces are healthy and not likely to infect others. Hotel employees should have their temperatures taken as they arrive for work, and personnel who are coughing or showing other observable symptoms of COVID-19 should be prevented from entering the workplace. Thankfully, the U.S. Equal Employment Opportunity Commission has determined that an individual with COVID-19, or symptoms of it, presents a significant risk of substantial harm to others, which justifies limited health inquiries and medical examinations and testing of employees, though employers must maintain all health-related information about an employee’s illness or condition as a confidential medical record. By virtue of this confidentiality requirement, hotel owners and operators must be thoughtful about whom they have asking medical questions and taking down health-related information, and how that data is being stored.

Regarding employee health and safety, one issue unique to the hospitality industry relates to protocols put in place for guests (e.g., the frequency in which guestrooms are cleaned, how food should be delivered and whether guests will be tested for COVID-19). In other words, employees need to be protected not only from their co-workers, but also from hotel visitors, which may prove to be rather tricky as a practical and operational matter.

Another issue for hoteliers to keep top of mind is what personal protective equipment (PPE), if any, their employees should wear (e.g., masks, gloves, etc.) while on the job. To the extent PPE is necessary, employees will have to be trained in its use and proper disposal. Attention must also be paid to the most routine events, like managing the ingress and egress to a hotel property or its elevators to prevent congestion. Likewise, to mitigate the chance of another outbreak, it may be essential to limit undue density in a property’s breakrooms or other common areas.

How should hotels approach contractual issues like large booking and event cancellations due to the coronavirus?

When it comes to significant room and event cancellations, hotels need to tread lightly, keeping in mind the possibility of PR- and brand-related fallout. The prospect of adverse publicity aside and with regard to contract performance, enforcement rights pertaining to booking and event agreements will largely hinge upon the principles of force majeure.

A force majeure clause operates to excuse performance under an agreement or to extend time of performance when an unforeseeable event—or one that is beyond a party’s control—causes that party to be unable to meet its contractual obligations. Arguably, the coronavirus may well qualify as a triggering event for purposes of a force majeure provision in a hotel contract, but that will not always be the case.

Force majeure language must be very detailed, as many courts set the bar quite high and require specific reference to the problematic occurrence (here, a pandemic or virus). Nonetheless, force majeure could be grounds for the cancellation of a large booking or event. So too may the legal doctrines of frustration of purpose and impossibility of performance.

Lawsuits filed over the last month in California, New York, and Texas have called into question the enforceability of force majeure provisions in light of COVID-19. Unfortunately for hotels juggling cancellations, concrete answers will not be coming anytime soon as these cases will likely outlast the virus.

Beyond force majeure, hotel owners and operators should be aware that several class actions are being pursued in California under the Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL). These disputes—mostly related to large-scale events—are at least partly based on the venues’ failure to conspicuously outline cancellation and refund policies.

Dana A. Kravetz is managing partner of Michelman & Robinson. Contact him at dkravetz@mrllp.com. Lara Shortz is recruiting partner at M&R, Contact her at lshortz@mrllp.com.

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