The most common HR mistakes that lead to hotel industry lawsuits – and how to prevent them

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Attorneys in the field say claims related to tips, overtime, and sexual harassment are among the most prevalent

by Tom Gresham

Legal experts say the hospitality industry is particularly vulnerable to human resources-related lawsuits that can be separated into two distinct categories: wage and hour claims, and sexual harassment incidents. Both categories are challenges in other industries, too, but experts say the hospitality industry is uniquely susceptible to those types of actions because of the nature of the hospitality workplace and how its employees often are compensated.

Preventing the problems that lead to these lawsuits can seem like a daunting task, particularly because of the dizzying array of highly technical compliance issues at play. However, Jeffrey Ruzal, an attorney who leads the hospitality service team at Epstein Becker Green, says, ultimately, there is a simple, straightforward approach to keep in mind.

“It really all comes down to knowledge and training,” he says.

WAGE AND HOUR CLAIMS

Amy Traub, partner and chair of BakerHostetler’s national Labor and Employment Group, says wage and hour lawsuits encompass a variety of claims, including those tied to such mistakes as failure to report tips, improper tip pooling, improper calculation of overtime rates of pay, failure to compensate employees for all working time, and failure to meet wage notice and pay stub requirements, among many others.

The management hiccups that lead to these myriad wage and hour issues are intertwined and can trip up even the most diligent supervisor. Traub says wage and hour lawsuits rarely result from an employer’s attempt “to be sneaky or get around their legal requirements when it comes to compensation.”

“Rather, they tend to stem from a lack of awareness or understanding of the applicable wage and hour laws,” Traub says. “Some employers might even know about the federal wage and hour laws (which are mostly contained in the Fair Labor Standards Act), but they may be unaware of their state or city’s wage and hour laws.”

As an example of the type of simple mistake that can slip through overlooked, Ruzal says one routine scenario for a plaintiff to claim is that an employee worked while technically off the clock – even if it was not for an extended period of time or if the employee did the work at their own direction rather than the prompting of a supervisor. If management had not put in place policies and processes to prevent that work and make clear it was not allowed, the company could be at risk.

Ruzal, a former prosecutor with the U.S. Department of Labor who routinely prosecuted wage and hour actions, says plaintiffs’ lawyers have developed a keen eye for what he calls “foot faults” – technical compliance violations that are easily missed by managers. In the event of a finding for the plaintiffs, the defendant hospitality company must cover the plaintiffs’ attorney fees in addition to whatever liability they face. For hospitality companies, Ruzal says, “Failure to comply even with the most technical of requirements on state and federal law could result in a truly catastrophic result.” That’s why he and other experts say the cases tend to end with early settlements.

Luis Santos, an attorney in FordHarrison’s hospitality group, says plaintiffs’ lawyers are aware of how difficult it is for hospitality managers to remain attuned to the complex web of laws in place.

“Plaintiffs’ lawyers are going after [hospitality]employers and recruiting tipped employees to bring these sorts of wage and hour lawsuits either on a class-action or a collective-action basis or even individual claims,” Santos says. “I see more and more of these come in every year.”

Santos says hospitality companies should routinely conduct audits to identify vulnerabilities and patch them.

“The most important thing is to know what’s going on in your business,” Santos says. “That means conducting regular audits to ensure compliance – making sure that you’re paying minimum wage, making sure that you’re paying the correct overtime (which sounds like a simple task, but it’s far from it), making sure that employees are properly classified under the wage and hour statutes, making sure that employees participating in tip pools are the proper tip pool employees. So, in general, making sure you’re on top of your game when it comes to wage and hour regulations.”

In addition, robust training is crucial. Santos says too often hospitality companies do not pay the same level of attention to HR-related training for managers that they do to more customer-focused topics, such as food safety. A former front desk clerk and assistant manager in the hotel industry, Santos says high turnover in hospitality combined with the technical nature of the wage and hour laws makes regular training particularly essential to ensure that everyone who transitions into a position is well acquainted with the rules.

“I often see a gap in the hospitality industry where there’s a lack of consistent training of managers,” Santos says. “Training is really important. First, when you’re defending potential lawsuits, it will show that you were proactive about the issue. But most importantly, your well-trained manager is just less likely to screw up and make a mistake.”

#METOO LAWSUITS

Traub says the hospitality industry has an inherent risk for instances of sexual harassment, and the industry unsurprisingly has experienced an increase in claims with the rise of the #MeToo movement.

“The hospitality industry is unique in the sense that employees are working in close quarters, often very late at night, and often unsupervised, which tends to provide more opportunities for sexual harassment,” Traub says. “The industry is also ripe for these issues in the sense that the workforce tends to be younger and the workplace less formal, which can, for example, result in employees dating each other more often than in other industries. Employers also tend to skip or provide overly generic training to employees on sexual harassment issues, resulting in an environment that lends itself to the notion that perhaps harassing behavior will be tolerated.”

Traub says addressing #MeToo concerns requires concerted, detailed training efforts, not only for the education itself but for the signal it sends. “When an employer does not take a strong position on the issues by training its managers and employees in a meaningful way, the issues are exacerbated,” she says.

“Meaningful, comprehensive training by a skilled professional in sexual harassment issues – preferably a lawyer – is key,” Traub says. “And that training should take place at every level of the organization. Further, the tone from the top should be such that there will be no tolerance of sexual harassment in the workplace. An employer can accomplish this objective by conducting prompt and thorough investigations and taking effective remedial action against harassers.”

In addition, experts say employers must ensure they provide a proper complaint procedure for their workers and establish an open-door policy that gives them a variety of ways to report sexual harassment. An environment emphasizing transparency is essential, Ruzal says. He says he is seeing a marked improvement in the effort hospitality firms devote to addressing inappropriate behavior in the workplace.

“It’s important for managers to know how to interact with an employee who is a whistleblower reporting behavior that either they have experienced personally or they have observed,” Ruzal says. “And I think that when you create that transparency among employees and management, everyone’s clear about what is and what is not tolerated and that there are clear mechanisms for reporting instances and that there will be repercussions. That is a good way to stave off a lot of potential lawsuits, and, in the more immediate sense, it’s a good way to stave off inappropriate behavior in the first place.”

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