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Duff on Hospitality Law

Guest Room Privacy and the Fourth Amendment

Posted in Hotel Guest Room Privacy, Hotels

Hotels are faced with a delicate balancing act when it comes to maintaining guest privacy.  Hotel staff must comply with police investigations when noncompliance would constitute obstruction of justice.  At the same time, hotel employees must recognize their guests’ Fourth Amendment right to be protected from unreasonable searches and seizures.  If hotel employees comply with an unreasonable search or seizure that results in harm to the guest, the hotel could find itself exposed to civil liability.

Courts have recognized that the Fourth Amendment protection from unreasonable searches and seizures applies to searches and seizures in hotel and motel rooms.  Certain exceptions allow for warrantless searches and seizures, including consent.  In broad terms, the consent exception means that a party’s agreement, actual or implied to a search and/or seizure renders a warrant unnecessary.

In general, during a guest’s stay at the hotel, only the guest may consent to a search of his or her room.  While hotel staff members may access the room for cleaning and maintenance during the guest’s stay, they are not authorized to allow police to enter the room.  Thus, during a guest’s tenancy at the hotel, employees should not allow police to enter the guest’s room without a search warrant.

Fourth Amendment protections do not apply after a guest’s tenancy expires, at which point those employees with proper authorization from the hotel may aid the police and consent to a search of the room.  While this seems like a straightforward principle, it is not always clear when a tenancy actually expires for the purposes of the Fourth Amendment.  When faced with this lack of clarity, hotels can take certain actions to ensure careful compliance with the Fourth Amendment by issuing and consistently following policies regarding (a) guest checkout and (b) eviction of guests.

 I. Checkout Policy and Procedure

A guest’s Fourth Amendment rights expire once the checkout time has passed. However, this may be modified by the hotel’s practices and guest communications.  Consequently, hotel policies and practices may extend Fourth Amendment protections past the guest’s pre-arranged checkout time. For example, if a hotel gives a guest permission to stay until a later checkout time or has a practice of acquiescing when a guest stays past the posted checkout time, Fourth Amendment protections last until that later check-out time.  Courts have found that after a hotel provided specific guests with such an allowance, those guests “reasonably believed that the hotels would allow them to do so again, permitting them to retain a privacy interest in their rooms.”  Courts realize that most hotels have a pattern or practice of allowing guests some leeway regarding the checkout time.

Each Fourth Amendment inquiry concerning guests checking out of hotels hinges on the specific facts of the case.  A hotel that has a clear checkout policy and consistent procedures will provide both staff and guests with certainty as to when a guest’s Fourth Amendment protections have expired.

Fourth Amendment protections depend on the guest’s reasonable expectation of privacy in his or her room, meaning that hotels must state their checkout policies in a manner that would not confuse a reasonable person.  An effective communication policy and procedure could involve a notification about the checkout time to the guest upon check-in, the issuance of a reminder to the guest several hours before checkout, and the posting of the checkout time in each room.  Further measures may include contacting the guest in the event that checkout time has passed.  In these ways, a hotel can unequivocally state that a guest’s tenancy and accompanying Fourth Amendment protections expire at a certain time.

A hotel should do its best to be consistent in communicating and enforcing its checkout policy.  In the absence of consistency, guests might be considered reasonable in expecting their Fourth Amendment rights to extend beyond checkout time.  If a hotel wants to retain the option to make exceptions to its general checkout time, it should provide a system for staff members to record these extensions so that they know whether or not each guest is protected by the Fourth Amendment.

II. Eviction Policy and Procedure

A justifiable ejection will also extinguish a guest’s Fourth Amendment protections.  A guest’s tenancy expires after the hotel has identified grounds for eviction and taken affirmative steps to repossess the room.

Examples of what courts have found to be valid grounds for eviction include:

  •  Raucous behavior.
  • Illegal activity, including storing illegal drugs.
  • Failure to pay for the hotel room.
  • Intoxication, disorderly conduct, and carrying a gun in the hotel.
  • Odors of marijuana (except in those states that have now legalized recreational use) and complaints of loud noise.

The hotel must then act to take back possession of the room, which ends the guest’s expectation of privacy.  The Fourth Amendment continues to protect a guest until the hotel staff takes action to commence eviction.  The following actions have been identified as sufficient to constitute the commencement of eviction, and thus the extinguishment of Fourth Amendment protections:

  •  Locking the guest out of his room, as long as it is for the purpose of eviction.
  •  Contacting the police for their assistance in physically evicting the defendant.
  • Removal of the guest’s belongings from the room, a note left on the door informing the guest that he/ she had been evicted, the hotel staff telling the guest that he/she was evicted, or some combination of the above.

In order to create and follow an eviction policy that promotes compliance with the Fourth Amendment, a hotel should identify behaviors that justify eviction.  This requires consultation of the law, including any statutes that govern hotel policies.  The hotel should then train its staff to recognize and respond to behavior that triggers eviction.  A hotel should also provide guests with its eviction policy or communicate in some way the types of behavior that could trigger an eviction.  Finally, in the event of an eviction, the hotel must take steps to communicate to the guest that he or she is being evicted.  If the hotel has created any doubt or confusion as to whether the behavior under consideration triggers eviction, or does not clearly communicate that the guest is being evicted, Fourth Amendment protections may continue to apply. Therefore, as with the suggestions for checkout procedures discussed above, consistency and clarity will help to ensure a situation in which hotel employees and guests know when the Fourth Amendment no longer applies to protect guests.

In general, hotel staff should not allow police to enter a guest’s room without a warrant.  However, if the guest’s tenancy has expired because the checkout time has passed or the guest has been evicted, hotel staff may provide consent for a police search.  Hotels should implement polices and procedures that allow guests and staff to know, with certainty, the circumstances under which a guest’s tenancy expires.

What is “Suitable Seating” and How Does It Affect My Business?

Posted in Employment Law, Food and Beverage, Hotels

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.

Seattle’s New $15 Minimum Wage Raises Many Questions

Posted in Employment Law

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.

 

Hotel Rebranding: Time for a Change?

Posted in Brands and Trademarks, Hotels

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.

Who is Winning the Negative On-Line Review Battle?

Posted in Technology

The hospitality industry regularly faces tremendous challenges, ranging from unexpected tornadoes to salmonella lurking in organic eggs requested by guests.  However, negative reviews on TripAdvisor.com or similar sites pose particularly perplexing challenges.  Should the business respond or ignore them?  Our newest post from Judy Endejan, discusses the latest legal developments regarding negative on-line reviews.  Thank you Judy! – Greg 

Recently, some businesses have battled negative reviews aggressively by using contracts.  One web retailer, KlearGear.com, slapped a $3,500 fee on a customer for violating an anti-disparagement provision in its terms of use on its web-site and reported the customer as delinquent to credit agencies, harming their credit.  In another situation, a New York dentist required her patients to sign an agreement waiving any right to comment publicly about her services and to assign to her the copyright in any- after- the fact reviews.  While these examples represent creative, albeit desperate, attempts to stymie negative reviews, such tactics may cause more harm than the negative reviews.  For instance, the consumer who criticized kleargear.com has sued the company for harming her credit and trying to collect the $3,500 fee.

If a business sues a consumer for a negative review based on breach of its website’s terms of use, a court might void the language if it is unconscionable.  Standard consumer contracts printed in small type, that are not separately negotiated, generally will not be enforced because there is unequal bargaining power between the parties, which makes the contract unconscionable. However, this does not mean that every clause that waives the right to provide negative reviews is automatically unenforceable.  If these provisions are highlighted, specifically negotiated and supported by some unique consideration (such as a coupon for a free meal) a court might enforce them.  But how many businesses want to sue a customer?

Further, it’s very hard to strip a consumer of what many view as a fundamental First Amendment right to criticize.  Recently consumer groups have sought legislation that would prohibit businesses from stifling consumer reviews unless a consumer has expressly waived his or her right to give an opinion. Such legislation is pending in California.

So what is a business supposed to do about a false, negative review?  That depends on whether it can identify the negative reviewer and whether the review contains legally actionable statements. The First Amendment protects clear statements of opinion as long as the statement contains sufficient facts for a reader to know the basis for the opinion.  When an “opinion” implies the existence of undisclosed defamatory facts, it is actionable.  For instance, a review that contains hyperbolic, figurative language, such as “the place was a trainwreck” is generally viewed to be opinion and not defamatory if it explains why the reviewer came to that conclusion.  In contrast, reviews that contain provable false statements of fact may be actionable.  An example of this might be a review that states “the hotel lied about its cancellation policy,” when the cancellation policy is clearly disclosed in multiple places such as on its web-site, in confirmation letters and posted at the front desk.  In one recent case, Neumann v. Liles, the Oregon Court of Appeals allowed a defamation action to go forward against a wedding guest who posted a negative review on google.com about the wedding venue.  The Court found that the review contained factual statements that were wrong.  The Oregon Court found that the fact a plaintiff -business is public does not make the plaintiff a public figure, which makes it easier to prove defamation.  Otherwise if the plaintiff is a public figure the plaintiff must present evidence of actual malice, which means knowledge of falsity or reckless disregard of whether a statement is false.

This month a Lincoln City hotel owner took advantage of the Neumann ruling by suing an anonymous tripadvisor.com user that posted a negative review that stated, among other things, “the owner smokes weed” and the front desk attendant “had phone sex with someone.”  The Lincoln City hotel owner may have a hard time discovering the identity of the anonymous reviewer, however.  The First Amendment right to free speech includes the right to remain anonymous.  Website owners are extremely reluctant to cooperate in disclosing the identity of reviewers, if subpoenaed by a plaintiff in a defamation suit.  Any subpoena issued by a plaintiff’s attorney will likely be met with a motion to quash.  The right to remain anonymous is not absolute, however, and a business can succeed against a motion to quash, if it meets certain criteria that will vary from state to state.  For instance in Arizona, the plaintiff must show that (1) the anonymous speaker has been given adequate notice and a reasonable opportunity to respond to the subpoena; (2) the plaintiff’s cause of action could survive a motion for summary judgment for defamation on the elements of the claim, independent of the identity of the anonymous speaker; and (3) a balance of the parties’ competing interests favors disclosure, i.e. issuance of the subpoena to obtain the identity of the speaker.  Other jurisdictions, such as Washington D.C., require a plaintiff to prove that there is direct financial injury caused to the business by the alleged defamation.

While a business may be able to sue the reviewer it cannot sue Tripadvisor.com, and other sites such as Yelp. Congress enacted Section 230 of the Communications Decency Act that shields these from liability, as long as they are simply a platform for messages created by others.

Legal developments continue to swirl over the ying and yang of negative on-line reviews.  On the one hand, many businesses have a legitimate concern about stopping unfounded false, negative reviews that will harm their business.  On the other hand, consumers now view it as a God-given right to express their opinions about businesses in the many on-line forms that exist today.  So stay tuned for further developments.

Please contact me or Judy by email if you have any questions.

The Challenges that Hotel Brands Face in Paid Search

Posted in Hotels

I’m pleased to introduce guest author Sam Engel, from BrandVerity.  BrandVerity provides services that detect online brand and trademark abuse for a variety of industries including hospitality. Sam spoke recently to members of our Hospitality, Travel and Tourism team at our monthly meeting.  We’re grateful that Sam has offered to now share his experience and knowledge with our readers.  Welcome, Sam, and thank you for today’s post. – Greg

The Challenges that Hotel Brands Face in Paid Search

When you type the name of a hotel brand into a search engine, you’ll probably encounter a large number of text ads placed by online travel agencies (OTAs). Bidding and placing ads on variations of hotel brand names is a very common practice and has even led some in the hospitality industry to refer to it as a “war” between OTAs and hotels. Typically, those who support this viewpoint seem to frame it as a simple issue of direct bookings versus OTA bookings. While it’s certainly valuable for hotel brands to start thinking about it in those terms, there are some areas that this particular line of questioning still leaves uncovered. For example, why does the travel industry’s paid search landscape look like this in the first place? Furthermore, what other implications does this have for hotel brands?

In this post, I’d like to highlight some of the reasons that paid search is such a challenge for hotel brands—including the root causes that have led to the paid search struggle we have today, the broader implications of this struggle, and an idea for alleviating some of the industry’s conflict. Let’s start by exploring one of the reasons that we’ve arrived at this contentious relationship between hotels and OTAs:

1) It’s Easy for OTA Ads to Outnumber Your Brand’s Ads

In general, a hotel brand can only run a single paid search ad on a given search engine results page (SERP). This is because search engines have restrictions on “double-serving.” The engines’ rules prevent a single advertiser from having more than one ad appear on the SERP. This is typically enforced on the domain level. For example, only one ad leading to hilton.com would be allowed to appear—even if two separate AdWords accounts were trying to place two different ads for hilton.com.

While this restriction limits the brand’s prominence in paid search results, it enables OTAs to start to overwhelm the paid results. Individually, all the OTAs still have to follow the same rule. None of them can appear more than once. But in aggregate, they can really start to challenge the brand. Let’s say that five different OTAs are bidding on the same keyword as the brand. That leaves the brand significantly outnumbered with little recourse for pushing OTAs out of those spots. At BrandVerity, we’ve actually found this to be quite common in practice, too. In our recent report on hotels’ branded keywords, we found an average of nearly two OTA ads per branded SERP on Google and almost 5 per branded SERP on Bing.

2) The Search Engines Won’t Be the Middle Man

In the past, the search engines provided a pretty significant set of protections for trademark owners. In fact, they originally prevented any advertising on branded keywords.

That all changed long ago in the U.S. Today, anyone can bid on branded keywords. Furthermore, trademarked terms are up for grabs (and can be used by anyone in ad copy) unless a brand specifically opts out. When it comes to OTAs or other partners using trademarked terms, the engines distance themselves even further. Google and Bing are both very intentional about avoiding trademark disputes here. They each have language describing how “resellers” can use a brand’s trademark in their ad copy. This essentially places all the burden on the trademark owner to enforce their agreements with their partners. Brands can’t lean on Google or Bing for help—they have to go directly to the OTAs.

3) Hotels’ Contracts Can Quickly Become Outdated

One of the major reasons that OTAs initially had so much leeway in paid search is because it wasn’t in their agreements. It’s hard to write restrictions on something that doesn’t exist yet. So once Google AdWords came along, the OTAs had free reign to use the platform as they saw fit. Unfortunately for hotel brands, there wasn’t much recourse until the time came to renegotiate their contracts.

So, why does this still matter today? Haven’t nearly all hotel chains gotten past this and adjusted their OTA agreements accordingly? That may be true, but it’s important to remember that things can still change—just as they did when paid search first exploded onto the scene. Google is always experimenting with new ad formats, targeting options, and reporting tools. Not only is AdWords continually evolving, but there are all sorts of new marketing platforms being developed. To use another Google product as an example, the Google Hotel Finder made its debut only a few years ago. How many hotels have contracts with OTAs governing that channel?

Let’s assume that your contract specifies every single restriction down to a tee. That agreement is severely limited if you can’t identify violations and take action to remediate them. Unfortunately, paid search doesn’t lend itself to a quick ad-hoc review. It doesn’t offer the transparency of a billboard or a magazine ad. There are many variables affecting what you see when you try to investigate. The terms you search for, location you search from, time of day, and many other factors will impact what ads you see on the page. This can make it very difficult to be fully exhaustive in any compliance efforts.

4) Even with an Airtight Contract, Agreements Can Be Hard to Enforce

To further complicate the issue, many OTAs also have affiliate programs. Typically, they will have many affiliates in their program (often thousands). These affiliates are rewarded for the sales they refer to the OTA. This adds a layer of separation, and can make it very difficult to uphold your agreements. For example, let’s say an OTA’s affiliate is responsible for a violation of your agreement with the OTA. Will the OTA even be aware that the affiliate is responsible? If so, will they be able to rein in the rogue affiliate?

5) Will Increased Transparency Create More Trust?

One of the common grievances from hotel brands is that the OTAs are a bit of a black box. You know what bookings they generate for you, but you don’t have much insight about the pathway that the customer took to make that booking. This makes it very difficult to determine what credit belongs where—so it’s understandable that hotel brands might be slightly skeptical of their OTA partners. Which OTA bookings are truly incremental? In other words, which bookings did OTAs contribute that the brand would not have booked otherwise?

There are many variables involved in answering this question, and it may not be something that brands can fully answer. OTAs provide a lot of positives: access to a larger set of potential customers, websites that convert incredibly well, plus perks and guarantees that encourage undecided visitors to make bookings. There’s even the OTA billboard effect to consider, which may increase a hotel’s direct bookings outside of the OTA channel. But should all of these value-adds be bundled with the permission to bid on hotels’ brand terms? Should hotels be forced to buy the all-inclusive package?

It generally doesn’t make sense to order up an OTA’s services à la carte. One cannot simply ask for a booking here and a booking there, or to be featured on the OTA’s site with the caveat that customer ratings be excluded. OTA sites are a package deal. This may, in part, explain why OTAs have historically resisted making concessions with their paid search efforts. If paid search is just another part of the package, then why remove it?

Paid search is its own separate channel, and doesn’t have to be bundled. Unlike OTA sites, which are under direct OTA control and will most likely always be somewhat of a black box for hotels, paid search is a channel where brands can gain more visibility. Tools such as the AdWords Auction Insights report  are helping improve transparency, showing more of what’s happening under the hood. This is a good sign, because ultimately hotel brands and OTAs both stand to gain from it. Brands get the reassurance that OTAs’ interests are truly aligned with their own, and OTAs can reinforce the value they provide to brands. Furthermore, by increasing both sides’ mutual trust, the partnerships can be strengthened over time. Transparency may not solve all the issues, but hopefully we’ll see this trend continue—not just in paid search, but in other channels as well.

Chinese Investment in the U.S. Hotel Industry

Posted in Hotels

Today’s blog post was contributed by Garvey Schubert Barer’s D.C. attorney and China Practice ChairRichard Gluck, based on original research by GSB’s Yi Zhang. His extensive knowledge of international business and collaboration between the U.S. and China is a great resource to the firm. We’re grateful to have him as a new author to the Duff on Hospitality blog. – Greg

We have all seen the growth of Chinese investment in the U.S. hotel industry, but this is only the tip of the Chinese investment iceberg in acquiring U.S. management expertise and technology to fuel the growth of the hospitality and hotel industry in China itself.

With the robust growth of its national economy and an emerging tourism industry, China’s hotel sector has experienced rapid development in recent years. Economic growth in China has led to a significant increase in domestic travel for business and pleasure.  In 2013, with 2.3 million hotel rooms, China’s total income from the national tourism industry was over $305 billion, an increase of approximately 20% against the previous year. However, only 15% of Chinese hotels have a brand affiliation; the market is highly fragmented and has vast product discrepancies.

China has identified tourism as a core growth engine, and many provincial government authorities plan to promote tourism by encouraging direct investment in real estate and the tourism industry. Chinese government development policy controls the investment priorities within China.  According to the government’s current (12th) Five-Year Plan period (2010-2015), fostering China’s tourism industry is a strategic pillar for the country’s efforts to establish a satisfactory modern service industry.  The authorities in charge of tourism at all levels, including the national tourism industry, have been directed by the government to “optimize the development environment in an all-around manner, vigorously expand the development opportunities, and accelerate the transformation of the industry.”

This rather general statement of government policy can have far reaching consequences.  Consider these numbers:  By 2015, China’s domestic tourism population should reach 3.3 billion, the number of inbound overnight tourists should reach 66.3 million, and the number of outbound overnight tourists should reach 83.75 million. The annual increase of the number of direct employees in the tourism industry should reach 700,000 while the total direct employment in the tourism industry should reach 15 million by 2015. According to the China National Tourism Administration, about 200,000 additional accommodation properties are expected to be built by 2015. Formats such as time-shares and vacation rentals are also being considered as ways to help sell existing properties.

China is still a developing country.  This accounts for enormous growth and accelerating growth in the hotel and hospitality sector.  But sustaining that growth and ensuring quality requires China to obtain management and technology know-how from more developed economies. China’s domestic market could benefit from the knowledge, skills, and experience that are brought back from overseas investments. Thus, as both the Chinese central government and local governments develop their plans, they are focusing on differentiation, internationalization, high-end brands, and major impact.  They are welcoming foreign investment by experienced operators, and providing incentives for major hospitality players such as land-price discounts, cash or tax incentives, and priority approval processes.

Many of the investments made by Chinese companies in the U.S. hotel industry are designed to follow Chinese government policy that encourages “going out” by Chinese companies to “bring back” management expertise and best practices from world class operators outside of China to leapfrog the development process.

China’s mid-market is likely to be the most exciting space over the next few years. The mid-segment is currently under-represented from a brand and investment-grade product perspective.  But with rising incomes and a wealthier travelling middle class, dramatic growth is expected.  For example, March 13th’s Wall Street Journal reported on how Dalian, a northern Chinese port city on the Yellow Sea with a population of about 5.9 million, demands historic 17th- and 18th-century French architectural elements, including French carved stone details such as niches, balconies, and keystones, along with slate roofs.

Roughly 170 Chinese cities have more than one million residents, but only four cities – Shanghai, Beijing, Guangzhou and Shenzhen – are considered “first-tier” in terms of size and per capita GDP.  To be considered in the second tier, a city should have a population of at least three million and a minimum GDP equivalent to USD 2,000 per capita. By this definition, more than 60 Chinese cities are qualified as second tier.  According to figures from the U.S. Commercial Service, 14 of China’s second-tier cities account for 54 percent of the total imports from the U.S.  The hotel market potential in these cities vast and growing.

Are you someone who seeks to work with Chinese investors in the U.S. hotel industry, or looking to find investment opportunities in China? Let us know your thoughts and we would be happy to answer any questions. Please contact me or Greg Duff.

Gender Expression in the Workplace: A Primer for Employers

Posted in Employment Law

As you may know, discrimination based on gender identity is unlawful in several states and many cities.  This includes both the State of Washington and the City of Seattle.  The Equal Employment Opportunity Commission (EEOC) has also taken the position that gender identity is protected under Title VII’s prohibition against discrimination based on sex.

While the antidiscrimination laws that protect transgendered individuals are not new, the subject of gender identity may be new to your managers.  This post is intended to provide a very basic understanding of transgender issues to get employers off on the right foot for appropriately, sensitively, and lawfully handling gender expression issues in the workplace.

Defining Basic Terms

Broadly speaking, “gender expression” refers to the way people manifest masculinity or femininity.  This can be through clothing, hair, makeup, overall appearance, speech, or other behavior or form of personal presentation.  “Gender identity” refers to a person’s innate sense of being male or female.  When someone is “transgender,” it essentially means their gender expression or identity is not consistent with societal expectations of someone with the same assigned sex at birth.  “Sexual orientation” is a person’s physical and/or emotional attraction to the same or the opposite gender.  Although sexual orientation and gender identity are often discussed together, they are not the same: a person’s gender identity has nothing to with their sexual preference, just the same as it has nothing to do with their age, race, or ethnicity.

Unlike the broader, umbrella term transgender (sometimes shortened to “trans”), “transsexual” specifically means someone who strongly feels that they do not embody the sex they were assigned at birth and has changed, or is in the process of changing, their sex to correspond to their sense of gender identity.  These individuals often pursue medical options, such as surgery or medication, in order to align their physical characteristics with the gender with which they identify.  When a person undergoes a process of medically, legally, and socially changing gender, this is known as a “transition.”  A transition may or may not involve a “gender reassignment” (also known as “gender confirmation”) surgery.

One thing many people do not realize is that not every transgendered person necessarily identifies as the opposite sex or has any desire to change his or her body.  In fact, a transgendered person may not identify as any gender at all but actually prefer to avoid restrictive notions of male or female altogether.

Tips for Being an Ally to Your Transgendered Employee

  • Use respectful language.  It can be difficult to know the proper terminology to use when talking to or about a transgendered employee.  A lot of terms are out there in the media, but not all of them are considered respectful.  Avoid stigmatizing words like tranny, transvestite, hermaphrodite, and sex-change surgery.
  • Learn and use the proper pronoun.  You should always call a trans person by his or her preferred name and chosen pronoun.  If you don’t know their preference, it’s okay to respectfully ask the employee which pronoun they prefer, or how you should refer to them.  If you do screw up a name or pronoun, just apologize and move on; making a fuss about it will likely be perceived as awkward or offensive.  Along the same lines, ensure that an employee who recently disclosed that they are transgender is provided an updated name tag, uniform, business cards, etc. and that they are entered into internal and external systems with their preferred name and gender.
  • Do not ask them if they have had gender reassignment surgery.  This is a very private subject and should be treated the same way you would treat any employee’s medical issue.  The same goes for hormone replacement therapy or any other medical treatment.  Just because someone is transgendered, it doesn’t mean they want to talk to their boss or coworkers about their body.
  • Keep it confidential.  Be aware that a trans person’s name or gender on their driver’s license or other state or federal documents may be incongruent with their appearance or preferred name and pronoun (for example, when a person named “Steven” on legal identification presents as female).  If this occurs, do not confront or “out” the transgendered employee.  It may be necessary to note the trans employee’s legal name in formal employment documentation, but there is no requirement to use that same name in the workplace environment  – think of how often people go by nicknames or middle names rather than their given first name.  An employee’s status as transgendered should only be shared with those with a clear need to know, unless the trans employee prefers otherwise.
  • Give the employee safe and private spaces.  A question that always comes up with regard to transgendered employees is which bathroom they should use.  Simply put, the transgendered individual should be permitted to use the restroom of the gender with which they identify.  This is true regardless of whether they have had gender reassignment surgery.  If another employee objects, that person should be reminded that this valued employee has the same right to use the restroom as all other employees.  As for locker rooms, the trans employee should be provided a private area to change (either within the regular public locker room or in a separate area) or be given a separate changing schedule.

As an employer, you are responsible to ensure that both your managers and your other employees are treating transgendered employees respectfully.  As with most things, the tone you set at the top will make a big difference in how the rest of your employees behave.  (It’s also something that judges and juries give a lot of weight to when considering whether a company is responsible for an alleged hostile work environment against a transgender employee).  That said, teaching respect and sensitivity to your employees is not necessarily easy or simple.  If you have a transitioning employee, you may want to schedule a transgender awareness and sensitivity training to educate employees about trans issues and teach them how to respectfully interact with their transgendered colleague.

If you are experiencing issues with gender expression in the workplace or have any questions on the subject, feel free to contact me or Greg.

Meeting Labor Numbers – Working Off the Clock Wage Claims

Posted in Employment Law

It is no secret that wage and hour class actions are among the “hot topic” law suits that are on the increase.  Like too many people, when I hear “class action” my heart starts to race, beads of sweat break out on my forehead and I start to feel sick to my stomach…and I don’t even own the business that is named in the suit.  I just know the wage and hour cases are time intensive and expensive to defend.  Wage and hour class actions often deal with the tried and true wage claims, misclassification of exempt employees as well as the overtime claims that go hand in hand with the misclassification.  However, occasionally one comes along that makes you stop and think.

Last week one such action was brought in Alabama against a franchisee of a fast food restaurant.  This particular lawsuit highlights the challenge of balancing the need to manage labor costs and the long term cost of doing so in an inefficient (or illegal) manner.

The restaurant industry is not a high margin industry, so it is tempting to cut corners where you can. For example, if you open early in the morning, you want to have everything ready to go as that first bleary eyed customer stumbles in looking for their first jolt of caffeine.  The problem is if you don’t have sufficient prep work done, having the customers show up before your staff is totally prepared can result in you being in the weeds faster than you ever anticipated.  The problem is the cash needed to support the labor isn’t there if the employees do the prep work before the doors are open.  If this recent Alabama lawsuit is to be believed, the employees were asked to show up for work at least a half hour before the business opened to the public – but they could not clock in until there was at least $40 on the till.  This essentially means all prep work was done off the clock – a fatal mistake under the wage and hour laws.

The Fair Labor Standards Act (FLSA) requires employers to pay for all hours worked to their benefit.  This means simple things like turning on the kitchen equipment sufficiently early to ensure it is ready to go when the orders start flowing.  This means getting the mise en place completed before the day starts.  Not paying for this time means you have employees working off the clock.

Some work places know that they are requiring employees to work off the clock, such as the alleged violations in this new lawsuit.  However, other work environments also create this problem, perhaps unintentionally.

Employer A: This employer limits employees’ ability to clock in while still expecting an unrealistic amount of work to get completed within the “working day”.  This leaves employees feeling like they are “bad” or “wrong” because they could not get everything done that was expected.  Their solution is to clock out but keep working so they can catch up.  This helps them appear as the “shining star” employee rather than the poor performer.  No matter the motivation, this behavior is a problem.

Employer B: This employer creates an environment where employees feel so much a member of the team that they clock out and work off the clock (without anyone knowing) so that they feel like they are “helping” the business succeed.  Here the good intentions of the employee still create liability for the company.

No matter the nature of the work environment, off the clock work is ultimately more expensive than simply managing your work force and keeping a realistic expectation on your labor numbers.  If a wage and hour suit is brought, the employer could be responsible for paying for all the off the clock hours worked (for the last six years), the overtime pay that would have been accumulated but for the off the clock time (for the last two, possibly three, years), as well as an equal amount in liquidated damages.  This is just under the FLSA.  Add any state law violations and penalties and the amounts can continue to climb.  You may even be liable for paying the attorney fees of the plaintiffs.  All of this is on top of the emotional strain and costs to the company, not to mention the cost of paying attorneys to defend the claim.

It is very important to manage your labor numbers.  It is even more important to manage your workforce and make sure that you aren’t creating an environment that either consciously or unconsciously creates a situation that employees feel compelled to work off the clock.  If you wonder how to manage your hours, or if you need an audit of your wage and hour practices to make sure there is not exposure to such claims, members of our Labor and Employment team are available to help.