Industry Update
Opinion Article30 December 2021

The Changing Hotel Legal Environment: Being Aware and Prepared

By Robert O’Halloran, Professor Director, School of Hospitality Leadership at East Carolina University.

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The legal environment of the hospitality industry is forever evolving and changing. Given specific hospitality industry events and circumstances, industry professionals need to view the law, policies and regulations across the industry -- and beyond -- with particular attention to social, political, environmental, and human needs and their responsibilities and obligations.

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The past few years have been framed by COVID-19 concerns and efforts to sustain, recover and transition back to a new normal. In this author's opinion, things won't go back to how they were pre-COVID-19, and the operating and legal environment will adapt to a changing environment across all aspects of business.

Hospitality / Hotel Law Topics

The legal environment in all business sectors is adapting to new challenges. In the service industries, consumer rights protection as it is related to tourism and hospitality is an important issue for overall society and includes the right for proper quality of service, and the right to receive services in compliance with the requirements of the legal regulations (Adamenko et al, 2020).

The hotel industry, as part of the greater hospitality and tourism industry, responded in a variety of ways to COVID-19 and its impacts on society, business and all aspects of the travel and tourism industries in general. In responding to an unprecedented crisis, new legal considerations have arisen and continue to emerge. For example, Andrew Hogenson, a lawyer at the St. Louis office of Lathrop GPM noted that "A temporary closure touches on virtually every area of law relevant to the operation of a hotel: labor laws; regulatory laws (federal, state and local); agreements with lenders; franchise, management and license agreements; general debtor-creditor relationships; tax law; and insurance law,"(Perkowsky, 2021).

Responding to the COVID-19 crisis, the American Hotel and Lodging Association (AHLA), quickly organized and offered guidance, advisory notices and research for owners and operators across the country. The AHLA Safe Stay effort helped to set the direction for operators to handle and manage issues in the pandemic.

For example, the AHLA effort examined meetings and events, indoor air quality check lists, and Safe Stay property signage and vaccine fliers. Safe Stay program efforts also included education courses and created an advisory council that focused on employee and guest health, employee safety, cleaning and disinfecting products and protocols, and included the creation of an enhanced industry-wide hotel cleaning checklist, and guest check list. AHLA quickly reacted to the crisis and also as is the norm, included legal disclaimer.

Hospitality business programs are not law schools but focus on the management and control of hospitality businesses. From the perspective of a higher education hospitality business school, it is standard operating procedure to offer a course in hospitality and or hotel law. As part of hospitality businesses operations, managers need some knowledge of their legal environment to manage and exercise reasonable care in their regular management routines. A review of hospitality business curriculums notes courses in lodging, food service, meetings and events and tourism.

Additionally, traditional business disciplines, i.e., accounting, finance, marketing, management and management information systems and business law are offered and applied to hospitality industry scenarios. Hospitality Law courses include topics such as labor laws, franchising, risk management and insurance and more. Hospitality law textbooks and or course syllabi organize legal topics under headings that may include prevention, government, hospitality business operations, contract law, human resource law, and hotel operator legal responsibilities (Adapted from Barth and Barber, 2017).

The topic of hotel law is often introduced using what is referred to as the STEM process, "select, teach, educate, and manage" (Barth and Barber, 2017). This process is logical from an educational perspective, but a lot of material for students to absorb in a semester. The premise here is that students will not be legal experts but should be able to relate knowledge of their legal environment to planning, management and control of their hospitality operations. For faculty, we can set the tone for operating with ethical procedures and decision making. While personal ethics and the law are not always the same, they are clearly linked. From the education perspective, hospitality management curriculums need to note the importance of federal, state and local regulations.

Under more specific headings content would include ethics, government regulations, federal, state, and local, immigration and employment, agency relationships, franchising, the Uniform Commercial Code (UCC), management contracts, immigration, payroll, discrimination, liability, food and beverage concerns and the management of, and reactions to crises. The latter brings us to the current COVID-19 pandemic and its impact on hotels and the hospitality industry.

Multiple and diverse topics are included in hospitality law courses. These courses due to the changing legal environment are constantly being updated to include current issues. For example, in most states, business owners have a duty to exercise "reasonable care" to protect their patrons and customers from being injured. While there are no published decisions specifying what constitutes "reasonable" care during the COVID-19 pandemic, hospitality business owners should, and most did, implement various safety protocols to protect themselves from future COVID-19-related liability claims (Adapted from Dial, J. 2020).

Legal Topics in Coursework

Many legal topics are regularly included in course-work but students are not immersed in the topics as they would be in a law school. A hospitality law course could have descriptors and goals as reflected below, which come from our school's curriculum.

  • Knowledge: Identify the four essential components that must be present to create a valid contract. Describe responsibilities of a manager/owner regarding employee selection and discrimination in the selection process. Discuss the types of legal duties required of a hospitality operator.
  • Think:
    Identify basic principles of law and their applicability in a hospitality context. Assess the theories of bailment to be able to implement policies that limit potential legal liability.
  • Value: Demonstrate responsibilities of reasonable care to protect the best interests of their stockholders, employees, the guests and clientele, and the greater community.
  • Communicate: Analyze and assess a situation according to legal theory and develop, implement and evaluate prevention techniques.
  • Lead: Recognize ways to manage their business in a legal and ethically and morally responsible manner. (Adapted from Master Syllabus, HMGT 4244, Hospitality Law, School of Hospitality Leadership, College of Business, East Carolina University.)

Additionally, in the sampling of legal topics below are topics that are often discussed in hospitality business coursework including hospitality law courses and introduced as significant parts of hospitality content.

  • Hotel Property Development: Real estate law, leases etc.
  • Human Resources: Employee selection, discrimination in the selection process, ADA verification of eligibility to work, employment relationships, workplace discrimination and sexual harassment, Family and Medical Leave Act, uniform services employment and reemployment rights act, compensation, overtime pay, tipped employees, benefits; the Patient Protection and Affordable Care Act of 2010, unemployment claims, posting opportunities, workplace surveillance.
  • Lodging: Your responsibilities as a hospitality operator to guests, accommodating guests, guest privacy, responsibilities to non-guests, removal of guests, liability for guests' property.
  • Food and Beverage: Your responsibilities when serving food and beverages, serving food, foodborne illness, truth-in-menu laws, serving alcohol laws.
  • Hospitality Law: Franchising, management contracts, conference services contracts, liability, safety and security issues, human trafficking, crisis management programs. There are obviously many more topics and legally related issues to be explored.

The Changing Legal Hotel Environment: Issues and Content

The COVID-19 pandemic has affected the hotel industry like no other event in history. The pandemic has also raised several legal issues that hoteliers need to consider when and if closing their hotel is required, which may include furloughing or laying off staff and applying for government assistance in accordance with the Coronavirus Aid, Relief and Economic Security (CARES) Act (Perkowsky, 2020). In the hiring process, identifying what managers can do and cannot do will assist in the uniformity and consistency of processes. These topics relate directly to the standard operating procedures for human resources activities and are keenly important in our service environments.

As a young manager, I appreciated company policies and rules as providing the guidelines for company procedures and basically just doing my job correctly. However, what also became clear was that policies and rules that a company created were not necessarily laws. As we plan for the recovery and move forward to create new operating norms in the lodging business, we must consider and anticipate the unexpected. Crisis and risk management has long been discussed and having a crisis plan is recommended regularly. For our students, we, need to make sure they understand that a crisis plan is a significant part of managing their legal environment.

A course in business or hospitality law will not make managers legal experts. The consideration for managers is when is it necessary and appropriate to include legal representation and input in planning and operating lodging operations. As the lodging industry has grown and matured, its processes and business practices have become more sophisticated and therefore more complicated. Issues like branding and logo protection, franchising and management contracts are complicated and have multiple provisions that impact owners, operators, and guests.

For example, as a young manager, I received correspondence from a law firm representing a well-known operator/competitor in the region. The letter stated we were to cease using the logo we (the company) were infringing and or violating their brand. As the manager, I was the representative of the company that owned the operation, and immediately shared this notice with headquarters office. My employer, apparently, in its processes and creation of this brand, did not adequately research existing brands.

Ultimately, the logo being used needed to be changed. I was not an expert in brand infringement and needed to call in legal expertise at the corporate level. In hospitality business education we see and encourage creativity in our students, but creativity and the creation of brands requires legal homework. The point is, that many activities and actions in lodging and other hospitality businesses can be viewed as normal operating procedures without consideration of their legal environment. We don't want to be frozen by legal concerns, but we need to be thoughtful.

Additionally, lodging safety and security issues, are front of mind in the current environment. COVID-19 has pushed the guest and employee safety to heightened levels. Previously discussed Safe Stay procedures from the AHLA, as I see it, have and will become current and sustaining standards. For example, meeting planners will likely ask for details they can share with their groups about sanitation and safety processes and procedures in their hotel venues. Lodging employees will also continue to insist on safe and sanitary working environments.

Given the staffing issues in the hospitality industry today, legal issues have been noted concerning mask mandates, requiring employees to have received the COVID-19 vaccine etc. There are currently multiple business sectors and government entities struggling with issues arising from required employee vaccinations. Perceived health risk, as noted by Greenhalgh and Rosenblatt as far back as 1984 can result in perceived job insecurity (PJI) (Adapted from Greenhalgh & Rosenblatt, 1984). It could be argued that perceived risk continues to plague hospitality recruiting noting COVID-19. Due to working in hospitality high-contact environments, front line employees can be at high risk for COVID-19 infection. It is noted that PJI has both affective (emotional reactions of individuals to potential adverse changes) and cognitive (undesirable changes perceived by individuals) components (Jiang & Lavaysse, 2018). Therefore, operators must provide, a safe and secure workplace and be held accountable for that environment.

The lodging and hospitality business sectors will continue recruit and select qualified employees. The labor market is challenging as other service sectors, retail, healthcare etc. have aggressively recruited furloughed or separated hospitality employees. The challenge for the industry is luring these former employees back. Also of note, is that the hospitality industry is a global business sector and has long struggled to attract and retain the best qualified people. Many sectors of the hospitality industry have long recruited international professionals.

United States based organizations must support these hiring efforts in the form of assisting potential employees in obtaining work visas. This effort has never been easy and is increasingly difficult in a COVID-19 legal environment. The global pandemic has impacted border crossings and immigration. The restrictions on international travel etc. have complicated global hiring efforts. The recruiting question, that is, is it reasonable to hire an international candidate instead of a work eligible citizen? One response from the lodging industry has been the lack of qualified applicants.

For example, this author has previously provided evaluations to law firms asking for an educational assessment of international candidate's qualifications for management positions at US hotel company locations. The assessment of educational equivalency involves the comparison of a USA based hospitality business curriculum with international education and experience.

Working with the Law

One of the pressing issues for hospitality businesses (and hospitality business program graduates) is recruitment hiring. Given the number of layoffs, furloughs and business closings since the pandemic began, most lawsuits related to employees are hiring claims center around what, if anything, was promised to former employees, questions asked during the screening process, and the basis for hiring decisions. It is important for employers to keep these issues in mind as they bring employees back to work.

Ekelman et al, (2021) noted, must an employer rehire its former employees before considering new applicants and can an employer legally hire an applicant and reject a former employee who was laid off? The answer is yes, but they urge that operators should review hiring and recruitment plans and identify best practices when evaluating applicants. They also state that the most important step an employer can take to ensure its hiring decisions are fair and lawful is to train interviewers and decision makers.

Conclusion

In the COVID-19 crisis era, there is no individual blame that can be assessed and/or assigned for the pandemic and its impact on lodging operations. It is questionable if the COVID-19 crisis could have been prevented. However, going forward, hotels owners and operators can plan for whatever the next crisis will or might be and be prepared. A plan to operate legally, effectively, and efficiently will put controls in place to help protect a hotel business. Additionally, using all the resources available, e.g. Safe Stay guidelines, are arguably a "reasonable care" effort in creating a safe environment. Ultimately this strategy will help a hotel regain market share.

Education is a critical step toward understanding the law and its relationship to hospitality businesses. For hospitality business programs, hiring and placement of our graduates continues to be a key issue. Hospitality business education can reinforce the importance of fairness and impartiality in managing lodging and hospitality operations and therefore guide students and graduates to operate in an ethical and legal manner with all its stakeholders. Education of the law related to hospitality can reinforce purpose, consistency, impartiality, best practices, and documentation (Ekelamn et al, 2021).

As a former hospitality industry manager and now a professor I recall hearing legal language like exercising "reasonable care" and "necessary and appropriate" from enabling legislation for things like concession operations in national parks. Currently we hear about "apparent agency" in franchising and leasing scenarios etc. This is notably a limited framework and no amount of lawyer TV will provide additional context. Most hospitality faculty are not lawyers (some are), but our role in this important area needs to the creation of an awareness of issues, policies and legislation, and potential impact on operations and liability. Therefore, focusing on the continuous monitoring of the changing hospitality business legal landscape.

References

Reprinted from the Hotel Business Review with permission from www.HotelExecutive.com

Robert O’Halloran

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