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Hi folks, Spring is here! At HospitalityLawyer.com, that means we’re making initial preparations for the 3rd Global Congress on Travel Risk Management, held from September 30 to October 1, 2013, at the Omni Hotel near the Galleria in Houston, Texas. The Global Congress has become an essential event for anyone and everyone involved in travel risk management, including travel buyers and suppliers, law firms, safety and security providers—and that’s just the tip of the iceberg! Click here for a list of the titles that attend. The conference provides attendees with solutions for the entire Duty of Care equation, including policy development, compliance training, employee tracking, crisis response, executive protection, insurance, and more! At HospitalityLawyer.com, we are proud to host such a crucial conference, where we can help you—the experts—make travel safer and more secure for everyone. Keep an eye out for more details in CONVERGE Magazine and Travel Risk Management Newsletter as the 3rd Global Congress approaches. Also, make sure you save the date for the next Hospitality Law Conference, February 10-12, 2014. If you’re interested in sponsoring, attending, or presenting at our conferences, don’t hesitate to give us a call (713-963-8800) or shoot us an email. Our door is always open.

PRESIDENT AND FOUNDER, HOSPITALITYLAWYER.COM


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E-Discovery Expertise: An Essential Skill for Litigators • Margaret Raymond Flood • Norris McLaughlin &

Marcus, P.A.

Summit • February 10-12, 2014

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Upgrading Through Free Agency: Seasonal Hires in a Down Economy • Ed Harold • Fisher &

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The New I-9 Form: What You Need to Know • Gregg Rodgers • Garvey, Schubert, & Barer

Phillips LLP

Register Now for the 3rd Global Congress on Travel Risk Management • September 30 -

HOTELS & RESTAURANTS

October , 2013

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23

TRAVEL

DEVELOPMENTS

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Save the Date for the 2014 Hospitality Law Conference • And the Hotel Owner Management

AKO Hospitality Insurance Alert • David P.

Bender, Jr. & Diana Schafter Gliedman • Anderson Kill & Olick, P.C.

In Case You Missed It • Marriott vs. Rennaissance Eden Roc


DEVELOPMENTS

E-DISCOVERY

An Essential Skill For Litigators

Expertise

Margaret Raymond-Flood, Member, Norris McLaughlin & Marcus, P.A. was interviewed by the Editor of The Metropolitan Corporate Counsel on February 20, 2013.

Please give us a brief description of your practice.

I

devote the majority of my practice to general litigation with an emphasis on complex commercial matters. I litigate mostly in federal court but also in state court, and I work on a wide range of general commercial litigation matters. While I enjoy handling all different types of litigation, I have the most experience as defense counsel in litigations

involving environmental, professional liability, insurance and intellectual property matters. Obviously, a big portion of my practice involves electronic discovery, so I also consult on matters in the office even if I am not the litigating attorney on that matter.

www.HospitalityLawyer.com • CONVERGE • March / April 2013 6


DEVELOPMENTS Why do clients need counsel with expertise in the area of e-discovery? It’s very important because companies are generating more and more documents electronically, rather than on paper. Some are migrating to pure electronic methods for the future, and others are even transferring older paper documents to an electronic format. Thus, e-discovery is taking priority in litigations, and it will continue to do so. E-discovery has a unique effect on the budget and on litigation strategy, and it is very important to manage the e-discovery element of the litigation right from the beginning of the case. Incorrect handling will increase litigation costs, cause duplicative work and, in a worst-case scenario, lead to problems that cannot be fixed later on. For example, preservation is a very significant requirement that is triggered as soon as an actual or

potential litigation becomes known. In the electronic world, the preservation process is different and more complicated than simply telling everyone not to throw away any paper documents. Companies and their counsel need to take action early on, and it’s of critical importance that they know specifically how to manage the e-discovery process. For counsel, this requires a comprehensive understanding of the various options for handling the data and knowing the right questions to ask – both of your client and of your adversary – in order to advise effectively.

Expanding on the preservation discussion, have companies adequately comprehended the sources of data and the methods of bringing it into the organization in a meaningful way? There is a definite trend toward improvement, certainly driven by counsel, in helping clients understand the issues and possible solutions. These issues are not new to anyone anymore, but the ability to face them depends in part on the sophistication of the clients. One factor is whether the company has in-house counsel and/or an

in-house IT department. While companies with both will have a better understanding of the issues, they still may not be able to apply this knowledge in the context of a particular litigation. Outside counsel can really help here, especially for companies without sophisticated in-house resources.

Is e-discovery a strategy point in litigation? E-discovery is a pressure point that is useful in settlement negotiations. It drives litigation costs and budgets, especially in cases that involve large volumes of information, so it is an important factor in a number of determinations: whether to file an action, whether to settle, and how hard to push for specific discovery. Considerations of proportionality with respect to the volume and cost of discovery, as compared to

the damages sought in a particular matter, can often drive settlements. At the very least, the process of thinking through e-discovery issues in this light can help both plaintiffs and defendants better evaluate their case and litigation options. At best, this analysis can bring clarity to the determination about whether settlement is the right option, or whether litigating through trial is a better option.

7 March / April 2013 • CONVERGE • www.HospitalityLawyer.com


DEVELOPMENTS Are corporations conducting liability assessments as to the prospect of litigation that specifically include e-discovery issues? I see this more from the defense side, so I will speak to that here. When companies become aware of a potential litigation, we counsel and guide them toward considering e-discovery to be an important factor in their assessments and strategic planning. I make it a practice to raise this topic early and often

during the litigation process. E-discovery can swing a litigation budget tremendously, so I make sure that my clients are aware of these potential consequences. This way, clients can make fully informed decisions that make sense from an economical and a business standpoint.

How often do you find that clients come to you without any prior experience in this area? Almost every client facing its first major litigation has little-to-no experience with e-discovery. Clients that have dealt with prior litigations still may not know how the courts are currently handling e-discovery, which really is changing on a rapid basis. Therefore, even the most sophisticated clients are Is it important to have a network of e-discovery vendors with which you are familiar? How does your own experience with available technologies come into play? It’s extremely important. As outside counsel, we do not select e-discovery vendors, but we do counsel our clients as to the strengths and weaknesses of vendors that are familiar to us. While it’s not necessary to have an outside vendor in all cases, depending on the sophistication of the client, their services are often required. When matters arise, clients may have very little lead time to get an outside expert on board, especially at that critical preservation stage, so it’s very helpful for us to have a group of outside vendors with whom we’ve already worked. We understand how they operate and, importantly, what their billing practices are; thus, clients can make an informed selection based on guidance that we provide. I am not an IT expert, so I work closely with in-house and outside technology experts. I do have a general understanding of what’s being used, and I stay in touch with current developments; therefore, even

looking to us for guidance because one of our core responsibilities is to stay up to speed on the issues and judicial developments.

“Almost every client facing its first major litigation has little-to-no experience with e-discovery.” if I don’t understand all the technical components, I know the right questions to ask. This is especially important when I am trying to figure out what internal resources the client may already have. Further, there are certain terms of art in the technology world that outside counsel has to understand, particularly when setting terms with an adversary. Without this vocabulary, you might end up promising something that you can’t deliver or that will impose unexpected costs and burden on the client. So it’s extremely important to understand how the technology works, including its limitations and costs, in order to reasonably assess if it was done correctly, and I can guide both my client and an outside vendor through the entire process.

www.HospitalityLawyer.com • CONVERGE • March / April 2013 8


DEVELOPMENTS What is the advantage of having a variety of practice groups involved in the firm’s Response to Electronic Discovery and Information (REDI) Group, and how does it assist clients and outside vendors? Having the REDI Group allows us to call on various lawyers from our own office to provide relevant expertise with matters. It allows us to fully counsel our clients without the need to rely on outside help. In the case of e-discovery issues, for example, I might be called upon for assistance in the ways I just described above – understanding the technical vocabulary, asking the right questions and vetting vendor tools and processes – all before clients spend money on e-discovery, and even if I am not handling the client’s matter in my own litigation practice.

demands a certain knowledge base in order to delve into the very technical and complex issues. So it’s extremely helpful to have the REDI Group in-house, and much more time- and cost-efficient to be able to walk down the hall and ask a colleague rather than bring in outside resources.

At the same time, I might need assistance from one of my colleagues, for instance, in the firm’s intellectual property practice area. I enjoy working with trade secrets and other matters in this area of the law, which has unique discovery aspects and really What are the most recent developments in case law pertaining to electronically stored information? Certainly, one important development is the Da Silva Moore case from the Southern District of New York, which came out in February 2012. In his ruling, Judge Peck said that computer-assisted review, or predictive coding, is acceptable in certain cases. The court looked at various factors, including the cost, the volume of documents, transparency, the superiority of computer-assisted versus manual processes, and the parties’ agreement to use it. Now many outside vendors have started offering products with this technology, and it’s been interesting to watch the development in the software and in methods of using it. More recent cases are providing the layout of specific protocols, which used to be more about search terms but now are addressing control sets, statistical validation, quality control and random sampling – all ways of ensuring that parties are getting the documents that they want via the predictive coding technology.

Of course, as the software develops and everyone gets better at using it, there will be additional developments. It seems that initial concerns from lawyers about computer-assisted review have been faced off against the staggering costs related to data volumes and manual review hours required to determine relevance and privilege. At least in certain cases, predictive coding may help clients get the job done in a less expensive and more efficient manner, so it’s something we’ll be seeing more of in the future. We’re also starting to see the orders and discovery outlines that parties are preparing and agreeing to, which lay out a transparent, step-by-step process that everyone is comfortable with. Here, the parties know exactly how they got to the productions, which enables them to correct or limit issues in a cost-effective way.

9 March / April 2013 • CONVERGE • www.HospitalityLawyer.com


DEVELOPMENTS How do those developments affect litigation strategy? Certainly, there is a big impact on the budget and on the process of talking through the budget with clients. Factors in the discussion include the efficiencies of predictive coding, particularly with large data volumes, and the cost of using an outside vendor versus manual review. Translating this

analysis into real terms allows parties to consider options in the context of their own volume of e-discovery. It also allows us to avoid disagreements with adversaries, and resulting discovery motions, if we can sit down and lay out a quick and efficient protocol that everybody can live with.

Do you do any kind of proactive counseling with your clients? Yes, I started reviewing e-discovery and retention policies for the firm’s clients when the e-discovery rules first came into play a few years ago. It’s very important to have such policies but even more important that clients follow them. So we’ve

reviewed policies for a number of clients, updated them as necessary and generally helped clients to understand what makes the most sense for the company.

Hotel Owner Management Summit SAVE THE DATE: FEBRUARY 10-12, 2014

And the

www.HospitalityLawyer.com • CONVERGE • March / April 2013

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PROGRAM OVERVIEW Recovery of property loss and business interruption claims under property insurance policies can present businesses with complex and difficult challenges. The process can affect businesses both directly and indirectly, as one business’ loss may cause losses to and interrupt the business of others. Property loss, and the ensuing loss of business, can be due to various causes, from Superstorm Sandy to construction accidents to fire. Our presentation will draw upon lessons learned from our experience dealing with claims not only from Sandy, Hurricane Katrina and other natural disasters, but also from complex losses involving construction sites, hospitality industry properties and commercially leased buildings. We will provide practical advice for successfully pursuing insurance recoveries. Many of the insurance issues are relevant to businesses that own, manage, build or lease insured commercial property. The topics discussed will include:

1. Developing strategies for presenting and pursuing claims 2. Understanding key coverage issues and the court decisions interpreting important policy provisions 3. Dispute resolution options

SPEAKERS New York, NY, Ventura, CA, Stanford, CT, Washington, DC Newark, NJ, Philadelphia, PA, Burlington, VT www.andersonkill.com

Rhonda D. Orin Managing Partner Anderson Kill & Olick, L.L.P. Conference Moderator

Daniel J. Healy Attorney Anderson Kill & Olick, L.L.P.

Finley Harckham Managing Partner Anderson Kill & Olick, L.L.P.

Ronald J. Papa, SPPA President National Fire Adjustment Co., Inc.

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DEVELOPMENTS

UPGRADING THROUGH FREE AGENCY SEASONAL HIRES IN A DOWN ECONOMY By Ed Harold

S

easonal hiring is a critical element of retailers to successfully maximize sales and profits over the holidays. Increased crowds of shoppers require additional staff to provide quality customer service. With the competition of Internet shopping, retailers must provide an in-store service experience that cannot be accomplished with normal staffing levels. By way of example, major retailers such as Target and Wal-mart have announced expectations that they will hire tens of thousands of seasonal workers.

Given the state of the economy and the unemployment rate, employers are likely being presented with a better crop of candidates looking for seasonal work than ever before. Undoubtedly, some of these employees will perform so well that they will be retained. The question retailers must ask is whether they should plan to do more than just retaining the one-off spectacular performer and use this seasonal hiring binge as an opportunity to try to improve the quality of their overall in-store work force.

www.HospitalityLawyer.com • CONVERGE • March / April 2013

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DEVELOPMENTS HAVE A GAME PLAN In the sports world, teams are constantly looking to improve every position. A player who is performing adequately is constantly in danger of being cut and replaced by a player who is believed to be an upgrade at the position. These swaps do not always achieve the desired result, of course, but the teams never stop looking for higher-quality players. Most businesses, including retailers, rarely operate with this mindset. The prospect of terminating employees who are performing their job adequately simply doesn’t seem fair to most workers who believe that doing a good job should be enough to keep the job. This results in many store-level managers finding themselves lamenting their inability to keep some of the seasonal workers who have performed better than their regular staff. In the manager’s mind, their regular staff has not performed poorly enough to justify replacing them. This perception of unfairness inherent in replacing an adequate employee with two years

of tenure with a new hire who has worked for six weeks makes trying to improve the workforce through seasonal workers legally risky. This is so because juries are not as much concerned with whether discrimination occurred as they are with fairness. But failing to take advantage of opportunities to upgrade employees has significant downsides as well, in terms of store performance. Employees who stock more shelves in less time, or have better upselling skills, or who need less oversight, improve store profitability. The greatest advantage to finding these employees through the seasonal work force is that they have a six-week tryout period providing a significantly better ground for consideration than a 30-minute interview. Retailers who choose to use seasonal hiring as a means of upgrading their store teams’ quality should take a number of steps to diminish the legal risks inherent in replacing adequate performers with better performers.

THE DRAFT: HIRING In order to be positioned to improve the team, employers need to hire the best candidates for seasonal positions. This requires not skimping on the hiring procedures. Retailers will likely receive a surplus of applications for every position. Teach managers to identify good applications and problem applications. Look first for applications that are fully completed. Applicants who take the time and correctly fill out the application are more likely to do a good job.

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You should also look for work histories with significant terms of employment. While in times past, it may have been expected that individuals looking for seasonal work would not have that type of employment history, in the current state of the economy, it is much more likely that many will. Carefully review the statements about why an applicant left a former employer and stay away from applicants providing answers that suggest a victim-like mentality.

March / April 2013 • CONVERGE • www.HospitalityLawyer.com


DEVELOPMENTS Once a manager has culled applications for quality candidates, the interview process is critical. This will be the opportunity to determine if the applicants are potential long-term employees. Individuals who express an interest in staying beyond the holiday season if work is available are going to have a significantly higher vested interest in performing well during the season than

an applicant looking for a few weeks of work to earn some extra income for the holidays. Individuals who are looking for opportunities for advancement in the company, if available, will also be more dedicated to their work. Even if not hired for regular positions, these employees will likely do more during their tenure.

TRAINING CAMP: EVALUATING The most critical component of using seasonal hires to upgrade the workforce is the evaluation process in place during their employment. This process must be facially fair to all the current employees, or perhaps even weighted slightly in their favor. The key to facial fairness is providing notice to the current employees of any deficiencies in their performance and heightened expectations as well as continued assistance in raising performance levels. Managers should evaluate their teams’ performance well before the seasonal workers start. The goal is to be very clear with workers that expectations are being raised and identify opportunities for improvement. Workers need to understand that what was acceptable performance may not be sufficient to maintain employment in light of the current job market. At the same time, it is critical to offer assistance to these employees to help them improve. Managers should be holding regular, even if brief, team meetings to assist employees in working on areas for improvement. Managers must emphasize that the importance of the season to the success of the store increases the importance of their being at work when expected, on time, and with a “can do” attitude.

“Managers should evaluate their teams’ performance well before the seasonal workers start.” When the seasonal employees begin work, the managers must have the time and opportunity to observe all the employees, and use that time and opportunity. The manager should make notes of observations of employees doing either particularly well or poorly. This will not be an easy task during the holiday rush, but will be a critical component of post-holiday employment decisions. The manager should also be addressing any deficiencies with employees as they happen and providing assistance and support. By the end of the season, managers should have a well documented study of their teams’ performance.

www.HospitalityLawyer.com • CONVERGE • March / April 2013

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DEVELOPMENTS CHOOSING THE ACTIVE ROSTER: RETAINING AND DISMISSING When the store is ready to return to normal staffing levels, managers should have a very good idea of which employees they want to retain. Nevertheless, the decision-making process must be studied to be supportable against employment claims. First, the manager should determine what number of employees are needed of both part-time and full-time employees, among which available labor hours can be divided. In some cases, keeping a greater number of employees with fewer hours works better and provides more flexibility than was previously available. In other cases, very regular scheduling might dictate the need for only full time employees. But creating a proposed new team structure is a key first step in communicating the business purposes behind the changes. Once the manager has the structure in place, fill it with the strongest employees. At this point, the documentation created of employees’ performance over the season will be critical in differentiating among the employees. However, new documentation should be prepared wherein managers explain their choices. For example, if one employee significantly outperformed the others in stocking, it should be noted that the choice was made because of strength in this area. If another employee was the subject of several customer complaints over

the season, then it should be noted that this played a role in not retaining that employee. If employees receive written evaluations, it is also critical that these be reviewed. No matter how superior the performance of a seasonal employee, it will be difficult to justify trading up when the employee losing the job was rated “Outstanding” three months earlier. When the manager has picked the new team and made decisions that some employees will not be retained, a higher-level review should be used. Here, the reviewer, either a district manager or an HR representative should sit down with the manager and challenge him or her on the decision making. The goal is to determine how well the decisions can be explained. If managers are unable to articulate clear straightforward reasons for retaining a newer employee and terminating a more tenured employee at this point, the chances of their being able to adequately respond to these questions in a deposition is minimal. The decisions should also be reviewed to make certain there is no bias, or even the impression of it. For example, if a manager is choosing to retain three young male employees and letting go three older female employees, the support for the change must be rock solid.

15 March / April 2013 • CONVERGE • www.HospitalityLawyer.com


DEVELOPMENTS WINNING THE GAME Ultimately, the store with the best employees will deliver the best results for the company. While upgrading by retaining short-term seasonal

employees and terminating longer-tenured employees has risks, if carried out correctly, it presents a tremendous opportunity for growth.

Edward F. Harold, Partner

P: (504) 592-3801

E: eharold@laborlawyers.com

BY PETER LATTMAN LEGAL/REGULATORY • MARCH 25, 2013, 3:36 PM

www.HospitalityLawyer.com • CONVERGE • March / April 2013

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DEVELOPMENTS

THE NEW I-9 FORM By Gregg Rodgers

S

What You Need to Know

equestration didn’t stop the Department of Homeland Security from introducing a new Employment Eligibility Verification Form I-9 on Friday, March 8, 2013. The new Form I-9 went into effect immediately, but employers can continue to use the prior versions (Rev. 08/07/09)Y and (Rev. 02/02/09)N through the close of business on Monday, May 6, 2013. Only the new version can be used after May 6, 2013. The new Form I-9 is longer, split into two pages – one side for the employee and the other for the

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employer – and has more detailed instructions – six pages attached to the Form I-9, and a revised 70-page M-274 Handbook for Employers. Anyone who has any responsibility for Form I-9 compliance should be sure to read and understand them all to reduce potential liability. This article highlights some of the most significant aspects of these new documents and issues worthy of your consideration. It focuses exclusively on the printed format, not the electronic format that many private vendors may have available.

March / April 2013 • CONVERGE • www.HospitalityLawyer.com


DEVELOPMENTS Where to Obtain the Form I-9 The best place to get your Form I-9 is directly from the government’s web site, http://www.uscis.gov/i-9. The Form I-9 has been updated on a sporadic and unannounced basis. By accessing the Form I-9 directly from the

government, you know that you will be using the current version. Use of an outdated, no longer in use Form I-9 can cause problems in a government inspection.

Key Elements Have Not Changed The Form I-9 must be completed and retained by employers for each new employee hired to work in the U.S. after November 6, 1986. The Form I-9 should not be completed before an individual is offered and has accepted a job offer. Newly hired employees must complete and sign Section 1 no later than the first day of employment. The employer must see original documents, with the exception of a birth certificate, and must complete Section 2 within 3 days of the employee’s first day of employment. Section 3 of the Form I-9 is for situations involving reverification of employment authorization and rehires of former employees.

So why does this formerly one-page form require expansion to two pages, with six pages of instructions and a seventy-page handbook? You might be surprised that the revisions to the form and its instructions have actually helped make it easier to complete properly and to reduce the possibility of an error that can cost you and/or your business money. But they also raise questions as to potential liability for mistakes or failure to comply with the government’s new requirements.

Section 1 It can be very helpful to provide the full ninepage Form I-9, with its Instructions, Form I-9 and Lists of Acceptable Documents with a job offer or upon a person’s acceptance of an offer. The instructions for Section 1 take up more than one page, but offer helpful comments and explanations. For instance, the instructions explain that people with “two last names or a hyphenated last name” should include both names in the last name field. This explanation has never before been part of the instructions to the employee, and its absence often resulted in incomplete or inaccurate information and complications during inspections.

www.HospitalityLawyer.com • CONVERGE • March / April 2013

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DEVELOPMENTS “Other Names Used (if any)” has replaced the former version’s “Maiden Name” box. The instructions now make it mandatory to write either other “legal names,” such as a maiden name, or “N/A.” The instructions make it clear that it is not acceptable to provide a post office box (P.O. Box) as an address. And, for border commuters from Canada or Mexico, it is now clear that they can indicate their foreign address.

time-limited authorization to work in the U.S. are quite detailed, with four paragraphs of instructions and three of four lines requiring notations (with exceptions).

TIPS FOR SECTION 1 The instructions provide that “Employers must ensure that Section 1 is completed properly...,” and an accurately completed Section 1 can make it easier to respond in an inspection.

For the very first time, the instructions clearly indicate that providing a Social Security number (SSN) in Section 1 is voluntary, unless the employer participates in the government’s E-Verify program, in which case it is mandatory to provide the number in that location.

According to DHS, every box in the first two rows must have information in it except “Apt. Number.” An employer should consider adopting a practice of considering Section 1 of a Form I-9 as incomplete and unacceptable if any of the mandatory boxes are blank.

New to the updated Form I-9 are two additional optional boxes for “E-mail address” and “Telephone Number.” The instructions state that a person “may” write “N/A” if choosing not to provide that information.

Only one of the four attestation boxes may be checked and, for the bottom two, additional information must be included. For the bottom attestation, four of the five lines must have information.

Perhaps the best change to Section 1 is the expansion of the four-box attestation, now making it almost impossible for an employee to fail to understand that only one of the four boxes can be checked, and that for only certain boxes must additional, specific information be provided. However, the instructions for those with

Make sure that the employee has used the proper date format of month/day/year. (This can be easily determined upon seeing documentation of the employee’s birth date presented for Section 2.) It is all too common to see the alternate day/ month/year which, again, causes problems with inspections.

Section 2 The best change to Section 2 is the expansion of space for List A documentation and the related lack of additional space for List B or List C documents, which should never need more than one document.

19 March / April 2013 • CONVERGE • www.HospitalityLawyer.com


DEVELOPMENTS What is the Required Date of Completion for Section 2? (When can Three mean Four?) Generally, an employer’s representative must examine the required documentation and complete Section 2 “within 3 business days of the employee’s first day of employment.” For many years, many people thought that meant that if a person started work on a Monday, Section 2 had to be completed by the close of business on Wednesday. But DHS guidance now clearly advises that the three day period begins after the employee’s first day of employment. Thus, as the instructions now provide, “the employer must complete Section 2 by Thursday of that week.” As always, if someone is hired for a job that is expected to be for less than 3 business days, Section 2 must be completed by no later than the first day of employment. And DHS now makes it clear that it is completely acceptable to complete Section 2 on, or even before the first day of employment, if there has been both an offer and acceptance of employment. First, Write the Last Name Because the Form I-9 is now two pages, DHS requires employers to write the last name, first

name, and middle initial of the employee at the top of Section 2, “to identify the pages of the form should they get separated.” While this makes some sense, is it really necessary for those employers who choose to use a double-sided Form I-9, and what penalty is there if an employer fails to do so at all, or not until the date the form is turned over to the government? To Photocopy or Not to Photocopy That is still the question that each employer must ask and answer uniformly. But another question remains open – what to do with the photocopied documents? The new instructions state that the “photocopies must be retained and presented with Form I-9 in case of an inspection by DHS or other federal government agency.” But where? The new M-274 Handbook provides, on page 29, that they “must either be retained with Form I-9 or stored with the employee’s records.” This appears to be one of the first times that DHS has confirmed that they can be separated. But separating them can present a logistical nightmare if they have to be re-united within a matter of days when an employer is presented with a three-day inspection notice.

Section 3 Those in the hospitality industry should be sure to understand that Section 3 is where they should indicate the re-hiring date of seasonal employees, unless they want to complete another Form I-9, retaining all previously completed forms. Documentation for a rehire can be in Section 3 of an existing Form I-9, even if that particular version is no longer authorized for use.

Reverification, which is an action associated with ongoing employment of an employee whose employment authorization is about to expire, must be on a Form I-9 that is authorized for use on the date of reverification. The M-274 Handbook provides a helpful, expanded explanation of the List A documents that never need reverification, despite having an expiration date.

www.HospitalityLawyer.com • CONVERGE • March / April 2013

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DEVELOPMENTS General Tips An employer is only required to retain pages 7 and 8 of the Form I-9 and any documents photocopied (if photocopying is the standard practice). It can help to print pages 7 and 8 on one, double-sided document so as to reduce the possibility of losing or misplacing a page. Is Absolute Compliance with the Instructions Important? Let’s face it – it now seems more likely that the new Form I-9 will not be completed as instructed by DHS than on the old form, especially in Section 1. Does DHS truly expect every new employee to read and understand the distinctions between boxes that “must” be completed and those in which they “may write ‘N/A’ if you choose not to provide this information.” And what penalty is there for an employer who fails to “ensure that Section 1 is completed properly,” especially when it comes to the distinctions between the mandatory and voluntary sections? We can expect to see how these issues get sorted out as the enforcement arm, Immigration and Customs Enforcement (ICE), conducts its audits in the coming months. It is clear that failure to comply with Form I-9 requirements presents a very expensive proposition. DHS clearly has the authority to assess fines of substantial, sometimes debilitating amounts. But it is becoming equally clear that, as the Form I-9 has expanded over its more than 25year existence, so too has the government’s position that it can fine for issues not fully

“Those in the hospitality industry should be sure to understand that Section 3 is where they should indicate the re-hiring date of seasonal employees, unless they want to complete another Form I-9, retaining all previously completed forms.” intended by Congress. Recent administrative decisions have confirmed that the government does not have the authority to impose a fine for every issue it had contended. Any business that has been the subject of an ICE Notice of Inspection of its Forms I-9 knows the disruption that such an inspection causes. ICE and other authorized entities can require an employer to turn over its Forms I-9 and related documentation with just three business days’ notice. And it can fine an employer for failure to properly prepare, complete and retain them. But ICE has taken the position that it can assess fines for many issues that many question as within its authority, and failure to fully comply with some of these new Form I-9 requirements are likely to be equally challenged. But these are issues to be sorted out in other forums. An employer may be best served by establishing specific protocols for Form I-9 compliance and then training those assigned the responsibility of preparing and retaining these important forms. A well-crafted protocol that is adhered takes time and effort, but can result in reduced liability in the long run.

Gregg Rodgers, Owner P: (206) 464-3939 Ext. 1404

E: grodgers@gsblaw.com


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Join us as we continue to “unlock the mystery” of ADA regulations and the impact these regulations have on the hospitality industry. In addition, we’ll discuss the market potential offered by the disability and aging baby-boomer demographic, a growing population thought to control approximately $220 billion in discretionary income.

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SOLVING THE

DUTY OF CARE EQUATION


HOTELS & RESTAURANTS

AKO HOSPITALITY ALERT David P. Bender, Jr.

BY

Diana Shafter Gliedman

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HOTELS & RESTAURANTS The hospitality industry relies on insurance coverage to protect against a wide range of risks, from simple slip-and-falls to devastating property damage. Every entity is different, and selecting the most appropriate insurance coverage for a particular property or company is crucial. Yet it increasingly common for members of the hospitality industry to have themselves named as “additional insureds” on another entity’s policy, rather than reviewing, comparing and then selecting a policy for itself. Franchisors frequently have themselves added to their franchisees’ insurance policies. Property owners often delegate the responsibility of purchasing

insurance to companies that manage and maintain the property. While this often makes economic sense in the short term — the company delegating responsibility for purchasing insurance saves money on premiums, brokers’ fees and other costs — permitting another company to purchase your insurance is not without risks of its own. Members of the hospitality industry (or any other industry) seeking to have themselves named as an additional insured should not simply sit back and allow the named insured to procure the insurance. By participating in the process, additional insureds can maximize the likelihood that there will be coverage for claims if and when they occur.

BE AS SPECIFIC AS POSSIBLE IN ESTABLISHING THE INSURANCE YOU NEED FREQUENTLY Franchisors and franchisees enter into licensing agreements that cover everything from franchise fees and construction and design guidelines to the franchisee’s duty to purchase and maintain insurance coverage. The specifications for purchasing insurance are often extremely general. For example, the licensing agreement may require the franchisee to purchase a commercial general liability, or CGL, policy with $10 million in limits of liability — but say nothing about the deductible, fail to specify between aggregate limits of liability and limits for individual occurrence, or omit reference to crucial terms, conditions or endorsements. Likewise, some agreements state that the named insured must provide

first-party property insurance for the additional insured — but do not specify whether the policy must cover adjacent or adjoining properties such as golf courses or beach fronts. Some agreements contain no specifications at all, simply stating that the franchisee must purchase “appropriate” insurance. Thus, it is not uncommon for a franchisor to discover that it has less insurance coverage than it understood. Franchisors seeking to be named as additional insureds on a franchisee’s insurance policy should take pains to be as specific and detailed as possible about the type and amount of insurance they expect the franchisee to procure.

GET A COPY OF YOUR POLICY, AND THEN READ IT—TWICE Few licensing agreements actually require that the franchisee provide the franchisor with a copy of the policy. As such, many additional insureds do not see a copy of their insurance policy until after an occurrence. This is too late. Franchisors should amend their licensing agreements to state that

the franchisee will forward copies of all insurance policies naming the franchisor as an additional insured as soon as possible — preferably before the date of inception, so that the franchisor can review the policy and ensure it comports with all expectations and agreements before it is finalized.

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HOTELS & RESTAURANTS All additional insureds should remember that under normal circumstances, the insurance company is not bound by the terms of the licensing agreement. If the licensing agreement says that the named insured will purchase cyber liability coverage, but that type of coverage is, in fact, excluded under the insurance policy purchased by named insured, the additional insured will probably have no recourse against the insurance company. While most licensing agreements include indemnification agreements between the franchisor and franchisee, if the franchisee does not have sufficient funds or assets to make up for the lack of coverage, the franchisor

may be left to shoulder the burden of its loss. Furthermore, some insurance companies seek to limit the coverage available to additional insureds by adding endorsements that restrict additional insured coverage to injury involving negligence by the named insured, rather than injury involving only negligence by the additional insured, which may have the result of leaving the additional insured with no insurance coverage for a loss or liability it assumed was covered. Additional insureds should protect themselves by reviewing the policy — and demanding changes, if necessary — before a loss occurs.

If You Don’t Have a Policy, Check Your Certificate of Insurance — And Hold the Insurance Company to its Terms

“Insurance companies are bound by the representations made in certificates of insurance.” As discussed above, insurance companies are not bound by the terms of licensing agreements, franchise agreements, or any other contracts entered into between its named insured and additional insureds. Insurance companies are bound by the representations made in certificates of insurance. It is not uncommon for an additional insured under a liability insurance policy to receive a certificate of insurance verifying that all of the agreed upon insurance require ments have been met — only to discover, after a claim has occurred, that an undisclosed exclusion in the policy defeats coverage. Many state courts have refused to permit insurance companies from defeating the reasonable expectations of additional insureds in this manner. One of the leading cases on this subject is the oft-cited International Amphitheater Co. v. Vanguard Underwriters Insurance Co., 532 N.E.2d 493 (App. Ct. Ill. 1998), (“International

Amphitheater”). In this case, International Amphitheater Co. entered into an agreement to lease its Chicago arena to a concert promoter, and arranged to be named as an additional insured on the promoter’s liability insurance policy. See International Amphitheater, 532 N.E.2d at 496. The Amphitheater never received a copy of the policy itself, but did receive a certificate of insurance. Id. During the concert, several persons in attendance allegedly were attacked, and four lawsuits were subsequently filed against the Amphitheater and certain other defendants, alleging negligent and willful and wanton conduct resulting in the plaintiffs’ injuries. Id. The Amphitheater sought coverage under the policy. Vanguard denied coverage, citing two endorsements in the policy that they claimed vitiated coverage. Id. at 497. Neither endorsement was referenced or listed in the certificate of insurance. Id.

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The Appellate Court of Illinois, First District, Third Division, first held that: Where a contract of insurance consists of a policy and other papers or documents, executed as a part of one transaction and accompanying the policy or incorporated therein by attachment or reference, they must be construed together in order to determine the meaning and effect of the insurance contract. In the instant case, the certificate of insurance is an accompanying document since the main policy is referred to in the certificate by its number. . . . Therefore, the certificate incorporates the policy by reference and the two documents must be read together in order to determine the meaning and effect of the policy. Id. (emphasis added). The court continued that: . . . where the certificate and master policy conflict, the certificate generally controls. In

this case, the policy contains, in endorsements numbers 3 and 4, significant limitations on coverage which are not contained in the certificate. . . . [T]he insureds should not be held to have knowledge of significant exclusions of which they were not made aware. We find that since the policy containing the exclusions in endorsements numbers 3 and 4 was not tendered to the additional insureds here, the extent of coverage in the instant case was uncertain. It is well settled that all uncertainty in the construction of insurance contracts should be resolved in favor of the insured. Accordingly, the conflict created in the instant case between the policy and certificate regarding exclusions in coverage must be construed in favor of Amphitheatre. Therefore, we find that the trial court properly found that Vanguard could not rely on endorsements numbers 3 and 4 to deny coverage to Amphitheater. Id. at 502 (emphasis added).

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HOTELS & RESTAURANTS CONCLUSION There are many benefits to being named as an additional insured on another policyholder’s insurance policy. In order to maximize the potential for recovery under the policy, however, additional insureds should not simply sit back and let the named policyholder do all the work. Additional insureds should emphasize precisely

the type of coverage they need, and obtain and review the policy (or, at the very least, a certificate of insurance) to ensure that coverage has been purchased. By participating in the process, additional insureds can ensure there is insurance to be had if and when it is needed.

diana shafter gliedman david p. bender, jr. David P. Bender Jr. (dbender@andersonkill.com) is a shareholder in the Ventura, California, office of Anderson Kill & Olick, P.C. A long-time advocate of policyholder’s rights, Mr. Bender represents public and private corporations, financial institutions, private and public educational institutions, and boards of directors. Diana Shafter Gliedman (dgliedman@andersonkill.com) is a shareholder in Anderson Kill’s New York office. Ms. Gliedman represents policyholders in actions ranging from small insurance coverage disputes to multi-party, multi-issue insurance coverage litigations. About Anderson Kill’s Hospitality Group From the boardroom to the guestroom, Anderson Kill & Olick, P.C. combines legal experience and business insight to provide its clients with solutions for the unique issues faced by owners, operators and investors in the hospitality and lodging industry. Our attorneys understand the business and they deliver results to clients facing legal issues in insurance coverage recovery, real estate and construction, bankruptcy, employment, executive compensation, litigation, corporate and finance. As counselors, we provide clients with a “first-line response” to legal issues, freeing our clients to focus on their business. For additional information, please visit our web site at www.andersonkill.com. The information appearing in this article does not constitute legal advice or opinion. Such advice and opinion are provided by the firm only upon engagement with respect to specific factual situations. We invite you to contact the Hospitality Industry Group chair or co-chair with your questions and/or concerns.

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IN CASE YOU MISSED IT

• Marriott sues owner of Eden Roc for preliminary injunction in New York’s Supreme Court to prevent Marriott’s removal from the hotel. • New York trial judge grants preliminary injunction. • Eden Roc’s owner appeals decision to First Appellate Division. • The injuction is reversed; the contract is declared “a classic example of a personal services contract which may not be enforced by injunction.”

CLICK TO READ TRIAL DECISION CLICK TO READ APPELLATE DECISION CLICK TO READ FLORIDA DECISION 29 March / April 2013 • CONVERGE • www.HospitalityLawyer.com


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