Hotel Online  Special Report
The Global Hospitality Advisor

Wage and Hour Lawsuits and
Audits Continue to Sweep
the Hospitality Industry

October 2003

State and federal agencies continue to sweep the hospitality industry for violations of wage and hour rules. As we detailed in the October 2002 and March 2003 Global Hospitality Advisor®, the hotel industry has become the target of state and federal agency audits as well as plaintiff class actions, involving alleged violations of wage and hour, including overtime rules. If you need these back issues, let us know. This is a major problem and you need to focus on it if you have not done so already. Here are some recent illustrations:

Joint Employer Liability

The U.S. Department of Labor recently announced that a federal investigation covering over two years resulted in an order against the owners of the Crown & Anchor and Crowne Pointe Historic Inn in Massachusetts to pay significant sums in back wages and penalties to its employees. The federal investigation found that employees worked at two separate locations: The Crown & Anchor, which is a restaurant, hotel and nightclub, and the Crowne Pointe Historic Inn, which is a hotel. Employees worked for more than 40 hours a week between both establishments and received straight time pay rather than the required time and half for hours worked in excess of 40 in a week. The owners and operators of the establishments maintained that the employees were separately employed and, therefore, did not exceed 40 hours at either establish-ment. Under a theory of “joint employer,” based on interlocking ownership and common management practices, the Department of Labor found both employers liable for failure to pay overtime.

Practical tip for employers. This case is particularly significant because of the DOL’s imposition of overtime liability based on the “joint employer” theory. Where employees are working for more than one entity that may be related through common ownership and/or management, joint employment liability may be found and could subject each of those entities to separate overtime liability. Similarly, it is easy to run into overtime liability issues in situations where employers compensate employees at different straight time rates of pay for different types of work. While it is permissible for an employer to compensate at different rates of pay for different types of jobs, there are certain overtime calculation methodologies that must be followed to avoid liability in this area.

Missed rest and meal periods

The world famous Beverly Hills Hotel in Beverly Hills, California has recently been the target of a class action lawsuit filed on behalf of banquet servers who are now or have been employees of the hotel during the last four years. The lawsuit alleges the hotel failed to provide plaintiffs with mandatory rest and meal period breaks. As a result, the complaint claims that the employees are owed overtime, as well as the statutory right to an extra paid hour per day for each day that they were required to forego ten minute rest periods, pursuant to the California Labor Code. In addition to back pay for overtime wages, penalties and interest, the suit seeks punitive damages, attorneys’ fees and injunctive relief. In a novel twist, the lawsuit also alleges that the hotel’s alleged pay practices constitute an unfair business advantage over its competitors in violation of California’s unfair business practices statutes. 

Practical tip for employers. Unfortunately, claims for violation of meal and rest periods (which are mandated under both federal and many state laws, as is the case in California) are frequently made against employers because they are easy to allege and very difficult to defend. In order to successfully defend against such allegations, the employer must have a paper trail to demonstrate that it: (1) properly maintains a policy of providing rest and meal periods in accordance with federal and state laws; (2) tracks employee rest and meal period breaks; (3) issues directives to employees regarding when and how they are to take rest and meal period breaks; and (4) provides a mechanism through which employees may complain and/or seek payment in the event of a missed rest and meal period breaks. Without these safeguards in place, employers are unable to defend against these kinds of claims. This is a good time to conduct an audit of rest and meal period rules and procedures.


Marta M. Fernandez is a senior member of JMBM’s Global Hospitality Group and Labor Department. As a management labor lawyer, Marta specializes in representing hospitality industry clients in all aspects of labor and employment, including implementation of preventative management strategies, such as executive training, arbitration enforcement, and policies and procedures; defense of administrative and litigation claims, such as employee claims of sexual harassment and discrimination; and labor-management relations including union prevention, collective bargaining for single as well as multi-employer bargaining units, neutrality agreements and defense of unfair labor practice charges before the NLRB.

For more information, please contact Marta Fernandez at 310.201.3534 or at
[email protected].

The Global Hospitality Group® is a registered trademark of Jeffer, Mangels, Butler & Marmaro LLP

©2003 Jeffer, Mangels, Butler & Marmaro LLP


For more information:
Jeffer, Mangels, Butler & Marmaro LLP
web site:
Email Jim Butler at [email protected]
Or contact 
Jim Butler at the Firm
 Jeffer, Mangels, Butler & Marmaro LLP
  1900 Avenue of the Stars
 Los Angeles, CA 90067
     Phone: 310-201-3526 
The premier hospitality practice
in a full-service law firm
Also See: Prepare NOW for an ADA Attack; Myths and Tips on How to Minimize Exposure / The Global Hospitality Advisor / JMBM / October 2003
Sarbanes-Oxley Update / The Global Hospitality Advisor / JMBM / Arpil 2003
Equal Public Access or Access to Deep Pockets? The Hospitality Industry Remains a Target of Lawsuits by Disability Rights Groups Under the Americans with Disabilities Act / The Global Hospitality Advisor / JMBM / March 2003
Outlook 2003: A Roundtable Discussion / The Global Hospitality Advisor / JMBM / Dec 2002 
Time Bomb Waiting to Explode: Wage & hour Claims Over Exempt Employees / The Global Hospitality Advisor / JMBM / Oct 2002
I'm Mad as Hell, and I'm Not Going to Take it Anymore! / The Global Hospitality Advisor / JMBM / Oct 2002
Settlement Procedure Available to California Hotels Plagued by Prop 65 Cases - The Global Hospitality Advisor / April  2002 
Top Ten Investment Challenges Facing the Lodging Industry / Lodging Industry Investment Council / April 2002 
Decertifying a Union? The Employer’s Bill of Rights / The Global Hospitality Advisor / JMBM / April 2002 
Outlook 2002: A Roundtable Discussion /  Bruce Baltin, Bjorn Hanson, Randy Smith, Jack Westergom - The Global Hospitality Advisor / January 2002 
New Rules for Hotel Workouts: REMICs for Dummies / The Global Hospitality Advisor / JMBM / December 2001 
Living in the Wake: Predictions & Practical Implications / The Global Hospitality Advisor / JMBM / December 2001 
Avoiding Liability for Lay-Offs / The Global Hospitality Advisor / December 2001
The Worker Adustment and Retraining Notification Act: Impact on the Hotel Industry / JMBM 
When is an Apartment a Hotel ... and Who Cares? / The Global Hospitality Advisor / JMBM / September 2001 
The 'Perfect Storm' / The Global Hospitality Advisor / JMBM / September 2001 
Richard Kessler's Grand Theme Hotels - Interview with GHG Chairman  Jim Butler / March 2001
Stephen Rushmore's  Industry Trends / Top Markets, Predictions & Opportunities  / Jan 2001
Outlook 2001: A Roundtable Discussion The Global Hospitality Advisor / Jan 2001
Perspectives on Hotel Financing in 2001; Jim Butler, JMBM's Global Hospitality Group Chairman, Interviews Two Active Players in Hotel Finance / Jan 2001 
Robert J. Morse: Millennium’s New President / Interview with GHG Chairman Jim Butler / Nov 2000 
Special Reports / Jeffer, Mangels, Butler & Marmaro LLP

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