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Latest California Legislation and Proposals Affecting the Lodging Industry

By Jim Butler, Hotel Lawyer | Author of
11 March 2009

What happens in Vegas may stay in Vegas, but what happens in California spreads like wildfire. That's why the lodging industry tends to pay such close attention to what is brewing in the California legislature. So, "heads up!" The California legislature is back in session. A number of new laws have already taken effect and a lot of bills are in the hopper. The City of Anaheim (home of Disneyland) has hit Internet travel providers with a whopping TOT bill.

This article by Jim Abrams tells about these and other developments facing the lodging industry in California and quite probably beyond the state's boundaries.

What happens in Las Vegas stays in Las Vegas, but what
happens in California spreads like wildfire 

By James O. Abrams, Hotel Lawyer

How to take charge of your destiny: Work with the CH&LA 

Before discussing the legislative developments, we want to remind readers that the most effective way for hospitality lenders, owners, and operators to take charge of their destiny in Sacramento is to participate in the California Lodging Industry Legislative Awareness Summit. The 8th annual Summit, which will be held April 1, 2009, at the Sheraton Grand Hotel and the State Capitol, is comprised of the leadership of the state's lodging industry: the event is sponsored by the California Hotel & Lodging Association in conjunction with the Asian American Hotel Owners Association, the California Lodging Industry Association, and the California Association of Bed and Breakfast Inns. 

Highlights of this year's Summit include a panel of hospitality industry lobbyists, moderated by Marlene Colucci, EVP of Public Policy for the American Hotel & Lodging Association, a panel featuring JMBM's Jim Abrams covering new key developments involving ADA lawsuits, a keynote address by Insurance Commissioner Steve Poizner, who is also a candidate for governor, and an all-important visit to the Capitol to communicate the lodging industry's concerns to our elected officials. This one-day event is the best investment you can make in the success of your business in California. For more information and to register, go to

The Legislature is in session! 

California budget: Although the Legislature has enacted a budget to run through June 30, 2010, its viability is dependent on the fate of a six ballot measures that will be voted upon May 19. Even if all of those measures pass, it is quite likely that the continuing deterioration of the national and California economies (California's unemployment rate is now over 10%) will push the new budget into the red, thereby requiring a renewed round of political roller derby.

California Legislature: February 27 was the deadline for introducing bills in the 2009-2010 session, and we are still wading through all of them. But quite a few have already been identified as having a potential impact on the lodging industry. In addition to numerous bills dealing with workers' compensation changes, employment law amendments, and numerous other issues, here are some key bills to note at this early stage in the legislative process:

AB 838 (Cal/OSHA). When Cal/OSHA adopted regulations dealing with heat illness injuries in outdoor occupations, employers fought hard to keep Cal/OSHA from regulating indoor places of employment. This bill would require the Occupational Safety and Health Standards Board, by July 1, 2011, to adopt a standard for controlling the risk of occurrence of heat illness where employees work indoors. 

AB 849 (Family and Medical Leave) This bill would increase the circumstances under which an employee is entitled to protected leave pursuant to the Family Rights Act by (1) eliminating the age and dependency elements from the definition of "child," thereby permitting an employee to take protected leave to care for his or her independent adult child suffering from a serious health condition, (2) expanding the definition of "parent" to include an employee's parent-in-law, and (3) permitting an employee to also take leave to care for a seriously ill grandparent, sibling, grandchild, or domestic partner. 

AB 1000 (Mandatory Sick Leave) This bill would mirror the mandatory sick leave ordinance that San Francisco enacted. It would provide that an employee who works in California for 7 or more days in a calendar year is entitled to paid sick days, as defined, which shall be accrued at a rate of no less than one hour for every 30 hours worked. It would cover full-time, part-time, and temporary employees and provide them with up to nine days of unpaid sick leave.

AB 1019 (Tippler's Tax) This bill would impose a surcharge equal to ten cents per drink.

AB 1020 (Anti-Entrapment Systems and Drains) This bill would enact in California the new federal anti-entrapment drain requirement for public swimming pools, wading pools, and spas (which include those at hotels and inns). Don't forget that the federal requirement became effective December 19, 2008. (For more information about this requirement, go to 

AB 1312 (Automatic External Defibrillators (AEDs) Currently, California law does not require hotels to have AEDs, but it does require that health clubs open to the public have them. This bill would also require them at golf courses and amusement parks. There is an ongoing debate within the industry as to whether or not it is wise to have AEDs from the standpoint of potential liability.

ABX2 5 (Alternative Employee Workweeks) This important bill, which has already become law and goes into effect May 22, 2009, was part of the just-adopted budget package. This was a piece of the governor's "economic stimulus" package, and it is designed to allow workers to expand their alternative workweek options without triggering overtime pay liability.

SB 183 (Carbon Monoxide Detectors) A similar bill was vetoed by the governor last year because of the budget stalemate. This measure would " state the intent of the Legislature to ensure that a carbon monoxide alarm is installed in each dwelling intended for human occupancy with a fossil fuel burning heater or appliance, fireplace, or attached garage."

SB 287 (Meal/Rest Break Penalties) Almost half of all labor and employment law litigation in California involves meal/rest break penalties. This critical measure would provide a tremendous amount of relief to employers and employees by making the currently unworkable rules reasonable. 

SB 355 (Police Calls at Economy Hotels) This outrageous measure would impose unacceptable burdens on every "economy hotel" (defined as a "hotel, motel, or other transient lodging facility with 10 or more guestrooms, for which the average daily rate during the most recent calendar year is less than one hundred dollars"). These hotels would have to post, on the Internet Web site operated by the hotel for the purpose of taking reservations, the total number of calls for police service and the ratio of calls for police service per guest room during the most recent calendar year. The bill would also require that the information be posted at the front desk of each economy hotel in a conspicuous location for public inspection. This could be a killer for thousands of hotels.

SB 810 Single-Payer Health Care) This is similar to Senate Bill 2, which was enacted in 2003 and then repealed by a ballot measure initiated by the employer community and other interest groups. This bill could prove extremely expensive for employers.

California Ballot Measures: There are at the present time six propositions qualified for the May 19, 2009, Statewide Special Election Ballot (to implement the new budget), three propositions qualified for the June 8, 2010, Primary Election Ballot, ten initiatives and referenda in circulation, and four initiatives pending title and summary at the Attorney General's office. And it's going to get much, much worse. The measures in circulation and pending at the AG's office cover such things as voter identification requirements, pro and con measures dealing with same-sex marriage, a one percent increase in the sales tax to fund education, changing the super-majority required to approve a budget from 2/3 to 55%, a "wealth tax," term limits, among other things. It is also anticipated that there will be measures put forward to allow open primaries, tax commercial real estate at higher rates than residential real estate, and to cover many other topics. (To keep up on these measures, go to CH&LA updates.)

Anaheim TOT Bill to Travelocity And Others: One of the most contentious, ongoing fights throughout the country has to do with attempts by local governmental entities to collect transient occupancy tax from Internet travel providers (ITPs), such as Travelocity, Expedia, and In short, the cities claim that the ITPs buy rooms from hotels for a fixed price (on which the TOT is paid) and then sell the rooms to the public for higher amounts. The cities argue that the ITPs owe TOT on the "markup." To date, the ITPs have been winning these court cases. However, Anaheim has convinced an administrative hearing officer to force a number of ITPs to pay over $21 million! Here is an excerpt from a February 13, 2009, press release from the City of Anaheim:

An administrative hearing officer has ordered a group of online travel companies to pay the City of Anaheim $21.3 million dollars in back taxes, interest and penalties. The companies have been collecting the tax known as a Transient Occupancy Tax (TOT) on the retail price guests pay for the room, but have been remitting to the City only the tax on the wholesale price paid by the online travel companies. 

"The issue at hand is full reimbursement of the taxes collected," said Anaheim Mayor Curt Pringle. "There is no reason why online travel companies should be paying a different amount of taxes than others who book the same hotel rooms. The hearing officer's decision is both logical and fair."

At issue in the case was the companies' tax liability per the Anaheim Municipal Code and the assessment of taxes owed from January 2000 through March 2008. 

According to the hearing officer's decision, the companies in the case, Expedia, Orbitz, Priceline, Travelocity and related businesses, will be required to pay the 15% TOT on the difference between the wholesale and retail rates of hotel rooms they purchased and resold in Anaheim between 2000-2008, as well as all service fees associated with the transactions. The online travel companies are also being required to pay penalties and interest.

The $21.3 million ruling, handed down on February 9, is expected to influence a host of similar suits filed on behalf of local governments throughout the country.

As a result of the February 9 ruling, the online travel companies have since filed an action in Orange County Superior Court asking for the ruling of the administrative hearing officer to be overturned. Despite this appeal, the City will continue its efforts to recoup its share of TOT revenues from these companies.

The ITPs are appealing this ruling, but it is possible they will have to pay the $21.3 million owing as a prerequisite to this challenge. Needless to say, everyone involved in the TOT equation nationwide is watching the outcome of this proceeding. 

For information about any of the items mentioned in this blog or anything else involving California, national, or local governmental affairs matters relating to the hospitality industry, contact Jim Abrams at JMBM at 415. 984.9679 or

Jim Butler is one of the top hotel lawyers in the world. GOOGLE “hotel lawyer” or “hotel mixed-use” or “condo hotel lawyer” and you will see why.  He devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders.  Jim leads JMBM’s Global Hospitality Group®—a team of 50 seasoned professionals with more than $40 billion of hotel transactional experience, involving more than 1,000 properties located around the globe. In the last 5 years alone, they have brought their practical advice to more than 80 “hotel-enhanced mixed-use” projects, a term Jim coined to fill a void in industry lexicon.  This term describes one of the hottest developments in real estate-where hotels work together with shopping center, residential, office, retail, spa and sports facility components to mutually enhance the entire project’s excitement and success. Jim and his team are more than “just” great hotel lawyers.  They are also hospitality consultants and business advisors.  They are deal makers.  They can help find the right operator or capital provider. They know who to call and how to reach them. They are a major gateway of hotel finance, facilitating the flow of capital with their legal skill, hospitality industry knowledge and ability to find the right “fit” for all parts of the capital stack.  Because they are part of the very fabric of the hotel industry, they are able to help clients identify key business goals, assemble the right team, strategize the approach to optimize value and then get the deal done.  Jim is the author of the Hotel Law Blog,  He can be reached at +1 310.201.3526 or

Jim Butler
Chairman, Global Hospitality Group
Jeffer, Mangels, Butler & Marmaro LLP
1900 Avenue of the Stars, 7th Floor
Los Angeles, CA 90067-4308
(310) 201-3526 direct

Also See: A New Sheriff in Town, the Department of Justice Auditing Hotels for ADA Compliance; Cost Effective Steps for a Proactive ADA Compliance Program / March 2009



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