Since the last Presidential election campaign began approximately two years ago, there has been a significant public focus on sexual harassment, income inequality, crimes against women, public corruption, and the income gap. Sexual harassment claims have skyrocketed in the wake of the #metoo movement, with some states reporting as much as 400% increases in claim filings. Corporations are drawing attention—both positive and negative—from the way they handled employee compensation when the recent corporate tax cuts went into effect. The restaurant industry is under heightened scrutiny due to the way certain companies distribute tips among servers and wait staff. Federal courts are recognizing an expanded reach of workplace non-discrimination laws based on sexual orientation and sexual identity. Union and collective bargaining issues arise during every election cycle. And, various government watchdogs, including the New York attorney general, and private-sector interest groups are opening large-scale investigations or starting publicity campaigns seeking to expose sexual harassment, workplace discrimination, and unequal treatment. For better or worse, as the Bob Dylan lyric goes: “the times they are a-changin’.”
Based on these trends, we predict substantial increases in the number of individual employee claims and government-backed investigations over the next several years. And, we expect that the hospitality industry will be a prime target. This is so because the hospitality industry touches virtually every person in the country in some way on a regular basis, and many hospitality employees are often young, transient, and looking for only temporary, part-time, or seasonal work. If your company works or contracts with the federal or a state government, an investigation or subpoena is even more likely. Hospitality companies should expect that it is a question of when—not if—they will become involved in some sort of investigation or litigation. So, what should you do to protect your company before and after the law comes calling?
Create a Paper Trail
An ounce of prevention is worth a pound of cure. The single greatest – and by far the most dangerous – pitfall for a company faced with a subpoena, government investigation, or litigation is incomplete record keeping or insufficient record retention. Even if a company has done everything right, it may nevertheless face substantial risk if it cannot prove it. It is, therefore, critical for companies and their corporate counsel to maintain detailed and accurate records of employee complaints, management and employee training, schedules, hourly rates, payroll and tips, and disciplinary action, among many other things. Without detailed records, companies could be facing an uphill battle in any investigation or litigation. Therefore, it is critical that companies create and maintain accurate records. Practicing good record retention is the best way to protect the bottom line.
Walk the Walk
Perhaps the most avoidable mistake a company may make that can lead to a lawsuit or government investigation is to ignore bad behavior or trivialize an employee or customer complaint. If an employee informs a supervisor that they have experienced sexual harassment or discrimination or they are concerned that they are being paid less than another employee for performing the same work: listen, investigate, document, follow up, and follow through. Following these simple steps is preventative as well as remedial. A company can avoid a lawsuit or investigation by taking appropriate action in response to a complaint, and an investigation is less likely to lead to liability if the company can prove that appropriate action was taken.
Successful companies have good relationships with their lawyers, particularly in the hospitality industry. A brief check-in with corporate or outside counsel on day-to-day issues can identify areas of risk and solve small problems before they become big headaches, all at a very low cost. And corporate counsel, when not familiar with particular areas of law or potential recent developments, should not be afraid to ask for help from outside counsel. Often, lawyers provide free updates or publications to their clients on changes in the legal landscape. And, when a lawsuit or investigation commences, having a trusted outside counsel that knows your company, understands your corporate policies and company atmosphere, and is invested in a long-term relationship can be a major benefit to your company and its bottom line.