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May 15 2013

NYC Mobile Food Vendors v. NYC Restaurants

food cartSeems the ongoing battles between brick and mortar restaurants and mobile food vendors may soon be calming down.  Most of the tension between these parties is caused by proximity (i.e. how close the mobile cart is located to the restaurant).

The New York City Council just enacted legislation which will (commencing June 2013) prevent mobile food vendors from setting up shop within 20 feet of any entrance or exit, including service entrances and exits, of any restaurant.  The soon to be prior law just prevented mobile food vendors from setting up within 20 feet of the establishment’s main entrance/exit.

This new law should go a long way towards easing some of the existing tension between the mobile vendors and brick and mortar restaurants.

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Apr 18 2013

PRESENTING AT THE COMMUNITY BOARD – LIQUOR LICENSE APPLICATION

You are required to provide the local Community Board (“CB”) with notice at least 30 days prior to filing an on-premise liquor license application the New York State Liquor Authority (“NYSLA”). The CB may then put you on their hearing agenda to find out more about your project. At the CB hearing they may ask you about everything from the type of cuisine that you plan on selling to your affiliations with any other NYSLA licensed premises. Nothing is off limits.

I am always asked, “Do I need to have a lawyer with me at this hearing?” My response, which is not going to please my fellow attorneys, is absolutely not. In fact, I typically recommend that you don’t bring an attorney there and that you should never have an attorney go in place of you. The reason is simple. If you were a CB member, would you want to hear the details about the restaurant / bar project from an attorney or directly from the owner/operator of the project? The CB does not want to hear an attorney describe the type of cuisine that you are offering, or what you will do to prevent people from lining up outside, or that you will not have dancing in your premises. They want to hear these assurances from you . . .the operator; the person responsible for ensuring that all of these assurances are going to be kept. I typically recommend that you retain an attorney to be present at the CB hearing only in the event that (i) you anticipate strong opposition to your project, or (ii) are uncomfortable with public speaking. Otherwise, save yourself money and have the person who is best able to present the details of your project present them. . .you.

In a related matter, Community Board 1 in Queens, NY, has just voted against the issuance of a liquor license for a bar where all the female staff would serve wearing only bikinis. The CB cited, amongst the reasons, that this type of establishment would not be appropriate surrounding family oriented community. The proposed name of the bar . . . “Racks.”

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Apr 05 2013

WAGE, HOUR AND TIP LAWSUITS ARE CRIPPLING THE NY RESTAURANT INDUSTRY

Strict compliance with the law in this area is difficult given the myriad of laws that pertain to employee’s wages and tips in the restaurant industry. As such, some NY lawyers have taken aim at the industry and, as a result, eateries have paid out over $70 million in settlements over wage and tip complaints in the past few years alone.

The city’s biggest names, including Nobu, Jean Georges, Sparks, Mesa Grill, Pastis, Balthazar, BLT, and the ‘21’ club have all faced similar lawsuits and have forked over millions of dollars as a result. Others have been forced to close as a result of such lawsuits, including Geoffrey Zakarian’s Country and Chris Cannon’s Alto and Convivio.

At least one of NYC’s top restaurateurs has had enough. Joe Bastianich, co-owner of Eataly, Del Posto and Babbo, who has been sued twice in NY with wage and tip complaints, vowed in 2011 that he will no longer be opening any more restaurants in this state. . . and he hasn’t. Rather he has since opened three establishments in Chicago and California giving those states the substantial tax revenue and 1000+ jobs created by the establishments. This loss of revenue and job creation is not something that even our relatively wealthy city can afford.

So what’s the solution? Comply with the law and you won’t have anything to worry about. If you are not positive that you are presently in compliance, consult with an experienced attorney immediately and have them review your wage and tip policies and procedures. Sure they will charge you for you the service . . .but you’ll get it right going forward and avoid the extremely costly fate of getting sued for a wage and/or tip violation.

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Dec 07 2012

NEW WAGE NOTICE OBLIGATIONS TO EMPLOYEES

Published by under Taxes,Uncategorized,Wages

noticeEmployers with New York employees must ensure that they provide them with an annual wage notice form by February 1, 2013, as required by the New York Wage Theft Prevention Act (the Act). This Act, which became effective in April 2011, significantly increases employers’ wage notice obligations to New York employees.

The Act requires private sector employers to provide each New York employee, upon hire and every year, with a detailed notice form setting forth that employee’s pay rate and the employer’s pay practices. Notice to current employees must be provided between January 1 and February 1 of each year, beginning January 1, 2012. Notice must also be given to employees within seven days following a reduction in their wages (or, if an employee works in the hospitality industry, following any wage change). Notice must be given to both non-exempt and exempt employees, and must contain the following information:
• the employee’s rate of pay and, if non-exempt, overtime rate of pay;
• the basis of the employee’s rate of pay (e.g., salary, commission or hourly);
• the employee’s regular pay day (employees are also advised to state the frequency of pay periods-e.g., weekly, bi-weekly or other);
• the employer’s name and any “doing business as” names;
• the employer’s telephone number and the address of its main office or principal place of business (and, if different, mailing address); and
• any allowances the employer intends to claim as part of the minimum wage (e.g., tip, meal or lodging allowances).

This means that, no later than February 1, 2013, all private sector employers must give ALL of their New York employees a written notice containing the above information.
Employers may provide this notice by hard copy or electronically, provided that employees are able to print out a copy of the notice. Employers must also obtain a signed acknowledgement from employees, acknowledging that they have received the notice. Although an employee’s email response confirming receipt of the notice is sufficient for acknowledgement purposes, an automated “read receipt” would not be sufficient. All notices must be retained by employers for six years.

The New York Department of Labor (the DOL) requires that employers provide the notice in an employee’s primary language for workers whose primary language is English, Spanish, Chinese, Korean, Creole, Polish or Russian. The DOL has notice templates available on its website for each of these languages. However, employers are not required to use the DOL-created templates. They can develop their own notice forms, provided that they contain all of the legally-required information described above.
Employers should be aware that the notice must be a separate form. As such, new hires should receive a separate, stand-alone notice form in addition to (or attached to) any offer letter or employment agreement they may receive. Moreover, if an employee works on a commission basis, the commission agreement should be attached to the notice form.  An employer who fails to provide required notices to its employees may be subject to significant penalties. Individual employees may recover up to $2,500 in a lawsuit, and the DOL may assess a penalty of $50 per week, per worker.

Employers are also advised that, in addition to the new stringent notice requirements, the recently enacted Act also contains provisions regulating recordkeeping, payroll records and paystubs.

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Dec 02 2012

TIP SHARING … OR TIP STEALING?

A recent onslaught of lawsuits involving illegal tip sharing amongst restaurant employees is rocking the restaurant industry. These lawsuits are not new to the industry but they have recently increased in numbers as a result of a few recent, and very substantial, plaintiff/employee successes.

On April 4, 2008, the largest class action suit ever brought by New York restaurant employees, employees sued Starbucks for violating a state law that prohibits management from receiving part of workers’ tips. At Starbucks, “shift supervisors” share the pooled tips with baristas, prompting a suit from a former barista, on behalf of at least 2,000 Starbucks baristas in NY who are allegedly owed over $5 million. The lawsuit was commenced almost immediately after a California ruling, where a state judge found Starbucks liable for $105 million, finding Starbucks illegally enabled shift supervisors to take a share of the tips.

GENERAL RULE: Restaurants in New York State are allowed to pay employees who receive tips as little as $5.00 — less than the federal minimum wage of $5.85 per hour and the New York State minimum wage of $7.15. However, To use this “tip credit”, amongst other things, employers are not permitted to share tips among “agents” of the employer.

This general rule seems straightforward, but it’s not. The law fails to define who constitutes an “agent” of an employer. An owner, officer of the corporation, or a general manager clearly fit this bill and cannot share in tips. But, what about a maitre‘d? a shift supervisor? or an assistant manager? The answer is . . .it depends on their job tasks and responsibilities – not their job title. The Department of Labor (DOL) has stated that an agent, “does not include a mere supervisory employee who does not have the authority to hire or fire.” And just because a maitre‘d has “supervisory” responsibilities over the rest of the dining room personnel does not necessarily mean that the maitre‘d cannot share in employee tips. The DOL will look at each situation on an individual basis, and pay particular attention to whether the maitre‘d (or another employee) “acts in the place of the owner”, by performing such functions as hiring and firing employees, or other managerial responsibilities such as disciplining and setting wages or work schedules.

In its defense, Starbucks argued in California court and again in New York that it’s shift supervisors are not managers (although they are in charge when managers are away and can evaluate baristas in performance reviews), because (i) the customers cannot differentiate between the shift supervisors and the baristas, (ii) the shift supervisors often do the same work as baristas including serving the customers, and (iii) the shift supervisors pay is only 22 cents more per hour. However, the California Court ruled that the tasks and responsibilities given to these “shift supervisors” did indeed make them “agents” of the employer and hence, they were prohibited from sharing in the tips.

Thus, the prohibition of sharing tips with an “agent” of an employer must be very carefully adhered to as the penalties can be severe. As in the Starbuck’s cases and many others, the definition of what constitutes an “agent” is presently being defined and redefined by the courts. If you are an employer and employ a Maitre’d, Assistant Manager, captain, or shift supervisor, play it safe, compensate them fairly – or even magnificently – but keep their hands out of the tip jar.

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Nov 22 2012

LIQUOR LICENSE: THE 500 FOOT RULE

When applying for a liquor license, the application of the “500 foot rule” often results in the application being rejected. It is imperative that an applicant know whether the rule will apply to their license application and, if it does, to prepare accordingly.

GENERAL RULE: No license for on-premises liquor consumption may be granted for any premise within 500 feet of three or more existing premises licensed and operating with an on-premises liquor license. BUT the State Liquor Authority, in it’s discretion, may still issue the license if they determine that the license would be “in the public interest” after consulting with the local Community Board and holding a public hearing upon notice (a/k/a The 500 Foot Hearing).

Factors the Liquor Authority consider relevant when determining if the license would be “in the public interest” include the type of the proposed establishment (i.e., restaurant or bar), and the number, classes and types of businesses licensed within 500 feet of the proposed premise. They also consider whether the applicant has had prior violations or complaints at other establishments and quality of life issues such as anticipated increased traffic, potential parking problems and noise issues.

The 500 foot hearing is held at the Liquor Authority and individuals and community groups may appear to challenge the granting of a license. A consultation with an experienced liquor license attorney is highly recommended prior to attending this hearing. But in general, wear a suit and be prepared to answer any and all questions regarding your proposed establishment. Bring a copy of your completed liquor license application with you along with all supporting documents filed therewith.

NOTE: The 500 Foot Rule is not applicable if the premises has been continuously licensed on or prior to November 1, 1993 or if the County has a population of less than 20,000.

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Nov 01 2012

BAD RESTAURANT REVIEW? Don’t sue.

Published by under Libel,Restaurant Review

Have you ever received a poor review for your restaurant and then contemplated suing the restaurant critic and/or publication that published it? Don’t bother. Review of the results of such litigation indicates that you would be wasting your time and money.

Libel is the publication of a false statement of fact. Opinion, however, regardless of how negative or damaging it may be, is protected and not considered libelous. Restaurant reviews have been consistently deemed “opinion” by New York courts and as such, the courts have consistently decided such cases in favor of the critics. For example, over the course of the past 20 years, restaurateurs have unsuccessfully sued over the following reviews: “Trout à la green plague”, “The fish tasted like old ski boots”, “Duck pancakes the size of a saucer and the thickness of a finger”, and “Bring a can of Raid if you plan to eat here.”

GENERAL RULE: If you receive a poor review, don’t file a legal action over it. Established case precedent dictates that you won’t win the case and even worse, the negative review will be republished (perhaps repeatedly) as a result of your legal action.

Rather than resorting to legal action, some established restaurateurs such as Harry Cipriani and Jeffrey Chodorow have retaliated against negative reviews by placing expensive full page ads called “open letters” denouncing the critic and the critic’s review and qualifications. While this avenue may be personally satisfying and even deserved, I don’t believe it has any redeeming business value. Besides being terribly expensive (a full page in the New York Times costs upwards of $84,000.00), it only serves to republish the negative review and keep it in the minds of potential patrons and public for a longer period of time.

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Oct 04 2012

NYSLA Conducts New York City Underage Sweep

The New York State Liquor Authority (SLA) recently concluded an underage sting operation in New York City where SLA investigators sent underage volunteer decoys into 239 licensed premises in all five New York City boroughs. In total, the decoys were able to purchase alcohol at an astounding 124 establishments.  The sting was conducted from March 29 through April 5, 2012.

The outcome of this sting is surprising.  More than half of the premises that were raided had violated the law and served alcohol to minors.  These violations are accompanied by monetary penalties and worse. For a first offense, a Licensee may be able to get away with paying a fine in the amount of $2,500.00 or so to the SLA to settle the charge . . .but if it is not their first violation, they may be looking at having a costly suspension or revocation hearing at the SLA.

However, the good news is that avoiding these violations are very easy.  Licensee’s must (i) train their employees as to what forms of ID are acceptable; (ii) insist that their employees require valid ID from all individuals that appear to be less than the age of 45 (just to safe) and (iii) inform employees that they are subject to job termination should they fail to properly check ID.

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Feb 02 2012

NEW YORK WAGE THEFT PREVENTION ACT IS NOW IN EFFECT: WHAT THIS MEANS TO YOUR RESTAURANT.

money tips

Pursuant to the New York State Wage Theft Prevention Act, effective February 1, 2012, New York employers are now required to give annual notice to their employees of wage information, including:

His or her regular rate(s) of pay and overtime rates of pay (if applicable);
The basis of the employee’s wage rate (i.e. hourly, weekly, salary, commission, other);
Any allowances claimed against the minimum wage (tip credit, meal credit, lodging allowances, etc.);
The employer’s principal place of business, and mailing address (if different);
The employer’s telephone number; and
Additional employer information, such as the official name of the business and all “doing business as” names.
Employers are also required to obtain signed acknowledgements from each employee which memorialize the employee’s receipt of his or her wage notice. These signed acknowledgements must be retained by employers for six years.
This Notice requirement is an important law with significant penalties for non-compliance. Any new employee not provided with the notice within 10 business days of his or her start date may bring a claim to recover $50 for each workweek that a violation occurs and may recover up to $2,500, plus attorneys’ fees. For statutory violations relating to a current employee, the employer may be liable for damages of up to $100 per week and may recover up to $2,500, plus attorneys’ fees.

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Feb 02 2012

CHOOSING THE RESTAURANT ENTITY: Should I form a LLC or S-Corporation?

Published by under Business Entity,Taxes

They both afford the owner(s) the advantage of limited liability and are both pass through entities for tax purposes (i.e. The entities both declare their profits and losses on the individual owner’s tax returns without the need for the entity to pay a separate tax for such income). Given the strong similarities between the two entities, choosing amongst the two is often a difficult task. As such, as a restaurant and bar attorney in New York, I am repeatedly asked this question by clients.

GENERAL RULE: Choose a Limited Liability Company over the other choice of entities when opening a new restaurant, bar or hotel in New York.

While the two have very strong similarities, they are not without their differences. For example, S-Corporations are subject to stringent corporate formalities such as holding annual corporate meetings, keeping the minutes of the meetings, appointing corporate officers to serve, and issuing corporate stock to owner’s which may often be difficult to sell and/or transfer. In contrast, an LLC does not require annual meetings, appointing officers, the recording of meeting minutes, or the issuance of stock. Moreover, profits and losses distributed by an LLC need not be made in proportion to ownership share. However, in contrast, if an S-Corporation owner owns 50% of the shares, he/she MUST receive 50% of the profits and/or losses.

Additionally, the amount of S-Corporation shareholders cannot exceed 100 and all must be U.S. citizens or permanent residents. An LLC does not have these restrictions either.

A downside to forming an LLC is the publication requirement. Within 120 days after the filing of the initial articles of organization, notice must be published once each week for six successive weeks, in two newspapers of the county in which the office of the LLC is located (one newspaper to be printed weekly and one newspaper to be printed daily; both need be designated by the county clerk). If the LLC is located in New York City, this publication will cost about $1,100.00. By contrast, an S-Corporation does not have any publication requirement. This publication cost is the main disincentive to choosing an LLC when doing business in New York, but in the end, if you plan on being in business for the next 10+ years, given the flexibility of the LLC entity, this additional cost is worth it.

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