Emerging Legal Issues in the Hospitality Industry


EmergingLegal Issues in the Hospitality Industry

EmergingLegal Issues in the Hospitality Industry

Thehospitalityindustry is considered one of the broadest classifications of fieldsthat offer different services, which include event planning, cruiseline, transportation, theme park, lodging, and several additionservices with the tourism industry. The hospitality industry has itsmain strength as the customer service and the shared concept of theindustry. Its performance mainly depends on the management and thestaff members’ commitment towards delivering the best. However,there are various challenges that have resulted legal issues in thehospitality industry worldwide, both regional, national and internalmarket places in the sector are not exceptions to the challengesbecause meet similar legal procedures and therefore similarchallenges. The paper has focused on a general topic, “EmergingLegal Issues in Hospitality Industry”. The legal issues discussedare general not specific to a particular region or place. The paperwill try to analyze the development of each issue and suggest anynecessary solution if possible and available (Barth,2012).The issues presented in this paper are of great concern to thehospitality industry and needs to be delved into in depth.

Oneof the common legal issues that have emerged recently in relation tothe industry is the hotel management agreement. A managementagreement refers to a document that defines the how the relationshipbetween the hotel operator and the hotel owner. The documentstipulates the duties and obligation for each party like any otherordinary contract deed. In most jurisdictions, the managementagreement tends to give the hotel agreement wide powers of operationto the owner compared to the hotel operator. The most serious legalmatter that arises in the particular case is who of the two partiesis responsible for the employees in the hotel. In most managementagreements, it is always not well elaborated because what isimportant is that the director or owner of the hotel employs themanager and the manager is in most cases responsible for theemployees. On the other hand, in current enterprises the owners areentities such as, insurance companies, private finance institutions,and REITS among other institutions. That is why the employee employerrelationship must be critically examined. The owner of the hotel isfinancially responsible for all the costs incurred in the courseemploying as part of the operating expense not considering who theemployer is. The situation has left many difficulties in thehospitality industries, where as other issues have taken to courts oflaw for resolution others are still pending and hindering theprogress of the industry.

Anotherlegal issue has emerged from security of tenure in ration toperformance test termination. Security of tenure refers to a legalprotection provided to employees from being dismissed withoutreasonable cause. In most jurisdictions, not all the laws in placeregarding the industry provide for a performance test termination,which means the owner, may not have any right to terminate anyemployee especially the manager. For instance, where a hotel managermay not perform to the expectations of the owner, but the performancemay not amount to the terms of termination in the management contract(Boella,Pannett and Pannett, 2009).It is a challenge to the hotel owner because any financial loss willbe directly facing him. Majority of the hotel owners haveincreasingly demanded for a performance test termination, yet it maynot be possible for it to kick off until a hotel stabilizes and getsto another level of production. However, the duration a hotel takesto stabilize differ from one hotel to another, which means a standardduration for all hotels cannot be fixed. The issue continues to be achallenge until the rightful solution is identified and put in place.In the event of establishing a performance test, it should include atleast an element that is characteristically in performance test. Forinstance, it can be weighed through operating profits, where by aminimum amount of profits should be made to a particular percentageof which failure to meet it the hotel manager will be regarded asfailed the performance test. In this case, the hotel owner can weighwhether to terminate the manager or not depending on the analysismade. In other jurisdictions, the performance test has been termed asthe “do over clause”, where the manager will be made topersonally pay for the loss or damage encountered in the course ofrunning his duties and obligation (Barthand Hayes, 2006).

Thepressing legal issue has emerged from the need of geographicexclusivity and licensing. There are various popular brand names ofhotels both national and group of hotels operating internationally. Abrand name, franchise or a flag are crucial factors in the hotel’sdevelopment together with the location. In a situation where adifferent hotel has taken the location and is using the same flag ora related brand, the original hotel will be affected by the newlylocated hotel. The financial status of a hotel at a particular timeand in the future depends on the daily conduct of business, the hotelproperty, the structure of the hotel, bargaining agreements forexample UNIT-HERE, intellectual property rights and the hotel debtsare all related. The owner of a particular brand of hotel does notwish the licensor to issue a license to another hotel that has abrand name that is similar to his or hers (Sherryand Sherry, 2010).A new hotel with the same flag greatly affects the owner’s hotel inthe same area. Therefore, reputed hotel owners prefer licensors notto issue any license to another hotel in the same area to afford themcomfort as the only hotel in the area. The exclusivity provisionmajorly has two mechanisms, which are distance and time. For instancethe license may stipulate that the licensor should not license aparticular brand name in relation to the ownership, marketing, sale,promotion, advertising or any other activity in a particular area(Boella,Pannett and Pannett, 2009). However, in the event when the period specified in the licenseagreement is over then the licensor has the liberty to go head andissue license for any other party interested in setting up a hotel inthe particular area.

Tipcredit and tip pooling is another legal issue in the hospitality. Inrecent years, the number of lawsuits brought to court over tip creditand tip pooling has increased. Tipping refers to a situation where anemployee is rewarded by the client as a bonus but as part of thepayment. Of recent, hotel employers have started claiming the tips aspart of the salaries. The suits that have been filed in courts areeither by employees or by workers associations advocating foremployees who are being exploited. It would have been important ifsuch tips are included in the contract of employment explaining ofhow it is part of the payment, but issue raises because tips are notmandatory due to the fact that not every client gives a tip, neitherare they mandatory. However, if the employee is not employed in sucha hotel he or she would not get the chance of receiving the tip,therefore the employee has to settle for the what the managerscommands. However, there are ways through which the issue of tipcredit and tip pooling can be minimized. The first is that allemployees who tipped deserve to be informed of the tip credits thatare deducted from their salaries. Secondly, proper records of thetips received should be maintained and thirdly the management is keenabout other categories of employees prohibited by the law from tippools not to participate (Boella,Pannett and Pannett, 2009).

Theprovisions of the new Americans with Disabilities Act bring about theother legal issue. The US department of justice provided the date of15thday of March the year 2012 as the deadline for complying with the newAct. Under title III of the ADA, the regulations made particularimportant change for any reachable services and recommendedadditional training to the employees. All policies in such placeswere subject to change for instance the manner in which customers areto be responded to especially those with disabilities. In regards tothe ADA the following are the major changes that were made inrelation to the hospitality industry. There was an introduction of anew structure in terms of communications such as automatic tellermachines the provisions introduced accessible means that werefavorable to disabled people, That is to say, a pool lift or a sloppyentry and transfer walls. The former law provided for at least 50%but the new provisions provide for at least 60% of public entrancesmust be accessible. The newly modified policies required an assurancethat disabled people were able to make reservations in the samemanner as normal people (Boella,Pannett and Pannett, 2009).The new rules and regulations did not have any problem but the issueto be resolved would arise when a facility has been operatingproperly but in the event of reallocating to a new place, it wouldnot function because it would need time to make the place feet inthose conditions. It means that the particular facility would notoperate until those conditions are fulfilled.

Itis important for the safety of the housekeeper to be ensured in orderto avoid injuries and eventually death at some point. This can bedone through having training seasons for the house keepers aboutsafety within the workplace as well as putting up safety signs onarea prone to accidents. This will greatly help in the reduction ofaccident and promote housekeeper safety and injury prevention withinthe hotel. However, most of the workers are still ignorant about thelegal actions they should take in case this happens. About85000 staff in the hospitality industry is injured every year intheir line of duty. More than half the number is forced to go on asick leaf because of their injuries. These injuries are usually gotfrom broken bones, cuts, sprains, burns and scalds to strains. Insome cases, some workers have been killed due to lack of safetymeasures within a hotel or restaurant. However,through safety measures all these injuries can be reduced andeventually eliminated. It is therefore the role of the hotels toensure that healthand safety is part of their business. Safety can be ensured throughhousekeeping programs that ensures that all the activities are donein accordance to plan and schedule will greatly improve the safetywithin a hotel (Boella, Pannett and Pannett, 2009). In addition,training the housekeepers on how to use different equipment will alsohelp reduce the housekeeping injuries that occur due to lack ofknowledge. Safetysigns need to put on all hazardous materials within the structure sothat anyone can read or even see the sign. This will help them avoidthese objects or protect themselves while using them. In the case ofenvironmental hazards that are as a result of the wastes that comeout of the hanger during maintenance and cleaning. These wastesshould be collected and properly disposed to avoid having them backto the environment.

Illegalcontracts are another legal issue that faces the hospitalityindustry. Various corporations have continuously to engage themselvesin illegal contracts either with knowledge or without knowledge. Inthe same way the hospitality industry has not been an exception tothis general problem. The issue arises in most cases withorganizations that encourage creativity, this is because suchorganizations or institutions teach and train special traits to theiremployees. For instance, a hotel can help in training an individual aparticular way of cooking and expect that individual not transfersuch skills to competitors. In most cases, companies including hotelsdraft agreements stipulating that such a person cannot work inanother company. In the event where such a person gets employmentfrom a different hotel it causes legal proceedings. At common lawthat is considered an illegal contract, it is considered a contractin restraint of trade. Any contract that restrains another personfrom practicing the law is regarded illegal on grounds of common law.In an English case Attwood Vs Lamont (1920) at Kidderminister theplaintiff employed the defendant as a tailor at and included a clausein the agreement that the defendant would not get employed as atailor within a particular distance to work as a tailor. In theholding the court held that the provision was a mere restrictiveclause that was restrained the defendant from practicing business. Therefore, an illegal contract under common law is the type ofagreement or part of the law that courts may not enforce because theresult of the contract would be an illegality. For instance agreeingto enter a contract to commit an illegality the contract cannot beenforced at common law (Boella, Pannett and Pannett, 2009). Thereforeit is important to note that one of the intensifying legal issues inthe hospitality industry is contracts in restraint of business ortrade. There is no defense if the contract is illegal. A contractcannot be honored if it is illegal. For instance, an agreement thatsupports prostitution goes against tax laws. Contract which mightindirectly aid illegal activities can also be breached. The nextdefense is to claim that the contract was supposed to be in writing.In case the contract was oral, one can refer to the state law that isneeded for that contract. For example, any sale of real property hasto be in writing. However, there are several defenses to breach ofcontract. These defenses include a mistake on the contract one candefend himself by providing concrete evidence that the contract wasflawed and had a mistake. For example, in the case that both partiesinvolved in the contract were not sure of the authenticity of apainting. Finally, the last defense in breach of contract is theuncertainty of the contract, it is indefinite. This can be used ifthe important terms of the contract were not agreed by the partiesinvolved. For example, if it is not clear how long the contract wasgoing to last and if the case is in court the parties will be forcedto act in good faith to reach an amicable decision. All these areissues that arise in the hospitality industry.

Anotherlegal issue that has been brought forward in the industry is that thehuge international group of hotels out competes the local hotels.This becomes an issue because the so-called huge groups of hotels arealways legally registered in the host countries, therefore, should berecognized and left provide. However, there is a need for anygovernment to and protect its native companies and organizations.Manygovernment and human rights organizations are concerned with thehealth and safety of those working within the hospitality industry(Barth,and Hayes, 2006).It has been established that the main cause housekeeping injuries arethe new and luxurious beds and beddings that are being installed inmost hotels to attract tourists and travelers.

Inconclusion, the paper has focused on the legal issues that areemerging from the hospitality industry. The paper has highlighted anumber of them including issues with the managing agreement, issueswith the security of tenure, geographic and licensing exclusivity andthe tipping issues in the hotels among others. All the issueshighlighted can be resolved but it needs the hospitality employers totake it on themselves and assess their practices and policesincluding those in relation to payments, employee handbook, socialmedia and practices that need to be included such as healthinsurance. All those activities need to be put in place so that theindustry can rhyme with the legal standard. It is also important thatstakeholder meet and deliberate on other related business issuesoutside what the paper has discussed in order to counter those otherchallenges that may be caused by National Labor Relations (Sherryand Sherry 2010). Thehospitality industry is a very lucrative field for one to beemployed. However, it comes with different legal challenges thatinvolve human safety and injury prevention. In most cases thehousekeepers are injured and some are left to take some time off andsome even end up dying as a result of the injuries they suffered atthe work place.


Barth,S. C., &amp Hayes, D. K. (2006). Hospitalitylaw: Managing legal issues in the hospitality industry.Hoboken, N.J: John Wiley &amp Sons.

Boella,M. J., Pannett, A., &amp Pannett, A. (2009). Principlesof hospitality law.London: Continuum.

Sherry,J. E. H., &amp Sherry, J. H. (2010). Thelaws of innkeepers: For hotels, motels, restaurants, and clubs.Ithaca: Cornell University Press.

Barth,S. C. (2012). Hospitalitylaw: Managing legal issues in the hospitality industry instructor`smanual.S.l.: John Wiley &amp Sons Inc.