Legal Eagle: Legalities of Running a Bar or Restaurant

While we all like to make lawyer jokes – even me, and I’m married to one – the legalities of running a restaurant, bar or nightclub are no laughing matter. On the eve of the Hospitality Law Conference, taking place in Houston in Feb. 3-5, we caught up with its founder, Stephen Barth. Also the founder of and author of Hospitality Law and coauthor of Restaurant Law Basics, Barth is an attorney and a professor at the Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston, and will be presenting “Drinkability, Accountability and Liability…a Treacherous Trio” with Elizabeth DeConti of GrayRobinson P.A. at the VIBE Conference in Las Vegas, March 9-10. He gave us his take on the current legal landscape for nightclub, bar and restaurant owners and operators.

VIBE: What are the biggest legal issues facing operators today?

Barth: People serving alcohol have to consider not just number of drinks guests consume, but also the amount of alcohol in each drink. That’s the number one service issue today, particularly with Martinis.

VIBE: What about legalities surrounding promotions?

Barth: In last eight years, there’s been a “look the other way” attitude regarding marketing and the relationship with potential sponsors. In future, there will be more scrutiny of those relationships — more accountability — driven by the Obama administration. We’re seeing it at the federal level, we will see at state level, and we’ll have to change way things are done if [the regulators] begin to really scrutinize and enforce the rules out there.

VIBE: In light of that, what are some baseline best practices?

Barth: For the bigger chains, I’d encourage finding counsel familiar with federal and state regulations in the markets where they operate. Basically, you absolutely have to know what’s allowed in your operating area and have a good lawyer.

The other thing that every operator needs to be involved with: tip sharing arrangements. You see ads in local newspapers asking, “Are you being asked to share your tips?” The lawsuits are significant. You really need to understand the guidelines around tip sharing, pooling and tip credits, especially when it comes to overtime; then, of course, the other thing is the general overtime exemption. All it takes is one complaint that triggers the audit and you’re liable for back pay, penalties and interest, which can be significant. Again, it goes back to knowing what’s allowed and what’s not.

VIBE: Anything else brewing?

Barth: An emerging issue is lawsuits over allergies. We’re starting to be very creative with ingredients in cocktails. So, we need to do a better job of training alcohol service staff about drink ingredients and the big eight allergens, and how to respond to a guest who inquires. When you make a Martini with an olive stuffed with blue cheese, you’re now talking about a greater potential for a reaction than when you had a regular olive in the drink. We have to be aware of that and [ingredients have] to be on the menu.

Also, with this economy and the number of foreclosures, some operators are taking over distressed properties. They must be cautious about when to operate under the existing license, when to get a new license and what’s the process. This is especially an issue for chains that want to plow ahead with expansion plans.

VIBE: We’re seeing reform in some licensing systems. Do you see more states unclogging bottlenecks?

Barth: It wouldn’t surprise me to see more states evaluating that process to make it more efficient. Face it, every government department is pressured to produce revenue and that’s one way to do it.

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