Legal Eagle: Top Law Issues for Operators

Stephen BarthWhile 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. The Hospitality Law Conference took place in Houston in Feb. 3-5, so we caught up with its founder, Stephen Barth, who is an attorney and also the founder of, the author of Hospitality Law and coauthor of Restaurant Law Basics and a professor at the Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston. He gave us his take on the current legal landscape for nightclub, bar and restaurant owners and operators.

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

Barth: People serving alcohol have to consider not just the 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. The other is bottle service: How do we control the distribution of alcohol when we’re serving a bottle to the table? In most jurisdictions, unlike wine, they can’t take a spirits bottle when they leave, so they feel compelled to finish it because of the huge price. Given that, is bottle service either directly or indirectly encouraging over-consumption of alcohol?

NCB: Even with that, more jurisdictions are now allowing bottle service.

Barth: Yes. And operators offering bottle service really need to reinforce their educational efforts with servers. Observe the metaphysical manifestation of intoxication, or retain the right to pour the alcohol and limit guests’ access to it. Another strategy is to have a minimum number of people sharing the bottle — perhaps at least four people. These are very difficult environments to control, and if you choose to offer bottle service, you have to recognize that.

Also, valet parking staff should be certified in responsible alcohol service (RAS), since they’re the last line of defense before turning over keys to the guest. And of course your security staff needs RAS training and also appropriate, peaceful intervention techniques.

NCB: What about legalities surrounding promotions?

Barth: In the last eight years, there’s been a “look the other way” attitude regarding marketing and the relationship with potential sponsors. In the 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 the state level, and we’ll have to change the way things are done if [the regulators] begin to really scrutinize and enforce the rules out there.

NCB: 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 you must 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.

NCB: 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.

NCB: 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 making that process more efficient. Every government department is pressured to produce revenue and that’s one way to do it.

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