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This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer. Please contact me at Jim Butler at jbutler@jmbm.com or 310.201.3526.

Published on:

01 April 2020
Click here for the latest articles on Labor & Employment.
Click here for the latest articles on the coronavirus.

Note: If you are an individual consumer with coronavirus-related travel issues, please do NOT contact us! We do not represent individual consumers. We advise businesses on major contracts, investments and financing. 

Following the enactment of the Families First Coronavirus Response Act on March 18, 2020, the Department of Labor has clarified which employers will be impacted by the Act and how they can comply with its mandates. Marta Fernandez, hotel lawyer and a partner in JMBM’s Labor & Employment department, has answered some of the most frequently asked questions by employers about the Act which goes into effect on April 1, 2020.

What hotel owners and operators need to know
about employee rights under the FFCRA

by
Marta Fernandez

Frequently Asked Questions or FAQs about employee rights under the Families First Coronavirus Response Act

Effective April 1, 2020 and continuing through December 31, 2020, covered employers need to begin complying with the mandates of the Families First Coronavirus Response Act (“FFCRA” or “Act”). You can find our original article explaining the FFCRA here. Since the law’s enactment on March 18, 2020, the Department of Labor has clarified and expanded upon what precisely is required under the Act and of whom it is required. Below are some of the questions we have been receiving from clients. The answers provided reiterate some of the previously announced requirements, and incorporate the additional guidance that has been issued by the Department.

#1 What obligations do covered employers have under the FFCRA?

Covered employers must provide eligible employees with up to 80 hours of emergency paid sick leave and up to 12 weeks of emergency family and medical leave.

#2 When is an employee eligible to receive paid sick leave under the FFCRA?

Under the FFCRA, a full-time employee may qualify for 80 hours of paid sick leave (or, for a part-time employee – the average number of hours that the employee works over a typical two-week period) where the employee is unable to work, or telework, due to a need for leave because the employee:

  1. Is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
  2. Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  3. Is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
  4. Is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
  5. Is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19; or
  6. Is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.

#3 How much compensation is an employee entitled to receive under the paid sick leave provisions of the FFCRA?

Employees taking leave for reasons 1, 2, or 3, noted above must be paid at either their regular rate or the applicable minimum wage, whichever is higher, with a cap of $511 per day and $5,110 in the aggregate.

Employees taking leave for reasons 4, 5, or 6 above must be paid at two-thirds their regular rate or two-thirds the applicable minimum wage, whichever is higher, with a cap of $200 per day and $2,000 in the aggregate.

The Department has now clarified that an employee’s regular rate of pay is the average of the employee’s regular rate over a period of six months prior to the date on which he or she takes leave.

#4 Can I require employees to substitute any accrued paid time off for the emergency paid sick leave?

No. While employees may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for the emergency paid sick leave, you cannot require employees to do so.

#5 What if I’ve already provided my employees with paid leave for a COVID-19 related reason?

The emergency paid sick leave is to be provided in addition to any other paid leave that an employer has already provided to its employees. Thus, leave taken prior to April 1st does not count towards the leave required under the Act.

CONTINUE READING →

Published on:

01 April 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on distressed hotel loans and here for The Lenders Handbook for Troubled Hotels.

Alternative Strategies
for Troubled Hotel Mortgage Loans
by
Jim Butler
JMBM’s Global Hospitality Group®

When a hotel loan gets in trouble, a lender should immediately perform a Comprehensive Situation Analysis. Borrowers should do the same and be fast to approach lenders with candor and an actual plan demonstrating what is needed and how it will work.

This Comprehensive Situation Analysis is the foundation for making some of the most important decisions that the lender and borrower will face on what to do with a distressed loan or asset.

When the Comprehensive Situation Analysis is completed, what’s next? What do the amassed facts indicate? How do they tell the parties what to do? What are the alternatives for dealing with a troubled hotel loan?

Basically, the alternatives for a lender with troubled hotel asset are:

    1. Do nothing (or sell the loan)
    2. Workout the loan
    3. Appoint a receiver
    4. Seek a deed-in-lieu
    5. Commence foreclosure
    6. Seek Relief in bankruptcy proceedings

The matrix below shows how many of the relevant factors will suggest the appropriate alternative to select.

Please let me know if you have seen any significant considerations we have missed.

CONTINUE READING →

Published on:

30 March 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on distressed hotel loans and here for The Lenders Handbook for Troubled Hotels.

The Comprehensive Situation Analysis should have gathered and considered all the relevant factors concerning the distressed hotel loan documents, the borrower, the hotel and their related considerations. Now it is time to consider these in light of the lender’s goals and the available alternatives. Given the complexities of the typical Special Asset, it is sometimes helpful to boil it down to a summary form that may over-simplify, but at least provides a grid or framework for analysis.

Over the years, I developed an analytical tool that we call “Butler’s Matrix” and it is set forth below: CONTINUE READING →

Published on:

26 March 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on the coronavirus.

Please join me and my esteemed co-panelists for an online presentation sponsored by NEXT Events and ICD Publications, titled “Hospitality in the Time of Coronavirus: Solutions for Our Industry.” The program will take place online on Thursday, April 2nd, from 2:00 PM EST – 3:00 PM EST.

The panel discussion will be followed by a question-and-answer period. Online participants will be invited to submit questions online.

Moderated by my friend, Christina Trauthwein, Editor-in-Chief at Hotel Business, the panelists include:

  • Jim Butler, Partner, Chairman, JMBM’s Global Hospitality Group®, represents hotel owners, developers and lenders.
  • Chip Rogers, President/CEO, American Hotel & Lodging Association (AHLA), previously served as the President and CEO of the Asian American Hotel Owners Association (AAHOA)— the largest U.S. hotel owners association.
  • Jamie Lane, Senior Managing Economist of Econometric Advisors and CBRE Hotels Americas, manages CBRE’s team of economists for all property types and specializes in forecasting of the hospitality industry.
  • Melissa DiGianfilippo, Co-founder/President of public relations, Serendipit Consulting, spearheads public relations and communications efforts, leading to positive press coverage across international, national and local media outlets.

Harry Spirides, President, Spirides Hospitality Finance Company, specializes in providing financing to hotel owners and developers for hotel development, acquisition and debt refinancing projects.

Register Now

Register here with a $25 suggested donation benefiting Hospitality Cares.

All proceeds of the program will benefit Hospitality Cares’ Coronavirus Fund with a $5,000 matching donation from NEXT Events.

CONTINUE READING →

Published on:

23 March 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on distressed hotel loans and here for The Lenders Handbook for Troubled Hotels.

The Comprehensive Situation Analysis
for Troubled Hotel Loans
by
Jim Butler
JMBM’s Global Hospitality Group®

When Special Assets Teams and special servicers see troubled hotel loans coming onto their screens, they should quickly perform a “Comprehensive Situation Analysis.” The Comprehensive Situation Analysis forms the critical foundation for a lender choosing among its alternative strategies of workout, receivership, deed in lieu or bankruptcy (seeking involuntary bankruptcy and appointment of a trustee).

What is included in the Comprehensive Situation Analysis? Read on!

Early Warning System

For the same reason a lender needs access to information, it needs an excellent early warning system. In addition to obvious items such as a default under a franchise agreement or material contract, knowledgeable industry people are likely to know or be able to detect when a geographic area, market segment or particular hotel is getting into trouble-long before it shows up in the profit and loss statement. A decrease in inventories, failure to maintain the property, a cutback in marketing and other changes in the annual plan, budget, and marketing plan may all be early warning signs. Many prudent lenders have consultants watch their asset portfolios for significant trends and changes that indicate problems. The Special Assets Team should become involved early in the process. But special assets generally also require availability and advice from industry-savvy consultants and counsel.

Without good early warning systems, lenders are being surprised by borrowers calling to say, “We are giving the property back. Payroll is due Friday, and there isn’t any money in the account. . .” Lenders cannot rely on last quarter’s budgets or projections. They need current information to avoid these nasty surprises.

Information Update

The concept of updating all information for troubled hotel assets is the same as for any troubled assets. However, in the case of a hotel, one will typically look for items such as hotel franchise agreements and amendments, management agreements and amendments, any agreements, leases and other arrangements with golf pros, concessionaires and the like, recreational use agreements for golf, tennis, aquatics, equestrian or other amenities, and tax information and returns including occupancy, sales and use, employment, personal property and real property taxes. A checklist approach is helpful.

CONTINUE READING →

Published on:

19 March 2020
Click here for the latest articles on Labor & Employment.
Click here for the latest articles on the coronavirus.

With hour-by-hour developments, here is an update on yesterday’s Labor & Employment blog post.

Labor Lawyer COVID-19 Update: Family First Act
signed by 
President Trump 

(Family First Coronavirus Response Act)
by
Marta Fernandez

As we expected, the federal government will provide additional sick leave relief and paid child care leave for employees; in anticipation of things to come, California will ease employers’ mass layoff notice requirements.

Families First Coronavirus Response Act

Yesterday, March 18, President Trump signed the Families First Coronavirus Response Act, the legislature’s response to the COVID-19 health crisis. Private employers with fewer than 500 employees and all government employers must be ready to offer emergency family and medical leave and emergency paid sick leave to eligible employees. Additional information and further clarification on these sweeping provisions will likely be provided in the coming days through federal guidance. This program will become effective within 15 days after its enactment by President Trump and is set to expire on December 31, 2020.

Emergency Paid Sick Leave

The paid sick leave portion of the Act requires covered employers to provide all employees who cannot work or telework due to COVID-19 related circumstances, with up to 80 hours of paid sick time, prorated for part-time employees. Employees are eligible if they meet any one of the following circumstances:

    1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
    2. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
    3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
    4. The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).
    5. The employee is caring for a son or daughter if the school or place of care of the son or daughter has been closed, or the child care provider of the son or daughter is unavailable, due to COVID-19 precautions.
    6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

If an employee is taking the leave for any one of the first three reasons listed above, the employee must be compensated at the higher of his or her regular rate, the federal minimum wage, or the local minimum wage. If an employee is taking the leave for one of the three subsequent reasons listed above, the employee must be paid two-thirds of the rate he or she would otherwise receive. This paid leave is separate and above any existing sick leave entitlements that employees may already have. CONTINUE READING →

Published on:

19 March 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on distressed hotel loans and here for The Lenders Handbook for Troubled Hotels.

Hotel industry crisis: 8 Do’s and Don’ts
for distressed hotels
by
Jim Butler and Guy Maisnik
JMBM’s Global Hospitality Group®

As the COVID-19 crisis grows in the US and elsewhere outside China, hotels and restaurants are among the businesses hardest hit. In select markets like Seattle and San Francisco, hotels are reporting single digit occupancies and crushed ADRs. Many hotels do not have the cash flow to keep their doors open. The major hotel companies are talking of furloughs for tens of thousands of hotel employees and many properties are looking at closure or skeleton team maintenance operations.

This is a time for those with troubled hotel assets to “get back to the basics”.  Here is our time-tested list of Do’s and Don’t’s for distressed hotels and other special assets closely intertwined with operating businesses. There is a wealth of such materials available at HotelLawyer.com.

Here is our updated take on the 8 Dos and Don’ts for distressed hotels. If you just got a notice that your hotel asset is about to lay off staff and close, jump to #4 in the list below and then circle back.

1. Prevention.

Prevention is the first step in a well-planned approach to troubled hotel loans. Proper underwriting, documentation and provisions for access to information may help a lender facing a troubled loan. In the event the loan does get into trouble, the lender will be in a stronger position to protect its interests. Prevention includes careful underwriting of the collateral and the borrower. In underwriting the borrower, the lender should obviously look to the usual credit report and financial statements, but should often go beyond them to get a better feel for the borrower’s reputation, character, fortitude, expertise, consistency and creativity. The lender should ask: Has this borrower built or managed this kind of project before? Are the market and feasibility studies realistic? Are the projections consistent with these factors and do they provide adequately for a “worst case scenario”? Even on non-recourse loans, personal guarantees with “bad boy” carve-outs help assure borrow cooperation when things turn bad.

Once the credit decision has been made, the transaction should be fully and carefully documented with prevention in mind. Use the checklist approach to be sure nothing is overlooked. (JMBM’s Global Hospitality Group® uses our proprietary HIT List – acronym for “Hospitality Investment Task” list.) Be sure all desired title and liability insurance is in place, with endorsements to cover the lender’s interests. Particularly with construction loans, negotiate all necessary controls for the project – to cover both the ordinary course of building and the possibility of default. A lender will never have a better opportunity to protect its interests than the period before it has disbursed the loan proceeds.

2. Monitoring and early warning.

Information control is paramount. A lender must carefully monitor its loans until they are paid off. All documents and information needs to be gathered in one centralized place for security, analysis and continuous monitoring. Early warning systems should be established to alert the lender to problems with the borrower, the collateral, or the project’s feasibility. Is the property considering closing or layoffs? Is the construction or marketing of the project being delayed? Is the property being wasted? Are materials disappearing from the job site? Have the demographics and economics of the market changed adversely? If trouble signs appear, the special asset group should be consulted at an early stage, even if the project stays in the hands of the loan servicing department.

Many institutions have been “bitten” by their good faith efforts in a workout situation. The pre-workout agreement is designed to minimize these risks. CONTINUE READING →

Published on:

19 March 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Labor & Employment.

Earlier this month, JMBM Partner Travis Gemoets was featured in a segment on Southern California National Public Radio affiliate KPCC’s Airtalk with Larry Mantle. The segment explored recent lawsuits filed against major hotel chains regarding their responsibility to detect and report human trafficking happening in their properties.

Travis discussed how training employees to recognize the signs of human trafficking, as well as how to report their concerns, can be an effective tool in helping hotels confront this issue as well as minimize their legal liability. You can listen to the full segment online through the KPCC website.

In California, hotel owners are required to provide at least 20 minutes of training and education about human trafficking to employees who are likely to encounter victims. More information about this requirement can be found in our Legislative Update. JMBM’s labor and employment lawyers have represented the hospitality industry for decades and can provide effective training for employees, as well as develop policies and procedures that protect employers who are implementing programs in human trafficking awareness. CONTINUE READING →

Published on:

18 March 2020
Click here for the latest articles on Labor & Employment.
Click here for the latest articles on the coronavirus.

As the Coronavirus Pandemic continues to impact California businesses, many employers are wondering how best to ensure the wellbeing of their staff. Marta Fernandez, hotel lawyer and partner in JMBM’s Labor & Employment department, discusses some of the key issues raised by employers and provides recommendations for complying with new mandates.

COVID-19: Immediate Advice For California Employers
Top 7 Frequently Asked Questions
by
Marta Fernandez

Most California employers are taking steps to keep employees safe during the Coronavirus Pandemic. These changes to workplace routines, policies and norms are the result of a mix of proactive steps, changes in demand, and government mandates. As labor and employment lawyers, our phones have been ringing off the hook. Here are the Top 7 most frequently asked questions by employers trying to ensure the health and safety of their workforce.

CONTINUE READING →

Published on:

17 March 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on distressed hotel loans, here for The Lenders Handbook for Troubled Hotels, and here for articles on the coronavirus.

 

Hotel owners, operators and lenders are under stress – hotel defaults, layoffs, and shutdowns loom. Prompt action is critical.

For the last three to five years the pundits have increasingly speculated that the longest economic recovery in history could not endure and that we were due for a recession. We hope that the extraordinary measures being taken now may defer some of the worst fears, but clearly the US economy has been plunged into distress, and the pain is particularly acute in hotels, restaurants and related travel and tourism businesses.

The shelter at home edits of the Federal, state and local governments are literally requesting that people stay at home for the next two weeks. Many hotels have plunged into single-digit occupancies and slashed revenues to cover fixed and operating expenses. Restaurants struggle to see if they can survive on takeout and delivery services alone. Furloughs and layoffs are imminent.

Lenders and borrowers alike are seeking relief, clarity, and resolution. It feels like some blend of the 1990s and 2008. And it is time to go back to the basics or distressed loans: Quick assessment, preparation of plans, transparency, communication, and cooperation for mutual benefit.

The lawyers who comprise JMBM’s Global Hospitality Group® have extensive experience and resources that can help hotel stakeholders answer these questions. The issues involved are too numerous to address in one article, and the answers will vary widely depending on each hotel asset and how it is structured.

Today’s article will address how the “structure” of hotel ownership and operations impact the interests of the various stakeholders.

  

Coronavirus: Creative strategies to mitigate financial impact
Loan defaults, lender rights & recapitalizations
by
Jim Butler and Guy Maisnik
JMBM’s Global Hospitality Group®

 

Facing the realities of low hotel occupancy and dwindling operating revenue

Lenders, equity providers, borrowers and operators are facing hard realities regarding the performance of their hospitality assets due to the Covid-19 pandemic.

What are the parties’ rights? What remedies can be pursued? What is the best approach for both the short term and the long term?

Understanding the structure of the hotel asset will help stakeholders answer these difficult questions.

The “operating business” is key

It is often said that hotels are a special real estate asset with an operating business. It really is the other way around: hotels should be thought of as a unique operating business first, within special purpose real estate. This is true not just for hotels, but for assets like timeshares, casinos, gasoline stations, movie theaters, and restaurants. The operating business comprises a large component of the asset’s value.

It is also the operating business that raises thorny problems when cash flow drops dramatically due to matters outside the control of any party – such as a global pandemic or a declaration of national emergency.

Identify and work with all stakeholders

It would be a serious mistake for any stakeholder to believe it holds all the cards in directing the final outcome on asset direction following a calamity. CONTINUE READING →