Articles Posted in Coronavirus

Coronavirus alerts for hoteliers

Published on:

By

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:

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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:

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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 →

Published on:

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16 March 2020

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

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. 

On Sunday, my local Starbucks had no tables or chairs inside or outside. It has gone to “Grab n Go” service only. You cannot sit and drink your coffee or eat your muffin. This is the harbinger of things happening right now!

Hotel Lawyer: SF orders businesses to close and residents to stay at home

San Francisco became the first major U.S. city to order most non-essential businesses to close and all residents to stay at home except for essential needs.

The order, announced by Mayor London Breed on Twitter Monday, begins at midnight. Ms. Breed said that “necessary government functions” and “essential stores” will remain open.

Click here to see the official Order of the City of San Francisco.

It has been reported that six San Francisco Bay Area counties have asked residents to stay at home, and similarly ordered the closing of non-essential businesses, excluding banks, restaurants (for pick up or delivery only), health facilities and the like.

CDC, California State and local government action

On Sunday, March 15, 2020, the CDC issued new guidance for large events and mass gatherings as follows: CONTINUE READING →

Published on:

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5 March 2020

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

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. 

Coronavirus issues are likely to affect every business and industry, and the hotel industry is looking at an immediate and out-sized impact. JMBM partner Mark Adams deals with these issues across all industries on an international basis, and he has a deep involvement and understanding of the hospitality industry’s unique contracts, issues, customs and practices. In the second of his series of articles regarding the coronavirus, Mark discusses the importance of jurisdiction and contract wording when considering force majeure as a defense.

Coronavirus COVID-19 force majeure:
Contract provisions and governing law are important

by

Mark S. Adams, Hotel Dispute Lawyer
Partner & Senior Member
JMBM’s Global Hospitality Group®

Force majeure provides an excuse for a party’s non-performance of its contractual obligations as a result of an extraordinary event or circumstance beyond the control of the parties, such as act of God, war, strike, riot, etc.

What law governs the contract? Common law or civil law principles?

Unless there is an express provision in the contract, force majeure does not exist as a standalone defense in common law jurisdictions such as the U.S. and the U.K. In civil law jurisdictions, such as France and Germany, however, force majeure is implied into every contract, unless the parties agree otherwise. In order to minimize unintended consequences, contracting parties in both jurisdictions include force majeure provisions in their agreements.

In common law jurisdictions, the general rule is strict liability for the breach of a contract. This reflects the principle of pacta sunt servanda (preserving the sanctity of the contract). But there are exceptions. Common law jurisdictions excuse performance when it is not practical and could only be done at excessive and unreasonable cost. In the U.S., the Restatement (Second) of Contracts § 261 (1981), states:

“Where, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.”

In the U.K., the similar doctrine of “frustration of purpose” is likewise a defense to non-performance. Frustration of purpose occurs when an unforeseen event undermines a party’s principal purpose for entering into a contract such that the performance of the contract is radically different from performance of the contract that was originally contemplated by both parties. Whether under an “impracticable” or “frustration” jurisdiction, the standard for relief is a high one, and is subjective. That subjectivity can only be definitively resolved by litigation and judicial intervention.

Specify conditions short of “impracticable”

To avoid the uncertainty of such subjective standards, contracting parties in common law jurisdictions typically include force majeure provisions to specify events or circumstances that will excuse performance of contractual obligations by a party. Such specified force majeure events might not rise to the level of “impracticable” or “frustration.” By negotiating force majeure provisions, the parties can better allocate the consequences of non-performance as between themselves. For example, in a supply contract for the purchase of medical grade masks, if the manufacturer/seller is suddenly unable to timely deliver the masks to the buyer because of a trucking strike, the manufacturer could suffer the consequences of the substantially increased costs of delivering the masks by a private carrier. So long as the delivery costs are not prohibitively higher, the manufacturer will be liable for breach of contract if the manufacturer does not perform.

The doctrines of “impracticable” or “frustration” are of no avail in these circumstances. And even if they might be available, the application of them would have to be litigated. But if a properly worded force majeure provision is in the contract it could excuse performance in the event of trucking strikes, and the manufacturer would be off the hook. CONTINUE READING →

Published on:

By

3 March 2020

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

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. 

In the article below, JMBM partner Mark Adams discusses the coronavirus in relation to force majeure provisions in contracts. This legal concept goes back centuries, but has become increasingly relevant as COVID-19 may be advanced by many in the coming days as a defense to breach of contract. This article is one of a series which will discuss the principles of force majeure and the commercial implications of the coronavirus.

We start with a brief explanation of the concept and trace its roots.

COVID-19 coronavirus as a force majeure defense to contractual non-performance

by

Mark S. Adams, Hotel Dispute Lawyer
Partner & Senior Member
JMBM’s Global Hospitality Group® 

One often doesn’t know the extent of one’s insurance coverage until a calamity occurs. So it is with force majeure provisions in contracts.

Typically, force majeure provisions are included in contracts to excuse a party from contractual obligations if some unforeseen event beyond its control prevents performance of its contractual obligations.

As of March 2, 2020, there have been 88,948 confirmed cases of this strain of the coronavirus (COVID-19) in 64 countries with 3,043 confirmed deaths. The first reported case of COVID-19 was just over two months ago on December 31, 2019 from Wuhan, China. The effects of this coronavirus have already prevented or delayed performance in countless agreements in numerous industries causing widespread commercial loss and business interruption. It is likely that travel restrictions, worker shortages, immigration quarantines, supply-chain disruptions, and event cancellations will worsen before they begin to recover. And now, those affected are dusting off their agreements to examine their force majeure provisions and determine whether they might cover a coronavirus event.

The concept of force majeure (meaning superior force) originated in the Napoleonic Code of 1804. The breaching party to an agreement was condemned unless their non-performance or delay in performance resulted from a cause that could not be imputed to them, and by a cause of a superior force or of a fortuitous occurrence. Today, most tribunals, both in common law and civil law systems, recognize that contractual performance that becomes impossible or commercially impracticable under certain contexts may be excused. That said, the words in the parties’ force majeure provision controls, and that provision is deemed to be the parties’ negotiated allocation of who bears the risks of particular catastrophic events as between them. CONTINUE READING →

Published on:

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20 February 2020

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

Coronavirus continues to be of global concern, and remains an issue the hospitality industry should be tracking, both for economic and legal reasons. Bob Braun discusses whether the virus may trigger a force majeure event for hotel operators and owners, and what that might mean for a property’s performance obligations and other operations.

 

Coronavirus as Force Majeure Event:
What Hotel Owners and Operators Should Consider
by
Robert Braun

Coronavirus (COVID 19) has been a leading news item for more than a month now, competing and often pre-empting other national and international news items. For the hospitality industry, the virus has created severe disruptions in the largest single source of tourists. Hotel companies, both inside and outside of China, have warned of reductions in revenues, and as the virus continues to spread, the trend does not bode well. Like the SARS virus of 2002-2003, coronavirus has the potential to disrupt travel for months, and the travel industry will take time to recover.

Performance Tests and More
The most immediate effect will be seen by hotel companies when they review upcoming financial statements and see shortfalls. This could, among other things, cause some hotels to fail their performance obligations, giving owners the right to terminate a management agreement (unless the hotel operator exercised a right to cure the shortfall). At that point, hotel operators are likely to claim that the impact of the virus constitutes a force majeure event, which would require performance tests to change the performance obligations. For more details on performance tests, see our article on Hotel Management Agreement Performance Standards.

CONTINUE READING →

Published on:

By

31 January 2020

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

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. 

On January 31, 2020, the Center for Disease Control (CDC) declared the Wuhan coronavirus a public health emergency of international concern. The numbers of confirmed cases, as well as the death toll continues to climb. (For current statistics, see the Center for Systems Science and Engineering’s online dashboard that pulls data from the World Health Organization.)

Containing the spread of the disease is of global concern. Beyond the serious human health impacts, businesses worldwide expect disruptions in supply chains for manufactured goods, evidenced by the S&P’s sharp decline on January 31st. The U.S. has issued a “Do not travel to China” advisory, major U.S. airlines announced cancellations of flights to China, and President Trump announced a travel ban on foreign nationals who have traveled to China.

Hoteliers have their own causes of concern.

Chinese nationals comprise the largest tourist market in the world with 159 million outbound tourists in 2019, accounting for 12.2% of all outbound travelers globally and US $275 billion spent. If you cater to even a small percentage of these tourists, their absence will affect your bottom line.

  • Do group travel organizers have contractual obligations to your hotel if they cancel trips due to the coronavirus?
  • If travelers in your hotel infect other guests or your workforce, what is your liability?
  • If you have hotels in China, what responsibilities do you have toward foreign guests who cannot easily return to their home countries?
  • What do you do if your employees refuse to come to work for fear of becoming infected?
  • What policies and procedures should you put in place for managing these kinds of crises?
  • What exactly does your insurance cover?
  • How can you find experts who can help?

CONTINUE READING →

Contact Information
Jim Butler, Chairman
Global Hospitality Group®
Jeffer Mangels Butler & Mitchell LLP
(310) 201-3526 • jbutler@jmbm.com
www.HotelLawyer.com

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