Restaurant Law Blog

Some former employees of Juventino Restaurant in Park Slope have taken to the internet to lambaste management for sexual harassment they claim occurred while they were employed. Through their new website "Juventino Disclosed" Staffers are hoping to "bring awareness to sexual harassment in the restaurant industry and maybe deter some prospective customers in the process." Some readers have left comments on the website promising not to frequent the establishment in support of the ex-employees. Undeniably, social media is a powerful tool that can dramatically impact one’s business in a good way, or in this case, a bad way. But is it ethical or for that matter legal? Can restaurant owners protect themselves from this sort of backlash? Can they file a defamation suit against their employees the way that the owners of Bar Veloce have? Unfortunately, each situation must be handled on a case by case basis, so before you do anything to defend or retaliate, seek legal advice.

Restaurant operators frequently come to me with their original operating agreement asking me to amend it to include one or more new investors that they have brought on-board (i.e. actually obtained money from and promised a membership interest to). I immediately cringe. Bringing in an investor is not always as simple as owners would like to believe. You are offering a security interest in your business which may need to be registered with the Securities and Exchange Commission. Keep in mind that all securities transactions, even your small transaction, are subject to the antifraud provisions of the federal securities laws. In other words both you and your company can be held responsible for any false or misleading statements, whether oral or written. The government enforces federal securities laws through criminal, civil and administrative proceedings and jilted investors can enforce these protections through private lawsuits and obtain a full refund of their investment plus interest.

One of the greatest obstacles standing between the success or failure of your restaurant is your employees. Mario Batali settled a recent wage and tip lawsuit for $5.25 million dollars folowing employee claims that Batali deducted 4-5% of nightly wine sales from the tip pool to cover the cost of sommeliers and wine related expenses because his waiters often had nothing to do with the sale of the wine. The Department of Labor has spoken firmly on this issue and maintains that a tip is the sole property of the tipped employee regardless of whether a tip credit is claimed by the employer. Therefore, even though Batali's sommeliers were the driving force behind the sale of more expensive bottles of wine, the tips associated with those increased sales remained the property of Batali's waitstaff.

It amazes me how often clients come into my office having identified a restaurant or bar they want to purchase, but are otherwise unaware of the significant out-of-pocket costs they will incur through the process. If you want to keep costs within reason, consider:

1. If you know you will need and attorney, accountant, broker, consultant, etc., ahead of time, then hire them ahead of time. Often work can be completed more timely and with greater efficiency with advanced planning. Delay and an increase in cost is inevitable whenever you ask your team to drop everything to handle a last minute transaction which requires permits and licenses to be obtained and due diligence to be performed.

Liquor license violations in New York City can put a restaurant, bar or nightclub out of business. There are also frequently challenges with Obtaining a Liquor License or Transferring a Liquor License.

A New York City liquor license lawyer can self-certify an application, which can dramatically speed up the process. Frequently, an attorney can obtain a decision on your liquor license within three weeks. Without attorney certification, the process may take several months or longer.

Consulting a Manhattan restaurant lawyer is critical whenever a pub or restaurant is facing a violation. Failure to properly contest a violation can lead to serious problems, including the forced closure of your business.

At this time of year, we all feel the crunch that comes with the filing of our annual tax return. Unfortunately, several businesses are struggling to keep their doors open and when that belt starts to tighten, several owners make horrible decisions that hurt more than help. Initially, the worst thing to do is to not pay your taxes. That includes property, sales and income tax. Not only will Uncle Sam continue to pursue you personally long after your business is dissolved, you will get hit with interest and penalties and could even face criminal charges. The New York State Department of Taxation and Finance issued a press release two past weeks identifying twelve individuals that were arrested and charged with felonies for failing to file tax returns. Is that a risk you are willing to take?

Owning your own restaurant can be extremely rewarding if you are able to navigate your way through the labyrinth of industry pitfalls.  If I could offer one piece of advice, it would be to tread carefully.  While the list of considerations, complications and requirements are exhaustive, a few key areas merit discussion. 

1.  Lease Agreement.  When buying a restaurant you will either be assigned the Seller’s lease agreement, or have to execute a new lease with the landlord.  One potential benefit to an assignment might be that the Seller has a long term lease at a favorable monthly rate which you would inherit, whereas a new lease might require a significantly higher monthly rent more in-line with the prevailing market.  Conversely, an assignment rarely permits you to re-negotiate any of the Seller’s lease terms, so careful review of the existing lease is critical.  Often, lease agreements contain hidden charges, obligations and restrictions on alienation that make an otherwise favorable lease, prohibitive.  

More than 1,000 responses were received In less than two weeks following the City Council’s request that restaurateurs provide feedback on the City’s food safety inspection process and new letter grading system. 

Council Speaker Christine C. Quinn and Health Committee Chair Maria del Carmen Arroyo unveiled the questionnaire on January 10th and all responses were due by January 31^st.  The survey responses will now be analyzed in preparation for an oversight hearing to explore the inspection process and areas for reform. 

Most restaurant owners say that finding and retaining a qualified, service oriented staff are their most difficult tasks.  The law is very specific about what an employer can and cannot do to secure a workforce.  Before employees can be selected, managers must understand what the essential functions are for each job position (i.e. job description).  From there, managers can identify what qualifications candidates will need to perform the job.  These qualifications should be in writing in all job advertisements.  The object of this game is to protect yourself because hiring and maintaining employees is legally tricky. 

Job qualifications can include physical and mental requirements but cannot include characteristics that would unfairly prevent a class of workers from successfully competing for a position.  For example, requiring that your dishwasher be six feet tall would be inappropriate because women and certain minority groups might have difficulty meeting it.  All job qualifications must be “bonafide occupational qualifications” (BFOQ) which in the absence of, an employee would be unable to safely or adequately do that which was necessary of him/her to perform their job description. 

The State Liquor Authority has granted an extension of credit for retail licensees in order to ensure that restaurants and bars have the ability to maintain and replenish their inventories throughout the holiday season.  Restaurant and Bars will be able to place orders for alcohol up until December 30, 2011 and will be charged posted December prices as long as delivery of the alcohol is made on or before January 4, 2012.  Wholesales are not permitted to accept new orders for December’s prices after December 30, 2011. 

As New Year’s Day (January 1, 2012) falls on a Sunday, All Night Permits allowing establishments to stay open until 8:00 a.m. are not being issued by the State Liquor Authority. Section 106(5)(a) prohibits alcoholic beverages to be sold, offered for sale or given away upon any premises licensed to sell alcoholic beverages at retail for on premises consumption on Sunday between 4:00 a.m. and 12:00 noon on Sunday.  The State Liquor Authority has clearly stated that restaurants and bars will be required to adhere to the approved closing hour in the County in which they are located, unless such establishments submitted an application for a New Year’s Eve Permit on or before November 15, 2011 and been notified by the SLA that their permit was approved. 

James DiPasquale

DiPasquale Law Group