Restaurant Law Blog

Thursday, September 25, 2014

Wage and Hour Lawsuit Brought Against Famous New York City Restaurant

Wage and hour issues are common in the restaurant business.  With the complexity of the wage and overtime laws and spotty enforcement, many restaurant owners do not even know they are committing a violation.  There has been an explosion of wage and hour stories covered by news outlets in recent years.  Due to the enhanced awareness of wage and hour laws, there has been an increase in labor and employment lawsuits focusing on these issues, especially by those in the restaurant business.  An example is a recently filed suit against a famous upscale New York City restaurant.

Le Cirque restaurant caters to royalty, politicians and celebrities of every caliber.  With sky-high prices and white glove service, allegations of cheating employees out of wages may come as a surprise to some.  Former employee, Elvis Pena, claims he worked in various positions at Le Cirque including runner, bus boy and waiter and that during this time, he was not paid minimum wage.  Although he worked well over 40 hours a week, Pena claims that the restaurant did not pay him overtime wages.  He also asserts that he was forced to pool his tips with other employees and share these tips with captains, who are considered management, in violation of state and Federal labor laws.



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Thursday, September 18, 2014

Changes to the Way NYS Restaurant Workers Are Paid May Be On The Way

Restaurant workers are paid in a number of different ways.   Usually, employees that do not have the opportunity to make tips, such as managers, hostesses and kitchen staff, are paid a salary or an hourly wage that is at or above the required state and Federal minimum wage.  Those that do have the ability to make tips, such as servers, bartenders and sometimes bus boys, are paid at an hourly rate that is below minimum wage.  The thought is that by collecting tips the workers will make at least the minimum wage if not surpassing it.  If the employee does not make at least as much as they would if being paid minimum wage, the employer is required to make up the difference.

Now, New York State service workers might be getting a raise.  Service workers include restaurant workers that make tips.  Various groups, including labor unions and service worker organizations, are pushing for these parties to be paid at least minimum wage, even if they are tipped.  They have submitted their pleas to state officials and it is now up to the state wage board to make a recommendation.  Once the board makes a recommendation, the New York State Labor Commissioner is responsible for making a final decision, which is expected in February of 2015. 



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Saturday, September 13, 2014

Judge Finds For City in Suit Challenging Department of Health Inspections

The relatively new Department of Health restaurant inspection system has been the source of constant anxiety among restaurant owners in New York City.  As a result, a group of restaurateurs has brought suit against the City in the Manhattan Supreme Court.

The group of almost 40 restaurant owners attacked the system in its entirety.  They claimed that instead of making it better for restaurants in the City, being subject to the scheme has been bad for business in general.  The penalty structure, which is widely accessible via the internet, designates fines ranging from $200-$1,000 for listed violations.  The plaintiffs claimed that these fines are assessed arbitrarily and for the sole purpose of raising revenue.  They also alleged that often times, due to the differing experience of inspectors, the fines that were originally assessed were then increased when the site was visited by an supervisor. The plaintiffs also claimed in their suit that the City Council overstepped their authority when passing parts of the charter legalizing the Department of Health regulations.  They asserted that the provisions were unconstitutional as the City Council did not have the authority to pass them in the first place.  The group also sought changes to the appeals process and $150 million in damages.


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Friday, August 29, 2014

Boozy Brunch Might Lead to Loss of Liquor License

Earlier in the year, there was some controversy regarding the legality of the ever popular bottomless brunch in New York City.  On Saturdays and Sundays a large number of New Yorkers attend all you can eat brunches that also include unlimited alcohol.  Now, one NYC hot spot might be losing its liquor license due to problems resulting from its booze-filled brunch.

Pranna Restaurant on 28th and Madison offers a $45 brunch that includes unlimited alcoholic drinks such as mimosas and sangria.  Residents of the area are claiming that this is causing a major problem in the neighborhood.  They allege that the excessive drinking is resulting in customers leaving the restaurant belligerent or being escorted out because of severe intoxication.  The patrons are unable to walk, throwing up and urinating in the street, lying down on the sidewalk, sitting in the street and fighting.  Residents also say that the restaurant is creating excessive noise and the customers are littering in the area.  Many of the complaints have been documented by residents using photographs and video recordings.  Residents also claim that the restaurant is operating as a nightclub with a club atmosphere and cabaret girls.  If Pranna was a nightclub this might not be such a big problem.  But, the establishment is a restaurant is not authorized to operate as a nightclub.


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Tuesday, August 26, 2014

Seminar Reminder: Restaurant Management Bootcamp 2.0 - Legal Considerations when Opening a Bar or Restaurant

This Thursday August 28, 2014 from 5:30 to 7:30 p.m. I’ll be giving a seminar in the Restaurant Management Bootcamp 2.0 Series that is hosted by NYC Small Business Solutions.  The Course Description is copied below:

Restaurant Management Bootcamp 2.0: Legal Considerations when Opening a Bar or Restaurant
An insider look at tips, tricks, and best practices to start your first restaurant in NYC, presented by Restaurant Attorney James D. DiPasquale.  To start and run a successful restaurant you must understand many different legal considerations which make operating in New York City, particularly unique.  Whether you are a new or existing restaurant owner, this special follow-up to the Restaurant Management Bootcamp class will help you gain a deeper understanding of all of the basic requirements to get your business up and running.



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Thursday, August 14, 2014

Katz Deli Copycat Case Settled

New York City restaurants are subject to intense competition.  These businesses work hard to establish and maintain their good reputations.  Why should anyone else benefit from that if they have not put the work in?  This is at the heart of a recent lawsuit filed by Katz’s Delicatessen of Houston Street Inc.

The famed Katz’s Deli has been serving genuine Jewish food in New York City for over 125 years.  The establishment is a landmark and has been featured in many movies and television shows.  Earlier this year, Katz’s Deli decided to do something about a Florida restaurant that was operating under a very similar name.  Katz’s Deli of Deerfield Beach, owned by Pump-A-Nickel Corp. Inc., is also selling Jewish foods, which makes it seem even more like the two restaurants are related in some way.  In the spring, Katz’s Deli sent a cease and desist letter to Pump-A-Nickel which they claim was ignored.  Katz’s Deli had no choice but to file a lawsuit against Pump-A-Nickel alleging trademark infringement and dilution (lessening the uniqueness of a trademark).  They claimed that Pump-A-Nickel was trying to unlawfully capitalize on their famous reputation and that this resulted in at least $1 million dollars in damages.  Katz’s Deli also argued that Pump-A-Nickel had engaged in cyber squatting by using the domain name Katzs-deli.com.


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Tuesday, July 29, 2014

High Rents Causing Chaos for NYC Restaurants

New York City retail rents have increased astronomically over the last decade or so.  Many restaurateurs entered into 10 or 15 year leases when NYC was a different place with less trendy neighborhoods and much lower rents.  Now, market rent has doubled or tripled and those restaurant owners with expiring leases are in a pickle.

The struggle is common one between lessors and landlords.  Restaurateurs that signed a lease long ago have been benefiting from low rent for many years.  Landlords have been losing out on market rent since rents started to skyrocket and are often waiting for the current lease to expire so that they can raise the rent.  With rents in some neighborhoods reaching $5,000 per square foot, these increases are forcing many restaurants to move to less expensive neighborhoods or worse, close their doors.  Even well known restaurants are falling victim.

Establishments as famous as Bobby Flay’s Mesa Grill have been forced to close.  While others, such as the Union Square Café and Four Seasons might be in the same situation very soon.    


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Tuesday, June 24, 2014

Does Your Lease Contain a Demolition Clause - Why You Should Be Scared

If you have opened a new restaurant or bar in the last two years, you have likely noticed that New York City landlords are becoming steadfast in their demand that all new leases contain demolition clauses.  Old office and residential buildings are potential redevelopment opportunities which landlords are no longer willing to overlook.  Landlords, of course, want to maintain a steady income from the property while also maintaining their flexibility to terminate leases and/or relocate tenants if the need arises.  If a landlord has redevelopment in mind, then a right to terminate existing leases so that demolition or substantial renovation can occur may be necessary. However, from a tenant's viewpoint, such a right, without limitation, can be less than satisfactory. Sometimes arriving at an appropriate middle ground can be impossible. Just ask Wylie Dufresne whose restaurant wd~50, is closing because the building is being torn down for renovation.    Similarly, according to Eater NY, P.J. Clarke’s is in the middle of a $40 million dollar lawsuit with its landlord who is allegedly attempting to push them out so as to make room for Pastis.  In short, tenants cannot overlook a landlord’s desire to evict them should an opportunity arise.  For that reason, when negotiating a new lease, Tenants must consider things such as:


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Tuesday, June 24, 2014

Top 10 Considerations When Buying a Restaurant or Bar

1.  Buying the Assets vs. Buying the Company

Buying a business can be structured as an asset sale or as the purchase of an ownership interest in the legal entity that owns the restaurant. There are critical differences between these two options which come into when dealing with the State Liquor Authority, Sales Tax Department and a myriad of vendors.  Generally speaking, if you only buy the assets of a restaurant you will not be responsible for the prior owner’s liabilities unless you specifically agree to assume them.  This is true with the exception of the prior owner’s sales tax liability, if any, for which you must obtain a waiver from the tax department.

Despite this, sometimes it is in your best interest to buy the company itself, even though the seller’s liabilities might remain. This is particularly true when you intend to apply for a liquor license in a difficult community in New York City.   Only by reviewing all of the facts can you best determine how to structure your deal.

2.  What Assets are Included

Every restaurant and bar has a myriad of assets, both tangible and intangible. Some assets are owned outright while others are frequently leased (e.g. dishwashers, soda machines, POS systems).  Be sure to identify each and every asset you are acquiring in the purchase and which assets the Seller has no right to transfer.  If the Seller is leasing equipment, does he/she expect you to assume his lease agreement and if so, what are the terms of the lease.  No buyer wants to close on a purchase only to discover that the many of the assets have been removed from the restaurant because the seller was under a different impression as to what was  being sold.


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Monday, June 2, 2014

Top 15 Reasons Why Restaurants Fail

I came across this list. “The Top 15 Reasons Why Restaurants Fail”:

1. Lack of experience, 2. Lack of capital, 3. Poor locations, 4. Inventory, 5. Equipment, 6. Poor credit practices, 7. Personal expenses, 8. Premature expansion, 9. Bad attitude, 10. Too many expenses, 11. Poor collections, 12. Low sales, 13. Inventory mismanagement, 14. Competition, and 15. Crime

I’m not sure that I agree with the list entirely. Let me start by saying that I am not a restaurant owner. I am a restaurant attorney. So, I may be wrong (and often am) but many of my clients who have sold their business express different reasons as to why their business failed. This is what I’ve gathered to be their top reasons why restaurants fail:

(1) Lack of Concept. A successful restaurant needs a clear concept. Owners that can’t describe their concept beyond the food that they prepare seem to drift from idea to idea. When an idea fails, they change again. They try to appeal to the greatest audience but in doing so, become too general and possess no identity that lets them stand out from their competitors.

(2) Family. The support of one’s family cannot be underestimated. My clients whose families are supportive of their endeavor tend to succeed. However, this seems to be a double edge sword. Supportive families usually mean a good family structure. I find that many of my clients have difficulty in balancing work/life. They see all that their family is doing to support them, and they in turn, want to be with their family. Running a restaurant is hard and very time consuming and does not leave much time for one’s family. Some owners find this very difficult and when they try to carve out too much time for their family, their business can sometimes suffer. My clients that most often succeed seem to be single or divorced. Now I’m not suggesting that families are bad for business (quite the opposite) but balancing family and work seems more difficult for restaurant owners given the time requirements they want (and need) to dedicate to both.


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Monday, May 12, 2014

Primer on Liquor License Violations

When the State Liquor Authority (“SLA”) commences an investigation, they can do so in one of many ways including:  (a) on-site inspections; (b) on-site undercover investigations by SLA Investigators and other law enforcement agencies; (c) a review of reports and investigations by the police and regulatory agencies; and (d) speaking to witnesses and gathering evidence of suspected violations.

The information is then evaluated to see whether there is sufficient evidence to initiate charges against an establishment. If there is sufficient evidence, the SLA issues a Notice of Pleading that describes the violations that are being charged.  It is at this point where the license holder enters a plea of not guilty, no-contest, or conditional no-contest. 


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