Oregon Restaurant & Lodging Association Takes Legal Action Against the City of Bend to Protect Lodging Tax Dollars Intended for Tourism Promotion
[September 26, 2017 - Wilsonville, OR] – The Oregon Restaurant & Lodging Association (ORLA) filed a lawsuit today against the City of Bend for diverting the City’s room tax revenues away from tourism promotion and reducing the allocation for tourism promotion below what is required by law.
ORLA is challenging the validity and implementation of a recent Bend City Ordinance which amends the percentage of room tax revenue the City spends on the promotion of tourism and improperly diverts restricted room tax revenues to road maintenance.
“Cities must follow the restrictions in place for disbursement of the lodging tax revenues they collect,” said ORLA President & CEO Jason Brandt. “Unfortunately, Ordinance NS-2291 results in Bend being out of compliance with state law. The vast majority of tourism revenues in Bend can already be spent on general fund purposes so we hope our lawsuit results in acknowledgment from the courts that this recent act is in violation of Oregon law and must be undone.”
Bend City Ordinance NS-2291 violates state law (Oregon Revised Statue 320.350) in one or more of the following ways:
a) 9% of the City’s 10.4% city room tax rate has a set of restrictions for appropriate use of those funds. Within the 9% city room tax rate, the City is statutorily required to spend 30 percent on tourism promotion and tourism related facilities.
b) The remaining 1.4% city room tax rate is subject to a statutorily required 70% investment in tourism promotion and tourism related facilities.
“Lodging operators should be recognized as financial partners of local governments,” said Brandt. “As tourism becomes more successful, so does the tax revenue provided to local governments to invest in the projects important to local residents.”
A report from Longwoods International shows for every $1 invested in tourism promotion, $237 is generated in economic impact and $11 in tax revenue to the benefit of Oregon residents.
ORLA is engaged on a state and local level, helping local municipalities realize that shifts in tourism promotion investments can do more harm than good. Brandt argues there is a direct correlation between tourism promotion and a community’s own tax revenue. “Tourism promotion dollars are crucial to keeping Oregon’s visitor destinations top of mind. Local communities stand to lose significant tax dollars for their general funds if tourists choose to travel elsewhere.”
In 2003, the Oregon State Legislature passed HB 2267, mandating 70% of new or increased local lodging taxes be directed to tourism promotion or tourism related facilities. At that time, the City made the commitment to fund tourism promotion with 30% of the initial 9% tax rate in Bend. In 2013, the City’s residents approved Measure 9-94, which increased the City’s room tax rate from 9% to 10.4%. That 1.4% increase in tax rate is subject to the restrictions established in HB 2267. This past May the City passed an ordinance, in violation of the law, changing the allocation of tourism dollars.
“The City claims their new allocation of lodging tax dollars still follows state law. This is incorrect,” said Brandt. “There is an error in the total investment they are required to make in tourism promotions and/or facilities.”
The hospitality industry sees transportation investments as a crucial contributor to Oregon’s continued economic success. ORLA looks forward to working with Bend and other communities to help identify appropriate revenue streams to fund transportation investments including the unrestricted portion of lodging taxes.
For more information, contact ORLA President & CEO, Jason Brandt, at 971.224.1501.
The Oregon Restaurant & Lodging Association represents approximately 2,500 members, and advocates for over 9,900 foodservice locations and 2,200 lodging establishments in Oregon. The foodservice and lodging industry is responsible for 173,700 jobs bringing in over $10.8 billion in annual sales and generates over 54% of the annual tourism dollars spent in Oregon.
Restaurateurs in Portland, Oregon are banding together to raise funds and collect donations on behalf of Hurricane Harvey victims. Here are some of the events that have been and are being held to help those in need:
Through Sept. 3, the Austin-style taco shop’s locations donated all of its sales from its taco and drink specials. The proceeds went to the American Red Cross and the Hurricane Harvey Relief Fund.
Le Pigeon and the Little Bird Bistro
The French-Northwest themed restaurants donated 5 percent of their Aug. 31 sales to the United Way of Greater Houston, in an effort to help with Harvey relief efforts.
The restaurant said it raised more than $4,000 on behalf of the hurricane victims. Starting Sept. 1 through sell out, Texas-born owner Melissa McMillan gave 100 percent of sales from her Texas Barbecue Cheeseburgers. The money went to the Houston Food Bank. Each burger, plus two sides, is $12 each.
The Country Cat Dinnerhouse & Bar
Owners Adam and Jackie Sappington, along with the Little Green Pickle’s Carrie Welch, organized a Sept. 8 fundraiser featuring participation from 24 restaurants.
Throughout the month of September, Lardo will donate all proceeds from its sandwich sales to the Houston Food Bank.
Gladstone Street Pizza
The pizzeria donated a portion of its sales during the first week of September to “those affected by Hurricane Harvey.”
Summer was humming along with strong RevPar and occupancy performance for Oregon’s lodging industry – then came a late spree of Oregon wildfires.
It should come as no surprise that active forest management (especially in Oregon’s federally owned forests) will have to become a higher priority as part of ORLA’s advocacy efforts. Our wildfire season will end up costing hundreds of millions of dollars for direct fire suppression alone. This doesn’t include the alarming impacts these natural disasters have on the environment, paychecks, and jobs within the tourism industry.
The facts at the time of this writing are as follows:
Thankfully, many of Oregon’s elected leaders realize more must be done. Many of the facts shared in the bullet points above were included as part of a recent editorial in the Statesman Journal by State Representative Sherrie Sprenger.
In her comments, Representative Sprenger made a valiant case for stronger levels of active forest management in federal owned forests in particular. In a recent conversation with an ORLA member in Brookings, he mentioned the cost estimates to contain the Chetco Bar Fire alone will most likely exceed $100 million.
It begs the question – what can we do collectively as Oregonians to make sure appropriate funding is in place for active forest management? What can be done to ensure Oregon’s federally owned forests are not tinderboxes just waiting for the next lightning strike?
Clearly more needs to be done to bring collective voices together that can speak to the importance of more active forest management in an effort to protect Oregon’s natural resources. In the coming months, ORLA will be working with statewide elected leaders and other industry groups to formulate solutions that we hope result in fewer road closures and negative impacts to Oregon’s forests and communities.
In the meantime, we hope you consider assisting those who have been directly impacted by the tumultuous season. Visit Travel Oregon’s wildfire page at http://bit.ly/OTCwf for the latest information and resource links where those less impacted can support those in the industry who have been hit hard by Oregon's wildfires. To support the families that have had to evacuate, contact the Cascades Chapter of the Red Cross at redcross.org/local/oregon.
NRA filed a supplemental brief with SCOTUS, reinforcing Tenth Circuit’s ruling “conflicts directly” with Ninth Circuit decision on tip pooling
UPDATE August 2, 2017: The National Restaurant Association filed a supplemental brief reinforcing the Tenth Circuit Court’s decision invalidating barring employers from including non-tipped workers in tip pools. The Tenth Circuit’s ruling explicitly rebuked the earlier decision out of the Ninth Circuit, with the Tenth Circuit panel saying that the US Department of Labor exceeded its authority by issuing the rule and that restaurants didn’t owe workers tips that never belonged to them. In a brief on Wednesday, the National Restaurant Association and the other groups said the Tenth Circuit’s ruling “conflicts directly” with the Ninth Circuit decision at issue and underscores the need for the US Supreme Court to intervene, review and issue a final ruling.
On July 20, 2017 it was announced that the U.S. Department of Labor intended to issue a Notice of Proposed Rulemaking in August to rescind the current restrictions on tip pooling by employers. "The announcement this week by the DOL is an absolute game changer," said Jason Brandt, President & CEO of ORLA. “This is a welcome relief to Oregon employers in the hospitality industry who have been handcuffed by a 2016 appellate court decision barring them from utilizing tip pools.”
Additionally, the Department of Labor and the Department of Justice have asked for another extension in the legal case challenging the tip pooling regulation and now have until September 8, 2017. ORLA, along with the National Restaurant Association and others, filed a Cert Petition asking the U.S. Supreme Court to hear the case. Our hope is that the Supreme Court will still hear the case in order to prevent any future administration from reissuing such a rule and to address concerns regarding retroactive liability for our members from private lawsuits for the period the rule was purportedly in place.
The DOL's agenda reflects an agency’s intentions to act in the next 12 months, and is subject to change. Continued caution with respect to tip pooling policies is advised until a final ruling is decided. Read more from Fisher Phillips.
On June 30, 2017 the U.S. Court of Appeals for the Tenth Circuit ruled tips belong to the employer, who can presumably either keep them or distribute them in whole or part to employees as it sees fit. This directly conflicts with the Ninth Circuit’s decision last year in Oregon Restaurant and Lodging Ass’n v. Perez, (9th Cir. 2016), pet for cert. filed, (Jan. 19, 2017) and likely sets up a showdown this fall in the U.S. Supreme Court.
On January 19, 2017, the NRA's Restaurant Law Center filed a Cert Petition asking the U.S. Supreme Court to hear a case, National Restaurant Association, et al. v. U.S. Department of Labor, brought by the National Restaurant Association (NRA), the Oregon Restaurant & Lodging Association (ORLA), the Alaska Cabaret, Hotel, Restaurant and Retailers Association, and the Washington Hospitality Association. The case challenges the Department of Labor’s anti tip pooling stance that prevents cooks and dishwashers from receiving tips.
Tip Pooling Options to Consider:
Tipped employees are those who customarily and regularly receive more than $30 per month in tips. Tips are the property of the employee; only tips actually received by the employee may be counted in determining whether the employee is a tipped employee. The requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips. Learn more in the Fair Labor Standards Act (FLSA).
Given the current uncertainty regarding a final decision from the Court on tip pooling in Oregon, ORLA recommends consideration of the following options.
1. Eliminate tip pooling with BOH employees immediately.
By immediately reverting to tip pools that only include “customarily and regularly tipped employees” restaurateurs are choosing to avoid any additional liability that could be brought forward by a private lawsuit.
UPSIDE: Protecting yourself from any private claims instigated by employees against your restaurant who feel their tips are now being pooled unlawfully. Only you can determine the real risk being avoided here.
DOWNSIDE: If the case is heard by the Supreme Court and ruled in our favor, tip pooling with BOH employees would remain legal. If that happens and you have already changed your policy to eliminate BOH tip pooling, then it may be more difficult to change the policy yet again to the original policy you had in place before the most recent ruling.
2. Keep tip pooling in place with BOH employees until ORLA hears from the U.S. Supreme Court.
Because the Ninth Circuit Court denied our rehearing and a motion for a stay was granted, you have until at least December 5 to comply with the Department of Labor rules regarding tip pooling. Our stay remains in effect until we hear from the Supreme Court. This means you have until the mandate is lifted to fully comply with the rules and eliminate BOH involvement.
UPSIDE: You have time to inform, educate and put into practice a new tip pooling system that does not include BOH employees.
DOWNSIDE: A private claim could be instigated by employees against your restaurant who feel their tips are now being pooled unlawfully. Only you can determine the extent of that risk.
3. Eliminate tips altogether.
UPSIDE: Tipping continues to invite litigation in the court system. Replacing tipping with service charges and/or menu price increases and moving to more standardized wages across the entire restaurant operation provides a compensation model less likely to draw challenges from lawyers or organized labor.
DOWNSIDE: Oregonians are
accustomed to tipping and may be displeased with mandatory service charges. In addition, front-of-the-house workers could feel demoralized and frustrated by this different approach that results in less pay overall.
4. Consider alternative ways to share tips.
Examples include adding a kitchen gratuity line to checks or using a tip jar (if the jar stipulates that the tips are for all employees - or shared amongst all employees).
UPSIDE: Restaurateurs can give their customers a choice about whether the tip that they provide goes only to the server, or if they want the tip (or a portion of) to go to the kitchen staff.
DOWNSIDE: Customers are not accustomed to seeing more than one tip line on a check and may feel obligated to add more than they are comfortable with.
Q: What if my servers decide they want to voluntarily tip-out to the BOH employees? Is that allowed?
A: Yes, voluntary tipping-out is allowed. To protect your restaurant however, ORLA recommends servers be asked to provide management with a signed note or letter created by the server stating they are voluntarily tipping out to BOH employees. As a side note, voluntary tip pools are frequently under scrutiny and challenged as not being truly voluntary. A signed document alone will not ensure that someone cannot still challenge that type of tip-out as involuntary.
For additional questions, contact Greg Astley, Director of Government Affairs, at 503.682.4422.
July 20, 2017 - DOL intends to issue a Notice of Proposed Rulemaking to rescind the current restrictions on tip pooling by employers. SCOTUS granted DOL an extension through September 8, 2017.
May 3, 2017 - SCOTUS issued an Order, further extending DOL's timeline through July 10, 2017.
Mar. 2017 - SCOTUS granted DOL an extension through May 11, 2017.
Jan. 2017 - We submitted a petition for rehearing to the U.S. Supreme Court.
Sept. 2016 - The 9th Circuit denied our petition for a rehearing, however, 10 judges issued a blistering dissent.
Feb. 2016 - The 9th Circuit reversed their position and ruled in favor of the DOL, ignoring their own precedent in the Woody Woo case.
2013 - We won again in federal district court.
2010 - We won a decisive victory on this issue in Cumbie v. Woody Woo Inc., before the 9th Circuit Court of Appeals.
State Plan for Employees Launched July 2017
OregonSaves, a state-run retirement program for employees of businesses who do not currently offer a retirement savings plan, officially launched in July when 11 employers selected for the first pilot program began payroll deductions for participating employees.
Attention hospitality industry: at the end of July, employers with 100 or more employees can expect to receive their first notice about the program from the State and have until November 15, 2017 to register with the program. The notice from the state will include instructions on how and when to complete the registration process.
In 2015, the Oregon Legislative Assembly enacted legislation, which created the Oregon Retirement Savings Board. House Bill 2960 tasked the Board with the establishment and oversight of a state-run retirement savings program providing employees with a flexible opportunity to save through payroll deductions and the ease of getting started with automatic enrollment and annual contribution escalation.
The new public website for OregonSaves is now live at OregonSaves.com and includes general information about the program as well as specific information for savers at Saver.oregonsaves.com and for employers at Employer.oregonsaves.com.
The first pilot program has successfully completed the registration process for OregonSaves. Pilot employers get early access to the program, receive hands-on assistance through the process, and began payroll deductions for participating employees in July, after the 30-day enrollment period ends. Registration for the second pilot will begin in August with payroll deductions for those who participate to begin in October. The second pilot phase will help test the automation of the program for a wide variety of employers in terms of size and ways of doing business, helping prepare for the statewide launch.
Employers must collect (payroll deduction) and remit the payroll withholdings each pay period to the State. This will create additional paperwork for employers to deal with staff. There is no cost; the plan is funded into IRA's.
OregonSaves is scheduled to roll out in phases starting with larger employers. The registration deadlines for employers are as follows:
a. An employer employing 100 or more employees: November 15, 2017 (audit required)
b. An employer employing 50 to 99 employees: May 15, 2018
c. An employer employing 20 to 49 employees: December 15, 2018
d. An employer employing 10 to 19 employees: May 15, 2019
e. An employer employing 5 to 9 employees: November 15, 2019
f. An employer employing 4 or fewer employees: May 15, 2020
Employers with a deadline of November 15, 2017 can expect to receive notice about the program from the State starting in July. In October, they will receive another notice with instructions about how to either register with the program or certify their exemption from it. They will have until November 15, 2017 to complete the registration or certification process. Payroll deductions for employees of those businesses that register by the deadline will begin in January 2018.
The first stage of the rulemaking process is complete for OregonSaves. The first set of rules can be found at Oregon.gov/retire/Pages/Rules.aspx. A second stage of rulemaking that started in June will consider technical matters that are not in the first set of rules, such as the process for joint employment circumstances.
More information and a complete list of frequently asked questions for employers and employees can be found at Oregonsaves.com/home/overview/faqs.html. | ORLA
FAQ’s about OregonSaves