Top Five Hazards of Economy-driven Employment Decisions

By Michael C. Schmidt Partner, Cozen O'Connor | August 07, 2010

Times are tough. Employers in the hotel and hospitality industries are not immune from the impact that the weakened economy has on their personnel issues. In order to minimize the legal tsunami that can result from economy-driven employment decisions that are made, it is critical for hotel and hospitality employers to take appropriate steps to minimize potential legal exposure.

1) The Trade Secret and Unfair Competition Dilemma

Hotel management and other key employees may leave in increasing numbers during an economic downturn, either voluntarily or involuntarily. Among the critical issues to be addressed is the fear that such former employees might unfairly compete or disclose trade secrets to the outside world, such as programs in development or hotel expansion forecasts. Employers should consider whether to seek the enforcement of non-compete and non-disclosure agreements, or, alternatively, whether to request that employees who remain with the company sign such agreements. On the flip side, in the event an individual who is hired has recently left another hotel, a prospective employer should determine whether the new hire is subject to any restrictive covenants with his or her former employer, and perhaps ask the new hire to certify in writing that no restrictions exist.

In many states, restraints on an employee's ability to compete remain disfavored except in certain circumstances when enforcement would prevent unfair competition. In a smaller group of states, restrictive covenants are statutorily prohibited. Before determining whether to bind an employee to a restrictive covenant, or to seek the enforcement of an already-existing agreement, an employer should:

  • understand that restrictions generally will not be enforced against an employee involuntarily terminated without cause;
  • make sure that all trade secrets are treated as such internally;
  • tailor any restrictions to the particular position of the employee, demonstrating that a business need exists which justifies restrictions being placed on that particular position, rather than using a boilerplate agreement for clerical employees and senior hotel executives alike;
  • include time and geographic restrictions that are reasonable and necessary to the hotel industry based on competitive concerns; and
  • consider "safeguards" such as additional severance to be paid during the restriction period.

2) The Medical Leave Dilemma

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Guest Service: A Culture of YES

In a recent global consumers report, 97% of the participants said that customer service is a major factor in their loyalty to a brand, and 76% said they view customer service as the true test of how much a company values them. And since there is no industry more reliant on customer satisfaction than the hotel industry, managers must be unrelenting in their determination to hire, train and empower the very best people, and to create a culture of exceptional customer service within their organization. Of course, this begins with hiring the right people. There are people who are naturally service-oriented; people who are warm, empathetic, enthusiastic, pleasant, thoughtful and optimistic; people who take pride in their ability to solve problems for the hotel guests they are serving. Then, those same employees must be empowered to solve problems using their own judgment, without having to track down a manager to do it. This is how seamless problem solving and conflict resolution are achieved in guest service. This willingness to empower employees is part of creating a Culture of Yes within an organization.  The goal is to create an environment in which everyone is striving to say “Yes”, rather than figuring out ways to say, “No”. It is essential that this attitude be instilled in all frontline, customer-facing, employees. Finally, in order to ensure that the hotel can generate a consistent level of performance across a wide variety of situations, management must also put in place well-defined systems and standards, and then educate their employees about them. Every employee must be aware of and responsible for every standard that applies in their department. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.