Learn how to protect your restaurant from potential legal trouble
By Nancy Wood
No business owner wants to be confronted with legal issues. And few businesses sit as squarely in the crosshairs of potential citations, fines and lawsuits than restaurants. From the plethora of permits, licenses and insurance needed to operate to health code regulations, alcohol sales and the proverbial ‘slip and fall’ liability concerns, restaurant owners and operators are constantly trying to navigate the minefield of local and state ordinances to stay on the right side of the law.
Making sure you have every base covered can be difficult at best. There are over 600 local sets of laws in Georgia. Every city and county has local rules, and they can vary significantly from jurisdiction to jurisdiction – especially when it comes to alcohol sales. But for experienced and new owners alike, being prepared for any potential situation that could put your business at risk is the key to avoiding what could become a financial pitfall.
An Ever-changing Landscape
It’s debatable right now if Georgia is in a post-pandemic stage, but the impact of the pandemic for restaurateurs hasn’t abated. Some of the current issues facing the industry include the use of face masks and the ongoing labor shortage.
While Georgia’s governor has refused to require a mask mandate, what is the responsibility of the restaurant owner? Taylor Harper, a shareholder and partner with the legal firm Taylor Feil Harper Lumsden, says with certain cities requiring mask mandates – and Georgia’s governor opposed to a mandate – there are legal issues that can be analyzed.
Taylor Harper’s practice focuses primarily on regulatory compliance and litigation in the food and beverage industry with an emphasis on beverage alcohol and cannabis sectors at the federal, state and local levels. His firm, TFH Legal, offers restaurants legal advice at reduced rates through the GRA with its Restaurant Legal Savings Program (garestaurants.org/legal-center).“Do they [restaurants] have the authority to do that? If there’s a need for a mask mandate,” he says, “or there’s a local jurisdiction that needs a mandate, it generally shies people away from going out.” That, he says, puts restaurants in an incredibly tough spot. “It significantly limits their revenue stream.”
For her clients in the industry, Michele Stumpe, attorney and partner at Taylor English, sees the issue as part of the landscape of COVID expectations. While there is the issue of protecting their staffs, should owners enforce masks for customers?
“Even if it’s not legally required,” says Stumpe, “is it something they should be responsible for to protect their staff and their customers? Generally, people assume the risk.” she says. “A lot of restaurants just want to make sure that they’re not stepping on any of the issues there.”
While there may be an assumption of risk when dining out, Harper says he has occasionally seen situations where a patron will try to get a refund from a restaurant for the meal that he or she had there, arguing that the justification for the refund is they were exposed to COVID.
“If a local jurisdiction has a mask mandate,” he says hypothetically, “and the governor has now come out and said you can’t force compliance to mandate. From a liability standpoint,” he supposes, “if there’s a restaurant that has only half of its servers wearing masks, a patron could later try to argue that they need a refund or the restaurant is somehow liable because they created an environment where the patrons were exposed to COVID or potentially exposed to other patrons or staff members who had COVID – and that the staff members weren’t wearing masks when there was a local mandate to wear masks. That could be an interesting issue that comes up.”
The shortage in staffing could also impact liability for owners and managers. “Seeing that transition of the workforce and having less staff on hand in general,” says Stumpe, “creates concerns with them following company policy.”
While adequate training is certainly part of any restaurant’s process with new hires, Stumpe explains that training people who are new to the industry comes with risks, like failing a compliance check or forgetting to check an ID. “The issue,” she says, “is that they’ve been through training, but because they haven’t been in the industry for very long, they might be more likely to make mistakes.”
Additionally, in Georgia, some local jurisdictions require employee permits – or alcohol server cards. “If you’ve got a new manager, they might not be aware of it,” Stumpe says. She encourages clients to make sure they know the local jurisdiction requirements. “I’ve seen more compliance checks than ever these last six to eight months,” she states, “where the Department of Revenue and the local jurisdictions are hitting restaurants and alcohol retailers as a whole. Most of the violations I’ve seen,” she adds, “have been employees who’ve been working less than two weeks.”
Keeping Up With Alcohol Regulations
One area that falls in that “ever-changing landscape” is alcohol sales and delivery. During the pandemic, rules were relaxed and executive orders put in place to help restaurateurs maintain an additional revenue stream.
When State Bill 236 passed allowing alcohol to-go delivery, the landscape got even more confusing. Figuring out exactly what’s allowed and what’s illegal starts with understanding both local and state mandates – then making sure your restaurant has the right licenses and permits.
“There are always two levels of jurisdiction governing alcohol service,” says Harper, “the local jurisdiction and the state. So even if the state allows something, you still have to make sure that your local jurisdiction is going to allow it.”
For example, he says, “If a local jurisdiction comes out and says that a restaurant can start selling liquor by the package, that’s going to be a violation of state law, but a lot of restaurateurs don’t completely understand that.”
Maneuvering which licenses allow what can also be confusing. Harper says that during the pandemic, some local jurisdictions allowed restaurants that hold consumption on-premises alcohol licenses to also sell beer and wine.
“Beer and wine is a different story,” he says. “It’s one of those areas where the state said ‘we’re going to defer to the local jurisdiction’ on whether they want to allow consumption on-premises licensee to also sell beer and wine by the package to-go.
“Before State Bill 236 allowing mixed drinks to-go was passed,” he explains, “there were some local jurisdictions that were allowing to-go sales from restaurants – not of just packaged beer and wine, but you could get a margarita and walk out the door with it. The local jurisdictions were saying that was allowed, but at the state level, that wasn’t allowed. When you have a local jurisdiction saying that something’s allowed, the restaurateur, not surprisingly, assumes that it is.”
Another reason to keep an eye on local alcohol ordinances is the fact that many were temporary allowances that were implemented through an executive or administrative order issued by the city council, mayor or county commission – and they had expiration dates.
“Now that those orders have been expiring,” says Stumpe, “the question is, are restaurants still allowed to have to-go alcohol or not allowed to do it – or could they possibly do it if they had a separate license? The way the law is stated,” she says, “is interesting for restaurants. If you’re permitted to sell alcohol by the package, then you can deliver it pursuant to the delivery laws – unless the local jurisdiction prohibits it.”
“Some jurisdictions were able to pass some sort of amendment to an alcohol ordinance that specifically allowed to-go sales in line with the new state law,” Harper adds, “but there are a lot of local jurisdictions out there that have very general prohibitions with respect to where alcohol can be sold.” He encourages his clients to engage with their local jurisdiction, “So you don’t end up in a situation where the restaurant thinks they’re doing what’s allowed, but they’re not in compliance.”
Protecting Your Investment
Having the right insurance coverage is obviously critical to protecting restaurateurs from costly litigation. And every possible scenario deserves a second look – from general premises and alcohol liability to protection in case of fire, cyberattacks and even commercial auto insurance, particularly if deliveries are being made by employees rather than a third-party service. The “slip and fall” category is particularly important.
Michele Stumpe is known as one of the top attorneys in Georgia for alcohol licensing and permits. In 2002, she developed “The Responsible Alcohol Sales & Service” (RASS) workshops to educate owners and licensees on the legal obligations and responsibilities of serving alcohol to consumers. Many Georgia jurisdictions now require attendance as a prerequisite to obtaining an alcohol license.“It seems like you’re seeing more pre-staged slip and falls,” says Stumpe, who has noticed an uptick in the last two years. “People are a little more belligerent with each other, and that can result in a liability-type issue.”
Stumpe adds that this can also be impacted by staff turnover. “Even if it’s not pre-staged,” she explains, “let’s say it was legitimate and someone gets injured on your premises – if it happened a year-and-a-half ago – with the turnover, most of those employees aren’t there.”
This scenario puts the onus on the restaurant to defend itself and puts the spotlight on the need for good incident reporting forms. Stumpe recommends completing incident forms immediately and to make sure they are fully and properly documenting what happened, particularly from employees. She even recommends getting additional contact information from employees – like their driver’s license number in case the employee is no longer there. This can be a challenge in a busy restaurant.
“The last thing you want to do when you’re busy is fill out an incident report,” she says. “People tend to jot down quickly and they don’t take the time to fill it out completely, but doing that is important.”
While the goal is having enough information to defend yourself, Stump also emphasizes the need to identify good conflict resolution procedures. “So many times,” she says, “that authority to resolve conflict initially can help prevent a lawsuit down the road or prevent something from escalating.”
Having the right protections in place is also critical should a restaurant owner need to defend against a violation for serving a minor. Harper asks a number of questions to help his clients be prepared: What are your policies going to be? Are you checking everybody’s ID – not just those who look under 40? Do you have to put the date of birth into your POS system in order to make a sale? Do you have cameras?
“All of these factors come into play,” he says, “because if you get cited for serving someone who was underage and we have to go to a hearing for that citation, I want to be able to talk about all the things that you have in place so we can pinpoint exactly why this went wrong and why it won’t happen again. As the owner of the business, you want to be in the position of being able to say – if you’re ever before a jury – we really did everything we could to prevent this.”
Avoid Violating Trade Practices
As if restaurateurs didn’t have enough to remember when it comes to legal issues, here’s one more: the “thing of value” prohibition. This three-tier system – manufacturing, wholesale and retail – has limitations and can present situations that result in citations.
The prohibition, explains Harper, is based on the interaction between the three tiers and maintaining retailer independence.
“A manufacturer or a wholesaler cannot give a thing of value to a retailer,” he explains. “The idea is that a retailer is then in a position to be coerced in a way to sell that manufacturer’s or that wholesaler’s product to the exclusion of other manufacturers or wholesalers products.” While there are ways restaurants are allowed to engage with wholesalers and manufacturers, there are also limitations.
For example, Harper says, “a wholesaler or manufacturer can try to educate a restaurant on the products that it offers in hopes the restaurant will then purchase that product and sell it to the patrons, but you can’t be induced or coerced in any way.”
In one situation he encountered, Harper says, “There was a manufacturer of an alcohol brand that was loaning some umbrellas to a restaurant patio for a weekend event. The umbrellas had the manufacturer’s name on it, but because they came directly from the manufacturer – not the wholesaler – the Revenue Department said that was a violation. While they only issued a warning, neither party involved had any idea it was doing anything wrong.”
Wholesalers on the other hand are allowed to provide certain types of point-of-sale material to restaurants but, says Harper, “They do have rules about the value, particularly if there is secondary value aside from having your name on something. If I give you a TV that happens to have my brand name on it, it’s got true secondary value because you’re going to use that TV versus coasters, table tents and signage on the wall. There’s no real secondary value to that.”
Whether the issue is a health code violation or questions about licensing and permits, the best advice is to think through potential risks on the front end and seek out the advice you need from experienced experts. Protecting your property and your reputation is paramount in this industry, and nothing is more important for restaurateurs than being prepared. As Michele Stumpe says, “Protect yourself before the fight.”
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