As the chair of Fox Rothschild’s Hospitality Practice Group and former chair of the Labor and Employment Department, Carolyn D. Richmond is one of the brightest in the business. After working as General Counsel with iconic NYC restaurateur Stephen Hanson, founder of monster hospitality group BR Guest, Carolyn found her passion. She returned to private practice and began helping restaurateurs in New York City get ahead with ease of mind.
With almost 25 years of experience, Carolyn has quickly become one of the most influential and involved people in the New York City hospitality scene. She was named in the 2009 CRAIN’s 40 Under Forty. Carolyn D. Richmond is a member of the Cornell University Advisory Board for the Center for Hospitality, Serves on the Board of Editorial Advisors for Hospitality Law, Serves as Labor Counsel to the New York City Hospitality Alliance, and serves on Culintro’s Culinary Trade Organization’s Board of Advisors.
What really got you interested in the hospitality industry?
It certainly skipped a few generations; my great grandfather Joseph Miller was what you could call a restaurateur during the 1920’s, 30’s and 40’s. He owned and operated restaurants and coffee shops in the New York, New Jersey, and Connecticut area. I don’t know if he would have used the word restaurateur back then but he certainly had the entrepreneurial spirit and work ethic. My grandfather in turn grew up in the industry and past along his love of food and hospitality to me. Certainly I was raised in a family of very good cooks and great diners. My parents would take us into Manhattan and as a three year old I remember going to Maxwell Plum. I still remember every bit of that restaurant’s layout. Even as a three year old I had a very defined pallet for the best burger in town!
How did you find yourself so specialized as Fox Rothschild’s Chair of Hospitality Practice Group?
The way I got into the restaurant industry is a little bit circuitous. I was a management side labor associate in 1996-7 but spent my “off time” working on the Clinton/Gore campaign. In 1997 I happened to be a seat filler for an Al Gore fundraising luncheon at the Plaza Hotel. I was seated by chance next to Steve Hanson, we began to chat and when he asked me what I do, the brazen twenty seven year old in me responded, “I’m an employment lawyer, I represent restaurants”! It was partially true—we represented a number of restaurants; he followed up and asked me if I could revise his handbook. Two seconds later, Secret Service walks up to our table and tells Steve that he is sitting at the wrong table and should be sitting at the table with the Vice President. I called Steve the next day, he gave me a shot, and the rest is history. Twenty years later, here I am. I owe everything to that seat and to Steve.
What did you take away from Steve, and what it takes to be successful in this industry?
A year working full-time for Steve as General Counsel in 2003-2004 was like a judicial clerkship. It changed my entire perspective on how to practice law and interact with clients. I got to see what it was like on the business side and it changed everything about the way I practice. First I learned that my legal advice is incredibly important but that it has to be practical and usually definitive. It’s great for me to give a legal answer pro’s and con’s. But, that’s not what an operator wants to know. They want to know if they can do it; what is the cost and what is the risk—then, it’s up to them to assess the risk. With Steve, I learned quickly to provide the pertinent information, concisely but thoroughly. That experience made all the difference over the next 15 years.
It’s one thing for me to advise an operator to terminate a sexual harasser but it’s quite another to appreciate that he might be the number one producer and termination will have serious consequences. Legal decisions in business are not black and white and the ramifications on the business have to be understood in context. A good legal advisor needs to be able to work with the business operator to find a practical solution that weighs the legal vulnerability with the financial risk. Any time I have spent with Steve took my critical thinking and problem solving to a new level.
What led to the decision to leave and to go into private practice?
Working at BR Guest was never more than a one year plan. I went on board when we were opening the James Hotel in Scottsdale and day to day legal needs and contract negotiations were at an all time high. A lot has changed in the last 15 years, back then having a deep human resources bench and a general counsel for a NYC-based restaurant group that was our size was fairly novel. Very few if any groups of a similar size had those positions; it took almost ten years for the industry to catch up to where BR Guest was. It was an incredible experience that year and it changed the entire way I practice when I I went back ‘out-house’. I went from being a more general management labor lawyer to something that I don’t really think existed up until that point in time –a restaurant side management labor lawyer, with a specialty in tips and wage and hour. Over the next ten years my practice became essentially one dedicated to restaurants, hotels and nightlife specializing in advice and counsel and litigation concerning wage & hour, discrimination and general hospitality workplace issues.
Have your colleagues at Fox Rothschild ever been concerned that your restaurant niche was too narrow?
You know it’s a cliché to say timing is everything but timing is everything. I went back into private practice in ‘04 and the landscape of employment law had started to change dramatically. The first ten years of my practice was all about discrimination and some traditional labor relations—with not one wage case. But, 2004 was the year everything changed. New FLSA regulations were issued that year; we started to see wage and hour class action lawsuits against the big box stores coming out of California and moving east. The garment industry had virtually disappeared from New York City and the New York Department of Labor was reallocating resources to the restaurant industry. The workforce looked a whole lot different than even twenty years ago; we were a service economy. Now we work with a lot of minimum wage workers. So, when I went back to private practice the tip suits were just starting to hit New York City’s fine dining community, and over the next decade they continued to morph into other claims over decades old industry practices that were long ignored.
I remember vividly my managing partner talking to me around 2011 and noting that I was doing very well at the firm and defending all these tip cases but what would happen in a year or two when everyone got into compliance and I ran out of suits? Sadly, that hasn’t happened. The State keeps changing the Hospitality Wage Order, New York City keeps enacting more onerous laws that burden restaurateurs with almost impossible procedural and paperwork requirements and the mandatory penalties and attorney fee provisions keep the lawsuits coming. While it certainly keeps me in business, it is far from my favorite part of the job. I have always enjoyed the counseling and preventative work more than defending what are often ‘no win’ suits.
What are the major issues you are facing now?
Today’s issues are still about who’s exempt or non-exempt from overtime. Essentially, can a sous chef or floor manager be classified as a true salaried manager or not? And, if you guess wrong, the overtime owed can be incredibly expensive. This is a hot-button issue for the whole country, not just hospitality. Hospitality however, gets hit especially hard by these suits.
The other issue that is particularly difficult for New York employers right now is the ever-escalating penalties on restaurants for simple paperwork violations for something as simple as an omission of a tip credit on a pay stub or Rate of Pay form or failure to provide the form in Spanish. Errors on either of these two documents could result in penalties of up to $10,000 per employee. An otherwise poster child employer who pays overtime correctly, operates a perfect tip pool, takes no shortcuts anywhere can still get hit for millions of dollars or liability because managers did not carefully maintain forms or even because an outside payroll company uses the wrong templates. The laws have become too draconian and keep people from even wanting to open businesses in NY.
New York has become almost impossible to open a restaurant, what are the solutions?
That is a sentiment we hear all the time. Unfortunately I have helped handle more restaurant closings in the last two years than I have done in the previous 22 years combined. It doesn’t take a rocket scientist to see the ever increasing government regulations in New York on small businesses and that has a real financial effect on the bottom line. However well intentioned a regulation like paid sick leave is, it means an owner has to cut back somewhere else or raise prices.
There is also very little infrastructure behind most of these small businesses where you can afford to have someone tracking all the record keeping requirements. Hiring just one employee or outside consultant just to handle all the extra paperwork for paid sick leave and rate of pay forms alone can wipe out any remaining profit for an entire year in a small restaurant.
What should somebody be looking for in terms of the selection of attorneys to protect their interests?
I think more and more in any business you need to find the right expert and specialist for your needs.. When you are negotiating a lease in this city I would want a real estate attorney who understands this city, real estate, landlords and the life-cycle of a restaurant. The same with respect to my liquor license. I would look for someone who understands community boards, the SLA and the issues you face in your geographic region. If you don’t get that license, you don’t have a business. The same with a labor lawyer—cutting corners now won’t help. Start your payroll properly now and understand the tip laws and immigration issues. There are a number of lawyers certainly in New York that understand the restaurant business. You should not be opening a restaurant if you don’t have the right accountant who understands the restaurant business, cash flow and operational expenses. Getting the right advice at the beginning is infinitely cheaper than paying on the backend.
I generally tell people coming to be at the beginning of a project that for five – ten thousand dollars worth of advice at the start from me or someone similar, and setting up handbooks, making sure your employment documents are right, training and making sure you have the right payroll set up and the right payroll company in place, you can literally avoid a million dollar settlement three years later. The difference is that much—or more—assuming you follow the advice at the beginning. I know how tight margins are, but if you don’t spend that money prospectively I guarantee some disgruntled ex-employee will find his way to the department of labor or a plaintiff’s attorney and will find some way to hurt you and your business. The real answer to all of this is serious regulatory reform, but that’s a tough and rougher battle.
To learn more about Fox Rothschild’s Hospitality division, visit their website.