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Essential Contract Clauses and Concerns for Post-Shutdown Meetings and Events
At the beginning of the COVID-19 pandemic, legal issues in the meetings industry primarily centered around cancellation, attrition and what became the moving target of force majeure.
Now, with face-to-face meetings taking baby steps to resuming, meeting and event planners need to cover their organizations and ensure the safety of attendees by including key contract clauses in an environment that lacks definition.
In this Meetings Today Podcast, Tyler Davidson check in with leading meetings industry attorney Joshua L. Grimes to see what contract clause musts planners should include going forward.
Key elements of a “COVID contract provision” could deal with cleaning protocols; the right to cancel if government-required measures make it so restrictive that your meeting can’t go forward; and indemnification. Grimes also offers one contract addendum all planners should make sure are included in their contracts. And will we soon start seeing “COVID surcharges?” Listen to this Meetings Today Podcast to find out more.
Read the transcript below:
Tyler Davidson: Hello, and welcome to this Meetings Today Podcast. I’m Tyler Davidson, vice president and chief content director for Meetings Today. And joining us today is Joshua Grimes, an attorney-at-law with Grimes Law Offices, and really, you know, probably one of the one or two foremost meetings industry attorneys. So thank you for joining us, Josh.
Joshua L. Grimes: Sure. Glad to be here, Tyler. And now I’ll spend the next 15 minutes trying to live up to that introduction. So thank you.
Tyler: All right. Well, and I know I work with you for many years and right as this whole COVID pandemic was really kind of manifesting itself and we really knew how serious it was. I did a podcast with you and Tyra Hilliard [Warner], one of the other big meetings industry attorneys, a very popular podcast and really just sort of detailing everything that planners needed to know as far as canceling meetings or postponing them.
Now, where sort of, you know, after a couple of months of really just a standstill and a shutdown, we’re sort of waking up as an industry, starting to see signs of life and people are starting to book meetings again. What sort of legal issues should meeting planners and their organizations be aware of in this environment right now?
Joshua: Well, yeah, it seems like when we did that podcast a few months ago, it seems like a world ago in terms of what we’ve learned since then, and I and probably many of the people listening have really gotten an education about dealing with uncertainty, dealing with diseases and, more importantly, how we’re going to move forward now, which is really the key because business is coming back.
Some are doing virtual meetings, which is terrific. But people like face-to-face contact, and they like seeing each other in person. So, we’re struggling for ways to meet going forward.
And I kind of put things in two categories in terms of legal issues with meetings. The first is how we can do our contracts to be comfortable in scheduling meetings during an uncertain future. And I say uncertain because, you know, depending on who you talk to, some people think that we’ve beaten COVID. Some people think there’s going to be another wave of COVID in a few months. We might have a vaccine in a few months—we really just don’t know.
So, the key is for people to plan their meetings considering all of the contingencies that they can consider, so that if your meeting goes forward, it can be done safely for your attendees. And that really is the key—to make sure that meetings go forward safely. And the other thing is so that if a meeting can’t go forward, that regardless of whether you’re a planner or a hotel or other supplier, that you don’t unduly get damaged by having to pay cancellation damages or something else.
So, really the first thing to start with—and I think it’s good that we’re kind of starting with smaller regional meetings first; we aren’t hearing about a lot of big national meetings—because then people can sort of get their feet wet and try things out as we move forward.
But what you need to do in your contract is consider for planners, what your meetings need to do so they can proceed safely with ensuring the health of your attendees as much as possible. And then of course, hotels and venues need to adapt their facilities to better protect guests. And also make sure they have the financial resources to do that.
So what I suggest is creating kind of a new provision in your contract that we can call a COVID-19 provision. And this might be for a meeting contract for the next two years, because I’m hoping that we’ll have a vaccine or some other cure for COVID within two years.
But if I were doing a meeting in that timeframe, I would say that within a few months before the start of them—and when I do a contract clause it says a few months before the start of the meeting, maybe three months, maybe six months—the hotel should give the group a list of changes to the hotel’s facilities and services that are necessary or appropriate due to COVID. And that list should be updated as appropriate.
So, for instance, if you’re in a place that has social distancing, so the group needs more meeting space. If networking events or open bars are prohibited, that would be a change to the facility, to the services and facilities. If the spa can’t be open, that would be something. If a buffet isn’t allowed or there’s a particular way you need to do food service, that’s something the hotel should tell the group several months in advance so that the group can be prepared.
Then the group has a decision to make. The group has to consider if these changes that the hotel is putting in place work for the group, in which case you can have a conversation with the hotel about how they’re going to work. But if they’re not going to work, because for instance, suppose it’s a meeting where it’s essential that exhibitors network with the attendee and there can’t be networking, then the group should have options to cancel without liability.
Tyler: And I’m guessing they need to spell that out in the contract, and be able to identify that potential problem, and then spell it out in the contract, correct?
Joshua: Yes. Because right now, we’re kind of trying to do this, but without a contract clause that protects it. So, you know, look, many groups are saying, I have a meeting in a few months and it just doesn’t make sense to have the meeting because we can’t do networking, or our attendees aren’t comfortable.
And then the hotels—and I don’t necessarily blame the hotels because they need the business—the hotels are saying, but you can’t just cancel for that because we are doing the best we can given the government rules. And so you have this tension, and this clause is intended in some ways to create a way to deal with that and possibly allow the group to cancel if the meeting just won’t work.
Tyler: And it’s interesting because, you know, something like that is something that would have been considered just obvious in a meeting six months ago, that we’re going to have a place for networking. So you would probably never even think to even put that in a contract—it’s just expected in a public place.
Joshua: And it’s important to note this isn’t sort of a be-all, end-all for a group that’s looking to cancel because, frankly, there are some hosts in some parts of the country where you essentially can do networking today. And I would argue, say, that off the top my head, Florida has been pretty lax in their rules at this point. And Las Vegas—although they want you to wear a mask—you know from what I’ve seen since the casinos reopened, there’s a lot of flexibility there as well. So, in those cases, there wouldn’t be strict rules, at least today, that the hotels would impose.
But, the point is the group should have to have an ability to know before they get there. The second part of this...
Tyler: Just going back to that really quick, I mean, you mentioned different states or jurisdictions. How does that play into it? I mean, it’s just a crazy quilt of regulations and in some cases non-existent regulations, I’m sort of gathering..
Joshua: ...and I’m gonna get there. I’ll let you know in this conversation, but that’s part of the issue, because the federal government has not led on recommendations. I mean, the CDC has issued directives, or recommendations, is what they call them, for safe meetings, but other parts of the federal government aren’t particularly encouraging people to follow the CDC’s recommendations.
And state governments aren’t necessarily bound to the CDC, and local governments are allowed—in local, meaning some cities or counties are allowed to have different rules than the states. So for instance, I think it’s in Texas, just today said that local governments can have rules, I think about mask wearing, that might be different from other local governments in Texas. (I’m hope I’m right that it was Texas, that I just read about it before this.)
I know California today has made masks mandatory in many situations—that’s just a few hours ago, from when we’re recording this, but that’s not uniform in other states. So, it does depend on the locality.
So the second part—going back to this COVID contract clause—the second part of this is about health practices and safety practices. And your clause should require that the hotel should implement protocols and best practices to protect the health of the group attendees and staff in accordance with the government, the various government rules, and the hotel’s own statement of safety practices they’re going to put in place, and best practices in the community where the hotel’s located if those are different
But...this is where we’re talking about cleaning protocols; testing hotel employees and guests as they come onto the property every day; orientating people to see if they have symptoms; excluding people not affiliated from areas that are reserved from group use.
Now, why do I put that on the hotel? Because frankly, those aren’t really things that anyone else can do. A group can’t bring their own cleaning people in. So it’s something that the hotel has to agree [on].
Now, when I say before, hotel protocols and practices, what I mean here is that many of the big hotel chains have come out with cleaning protocols that are going to protect people, or help prevent them from picking up COVID. Those are terrific as a start, but a group should look at those and make sure those are sufficient for the group’s attendees.
If the hotel’s cleaning protocols don’t include separating the group from other guests at the hotel, maybe you need to add to it. If the group feels they need more strenuous cleaning, you add to it. In addition, if local government recommendations are stronger than the hotel’s practices, I would recommend that the duty of care requires that you do whatever the government suggests if it’s more stringent than what the hotel plans to put in place on their own.
So, it’s important to do some research, see what the hotel is doing, see what people in the local community are doing, and make sure it all makes sense for your group, then put that in the contract.
Tyler: Yeah, and I do know, covering this, that a lot of the major chains all have extensive protocols and procedures in place, but I’m sure you know, there could be independent hotels that are not quite as far along as them at this point.
Joshua: Right. And here’s the other challenge. That one challenge is having the protocols in place, which is important, although again, they’re not necessarily a be-all, end-all. Some groups may want to have more stringent cleaning methods in place, and that’s fair to negotiate into a contract. There may be extra cost.
In fact, I wouldn’t be surprised if we see COVID surcharges coming to the meeting. I don’t want to put that suggestion in anyone’s ear, but I wouldn’t be surprised.
Tyler: Should we edit that out of the podcast?
Joshua: Well, not necessarily. I don’t think it would be necessarily unreasonable for a new contract to do that. But the other thing to be careful about—I as a lawyer, I’m naturally skeptical that venues are actually going to follow their own protocols. You know, I’ve seen all the videos that everyone else has seen of a guest now going into a hotel and there’s the housekeeper, you know, cleaning things right in the public area, and they give the guest as they check in a fresh pen, you know, that’s wrapped up when they come in, and there’s all sorts of things.
But I don’t know that there’s a guarantee—and this isn’t a fault of any particular hotel—but I don’t know that there’s a guarantee that two months down the line, every cleaner at every property is going to faithfully do everything they’re supposed to do on those voluminous protocols. Some of those are 30, 40 pages long.
For instance, just by way of example, one of the major casinos in Las Vegas issued in their protocols that they’re going to clean the elevator buttons every hour. Well, I think that’s great. But I wonder if at four in the morning, three months from now, the buttons are going to be cleaned every hour. Maybe they will, maybe they won’t. But the point is, is that I believe that I don’t think anyone intends to not follow it. But I think it’s just the nature of what happens.
Tyler: How do you monitor something like that? Does that invalidate the contract? Or how does that enter into everything?
Joshua: Well, I think the key is to hold the property’s feet to the fire. Everyone knows the term indemnification? Since you’re paying the hotel for the accommodations, and this is the hotel’s responsibility, I believe the hotel should indemnify the group from any claims or damages or judgments that arise not necessarily if somebody gets COVID, but if they get it because of the failure of the hotel to fully comply with the safety protocols they’ve agreed to follow.
So, if the hotel doesn’t live up to the standard of care, then they should be responsible. And that may be somewhat controversial, but quite frankly, I don’t think it ought to be, because this is something, a responsibility, that has to be on the property.
Tyler: And they want the business now, too, so they might be a little more willing to budge on some things they weren’t before.
Joshua: Right. Now, there’s issues about how do you prove that someone got COVID at a particular property. And, yeah, that’s a legitimate thing. Although I suspect that if someone gets COVID at a meeting, more than one attendee is going to get it, and there’ll be ways to trace it.
But again, I don’t think there’s any other way to deal with it. And I do think it’s important, and planners, this may become part of what they do for their site visits—a review of the hotel’s safety protocols and whatever else you’ve agreed to, and then a week before the meeting, go to the property and see if they’re actually doing it. And if not, bring it to someone’s attention and remind them of what they’re supposed to do, particularly if your safety measure that you’ve asked for may be different or more burdensome than what the hotel does on its own for your meeting.
So those are the kind of things that would be part of a COVID contract provision: the cleaning protocols; the right to cancel if government-required measures make it so restrictive your meeting can’t go forward; and the indemnification.
Tyler: Those are really the top-line issues? Are there any others that planners should be looking out for right now?
Joshua: Yes. Take a look at your force majeure clause because we’ve learned an incredible amount about force majeure in the last three months. And what have we learned? Amongst the things we’ve learned, one is that force majeure is looked at very narrowly. So if your clause doesn’t include cancellation for diseases—you have words like disease pandemic, things like that—then it probably, if it ever went to court, would not be upheld because you specifically need to mention things like disease.
Another thing I would look at is, does your clause say statute or law? Does it say government regulation? If it says things like that, it needs to be broader, because some governments don’t issue statutes for things like COVID. For instance, the CDC, that people like to follow, issues recommendations. So we’ll just say if there’s a government regulation that makes your meeting impossible or illegal or inadvisable, that doesn’t work.
So, I recommend people use words like ‘government advisories,’ ‘recommendations,’ ‘mandates,’ ‘laws,’ ‘statutes’ and ‘orders.’ And you also need to specify which governments: federal, state, local, foreign government, if you’ve got into international attendees; that’s something you need to look at very carefully.
Another thing, and this is maybe the last thing I’ll talk about with the force majeure, or the kind of things you need to put on, is when do we determine if a force majeure exists, and this has been a real weakness for the meeting industry, or a point of contention. Many properties have argued that this decision should be made based on certainty on what conditions are going to be on the meeting date.
So if you’re meeting—we’re taping this on June 18th—and your meeting is July 1st, we pretty much know what conditions are going to be anywhere on July 1st. But what if your meeting’s in November? And the challenge there is that many attendees make their plans to attend; they buy their airfare, they do other things, months in advance. So groups [that] want to cancel, if they need to cancel, they want to do it maybe 90 days in advance. Maybe even if they have international attendees, further.
So your force majeure clause should allow a determination to be made maybe 90, 120 days in advance. So that would be something new in the force majeure clause. One other thing to mention with force majeure is you may want to think about alternatives to cancellation. So, some groups right now have said, if we’re signing a contract today, if force majeure circumstances exist, the group can go forward with a reduced meeting with attrition waived, where you can reschedule to new dates without paying any damages. So there may be other alternatives you may want to work in your clause.
In a nutshell, these are the things we’re talking about.
Tyler: On that note about attrition, I know that I’ve been collecting a lot of information about sort of what we call back-to-business offers from properties. And a lot of them, initially when I approached a lot of these major properties to ask them you know, ‘Hey, you want to get business back? Are you relaxing your attrition penalties? Are you relaxing your cancellation charges?’ I was hearing crickets, but now the floodgates are starting to open and you’re starting to see a lot of, you know, no cancellation penalty, no attrition through various dates, so they’re listening right now for that.
Joshua: Yeah. And I think that’s smart. Because we’re dealing with uncertainty. And, look, when we started dealing with this in March, the hotels were bleeding revenue, because everyone wanted to cancel, and I don’t blame the hotels for wanting to see if they could collect cancellation damages, notwithstanding the situation. I can see why they needed to do that.
But now that we’re rebooking in a time of uncertainty, allowing attrition to be waived, it gives a hotel a means of capturing some revenue when the meeting might otherwise be canceled. It also allows a group to book even with an uncertain future. So it’s kind of a win-win in a lousy situation for both sides in a negotiation.
Tyler: And before we end the podcast today, we were talking earlier before we started recording, about you have some clients that you’re working with now that are even adjusting their programs through the end of the year. Where—on June 18, 2020, right now—where do you see things stand? And what are you hearing out there about why people may need to cancel or postpone still?
Joshua: Yes. I’m dealing with a number of meetings now that are really anytime between now and the end of the year, and some of them are in November, and the groups want to cancel. And the hotels, understandably, are saying it’s too early. But here’s where the tension arises.
Everyone listening to this knows you don’t just plan a meeting the day before the meeting starts, you have to plan the meeting months in advance. And this is incurring expenses, which frankly, for most groups right now, they don’t have the kind of money to just throw away at this point if the meeting’s canceled.
And so the groups want to plan, and they see that people aren’t registering for further meetings. They’re not making the plane reservations because they’re not sure about flying independently of whether the meetings going to happen. So the groups have a good sense now that they don’t want to move forward.
So they’re having these conversations; some properties have been very flexible and have agreed to let them cancel now. Others have not agreed to let them cancel, in which case the group has either had to unilaterally declare the force majeure occurrence, which they’re allowed to do under the contracts. And then they hope that the hotel doesn’t fight them later on. Or they’re discussing moving their meetings, maybe to the first quarter next year, or even second quarter next year, which, again, helps the hotel keep some of the business.
I think any of those are good. Any negotiated outcome is a good one where people agree. At the end of the day, the group has to do what they have to do. If they think people just aren’t going to come, and then cancel, and then well, you know, we can discuss damages or any other sort of remedies to the extent they might apply later on. Although I don’t know in most cases if there would be any damages because I think it legitimately could be a force majeure.
What I would just suggest to people is if you’re rescheduling meetings for a later time, two things to think about. One is deposits. We’re in a time when business is not good for properties. And if you’re rescheduling for more than a few months out, I wonder if you want to—if it’s good to have the hotel keep the deposits, because some of the hotels may be in a precarious position and it might be better to push back deposit payments. We hope that this is just me being overly cautious, but the reality is, is that we’re likely to see some properties closed.
One other thing you have to be careful about; if you renegotiate and sign an addendum because you’ve pushed your meeting back to new dates. Please, please, please planners, be careful to state in your addendum or your contract amendment that COVID-19 is still a valid force majeure reason, should it still be relevant on your rescheduled date.
What I mean there is that force majeure is supposed to be an unanticipated, unforeseeable occurrence. And if you do an amendment to a contract today, when we know about COVID, arguably COVID may not be a valid force majeure reason if it’s still around on your rescheduled day. So it’s important to reserve those rights if we’re still having a bad COVID situation on your rescheduled date.
[Related: See all our coronavirus coverage]
Tyler: Do you think at some point, some people will be tempted to kind of wave a magic wand and say, ‘Oh, the COVID period is over?’
Joshua: In fact, there are some leaders in the meetings industry who are doing their best to let us know that we’re back to business as usual. And I think everybody is entitled to their viewpoint, but I think that planners and hoteliers and other people in the industry need to do what’s best for them and make their own judgment that will protect your organization.
Tyler: And I look at it, too, even with these major meetings industry associations, when they were contemplating whether to go on with their big annual events. Ah, you know, that is a risk that I think you have to be conservative about, because if you had a big event, and all these people got sick, that’s the end of you. I mean, that’s the end of your association. You know, I don’t think you recover from something like that.
Joshua: Yeah. Hence, there’s nothing wrong with planning. But at the end of the day, if it doesn’t make sense for your meeting to go forward, because your attendees aren’t going to show up, you ought to have rights if, because of COVID, you ought to have rights to cancel without paying damages. And that’s the way it ought to come.
Tyler: And one quick thing before we go, and I really appreciate—I could talk to you all day about this stuff. I’m sure you know, being an attorney, you’re getting business in both directions. You’re getting business when meetings have to cancel, but you also must be getting a lot of business when organizations say, well, we’re ready to start meeting again and planning meetings, what do we need to do? You would be the best person almost of anyone to ask.
Are you seeing more people coming to you and inquiring about them wanting to resume face-to-face meetings again?
Joshua: Yes, because people are concerned about what they need to put in their contracts to protect them moving forward. I might also add that I’m seeing the same with virtual meetings, with hybrid meetings, there are legal issues with those that people ask me about a lot. Look, there’s always something in this industry—I’ve been doing this long enough. So there’s been, you know, SARS, avian flu, H1N1, terrorism, everything else—there’s always something.
We need to just keep updating our contracts and then negotiating the best contracts with the other side as we can. And it keeps people like me in business. What can I say? Also on the podcast.
Tyler: Me, too. And then you are saying you see people kind of, you know, getting interested and thinking we got to start meeting face-to-face again?
Joshua: Oh, yeah. I mean, there’s no substitute. Look, you know, everybody has done Zoom meetings and things like that, and they certainly serve a purpose, but there’s no substitute for contact. It’s hard to form relationships with people for business over Zoom.
So I think people are itching to get back out there. I happen to think that the industry will recover a bit sooner than some people are thinking, although it’s going to have to recover in a safe manner.
Because again, you know, people can have 30-page safety and health protocols that they’re going to implement at hotels, and we can tell people how great it is to fly when the plane is half full. But if your attendees don’t feel safe, or until they feel safe, they’re not going to show up. And that’s the bottom line.
Tyler: Well, great. We’ll end it on that, then. Thank you, Josh. I appreciate your time as always.
Joshua: You know, always a pleasure, Tyler.
Tyler: And thank you for listening to this Meetings Today Podcast. If you are interested in more of our podcasts, please head on over to MeetingsToday.com and check out our podcast section, where we have a variety of podcasts on all the myriad subjects that impact the meetings and hospitality industry. I’m Tyler Davidson, vice president and chief content director for Meetings Today. Thank you for joining us and have a great rest of the day.