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Legal Considerations for Restaurants Interested in Expanding Outdoor Dining Areas

 

 

When COVID blew up in March of 2020, restaurants, bars, and the food service industry in general were one of the hardest hit industries in the world. People were simply not comfortable sitting in an enclosed indoor space with no ventilation less than 6 feet away from many other patrons. The simple necessity of taking a mask off to eat or drink made indoor dining uniquely risky. Indeed, a Stanford study found that indoor dining was a “major cause of COVID-19 ‘superspreader’ events.” 

There are 4.4 million jobs directly associated with the restaurant industry, and millions more indirectly supported. As the industry began to shed jobs, state governments across the country began to change their laws to deal with the crisis. In Michigan, one of the most common solutions was to loosen restrictions on outdoor dining to allow restaurants to attempt to continue service in a safer way. Additionally, the Michigan Legislature passed an amendment to the Michigan Liquor Control Code of 1998 in June of 2020 (MCL 436.1551) which allowed local municipalities to designate “Social Areas” where outdoor open container restrictions on alcoholic beverages can be lifted.


(Michigan’s guide on outdoor dining enclosures from Governor Whitmer’s executive orders in June of 2020)

 

New Michigan Laws: 

These laws have been a godsend to restaurants overall, however they are not perfect. For example, outdoor dining is generally regulated at a local, municipal level. Most cities are handling expansions to outdoor dining on a case by case basis (exemplified by this resolution to grant a special exemption to the Unified Development Code to Drip House on Main and Stadium in Ann Arbor). The city of Ann Arbor requires businesses seeking to conduct new outdoor dining during COVID to get individual approval for their plans.  Outdoor dining is also limited to a maximum of 180 days per calendar year and the space cannot occupy an area of more than 10% of the Floor Area of the Principal Building or Principal Use. This creates a large burden on a business that needs to conduct outdoor food service. The requirement that the new outdoor dining area be less than 10% of a restaurant’s interior ensures that virtually every individual restaurant will need an individual resolution passed by the city government exempting them from the unified planning code. This process is wildly inefficient as it creates a high barrier of entry that smaller businesses or ones with less experience could find hard to get over. 

            The new liquor law passed by the state presents a different type of solution to the economic loss many restaurants faced as Covid severely limited their sales. As it stands, the state has given the power to local governments to designate ‘social districts’ where alcohol is permitted to be carried around. Essentially the state has allowed local governments to set up open container zones. Businesses within the social district can apply to the State for a special license authorizing that business to serve alcohol that is meant to be taken off premises within the confines of the district. This sounds well and good, but business should be wary of incorporating this into their future business plans as the state law is set to expire in 2024 and it is unclear if the legislature will want to continue this program considering the traditional opposition to allowing open containers of alcoholic beverages.

 

Legal Concerns:

         One of the chief concerns for restaurants looking to engage in outdoor dining during COVID-19 will be to protect themselves from liability. Generally, governments have granted liability protections against COVID related claims to businesses that follow public health guidelines. However, businesses can and will still be held liable for other types of claims. Businesses should be very conscious when deciding how to design and create their new outdoor dining spaces. They should ensure that employees and customers are protected when they are in the new space. For example, this means that businesses should construct their new spaces with non-flammable materials, make all heating elements safe to use, ensure that all power in the new spaces is up to code, and make sure that diners in enclosures that jut out onto the street are protected from cars.

        Another possible concern business owners might have is that any new structure or expanded dining area might have an effect on their insurance coverage. Significant additions to the premises of a business will always impact insurance coverage and businesses should check with their carriers on the consequences of such actions to ensure continued coverage at appropriate levels.

        One of the ways that businesses can protect themselves from outdoor dining related liability, is to engage a third-party contractor with their own insurance to design and build any new structures instead of attempting to handle it themselves. 

        Another concern for businesses attempting to take advantage of new outdoor dining opportunities is that their plans might run afoul of the Americans with Disabilities Act or the ADA. The ADA requires handicap accessible accommodations that might not be possible with the outdoor space at a given business. The ADA has various requirements for keeping sidewalks clear and ensuring a minimum width for travel, and businesses risk potentially very large fines if they violate the ADA. Additionally, businesses should be mindful of ensuring that they are not encroaching on the sidewalk and that any use of on-street parking areas or roadways are in full compliance with any local laws. 

        Finally, in regard to the new “social districts”, businesses should be aware of a potential for increased potential liability. Patrons before were expected to stay within one location while consuming alcohol before, but now they can be expected to move around an outdoor area. This could change the legally expected behavior of patrons. Restaurants might want to consider implementing strict policies around only serving one beverage at a time or a more sensitive cut-off for visibly intoxicated patrons.


By Will Wiener

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