By Dr. Gary L. Deel, Ph.D., J.D.
Faculty Director, School of Business
This is the third article in a six-part series on the particulars of club hospitality management.
(Note: For the purposes of this series, the word “club” should also be interpreted to include both “nightclubs” and “day clubs” (venues typically in and around a pool area and often are referred to as “beach clubs”), both of which typically entail many of the same management particulars. Where differences exist, they will be distinguished for the reader.)
In the first two parts of this series, we discussed the particulars of club hospitality marketing strategy. In the remaining parts, we’ll be looking at the other function of club management — operations.
Operations and Liability in Clubs
Assuming marketing efforts have worked, clubs will have their hands full with a variety of challenges in operations, from the moment the doors open until the last guest leaves.
One of the paramount concerns with club operations, in Las Vegas and everywhere else, is liability. Just as nightclub operators are rightfully concerned about staying in compliance with mandated capacity limits for revenue purposes, they also must ensure that they comply with regulations about drinking age, illegal substances, treatment of guests and other concerns. Failing to uphold the law in any one of these areas could lead to disastrous consequences, including the discontinuation of business and tremendously costly litigation.
Underage drinking is one of the most pervasive issues of club liability today. The appropriate age at which a person should be permitted to consume alcohol is still a hotly debated political topic, but irrespective of the legal age set (currently 21 in most states), clubs must comply with the law to remain in business. Some states impose a fairly high threat of liability by way of so-called dram shop laws, which hold alcohol purveyors responsible for the acts of individuals whom they knowingly intoxicate.
Fortunately for Las Vegas nightclubs, Nevada’s dram shop laws are very limited, which should be no surprise given the political influence the tourism industry wields in Las Vegas. But even absent such laws, club operators should be concerned about the behavior of patrons in and around the immediate vicinity of their clubs.
Clubs Must Guard Against Fake IDs
Today’s anti-forgery efforts in identifications (such as passports, driver’s licenses, and other types of state-issued IDs) have become very sophisticated, with microprinting, holograms, UV-light insignias and other strategies. However, with each new development, forgers steadily improve at copying these instruments. So nightclub operators must be ever-vigilant in detecting and deterring ID fraud.
“Novelty” identifications can easily be purchased online today. Provided they do not contain any copyrighted information or security features such as holograms or microprinting, these IDs are legal to purchase and possess, though attempting to pass them off as a legitimate government IDs would constitute an act of attempted fraud.
Typically, a club is barred from liability for permitting entry based on a fraudulent ID so long as its efforts to detect the fraud were reasonable. In other words, it has to have been reasonable for the club to have neither known nor had reason to know that the ID in question was a fake. This strategy may seem to indemnify clubs from liability for missing the well-engineered forgeries.
However, the problem, of course, lies in the concept of the “reasonable person” and the fact that the definition of reasonable can change over time. What might be reasonable today might be negligence tomorrow.
If today you are made aware of the ability of forgers to duplicate microprinting, but with a slightly different typeface, then the reasonable person standard tomorrow would be to check for such incongruities. Failing to do so opens the door for liability.
Scannable IDs are an up-and-coming technology in the field of identification fraud prevention. They use an encrypted barcode or magnetic strip that can be validated by a machine at entry points. This, in theory, would do much to solve the identity fraud crisis, elevating state IDs to the same protections afforded to credit payment cards. However, major infrastructure changes are needed as are agreements among all 50 states and the U.S. Department of State, which issues passports, to utilize a similar system for ID encryption.
Without this kind of cooperation, ID authentication is much more difficult. To help in the interim, many clubs purchase ID guidebooks that include pictures of each state’s authentic driver’s licenses and details about their unique security features (i.e., what to look for to detect fraud).
But these guidebooks do nothing to resolve concerns about international guests, whose IDs club security personnel may not even be able to read, let alone authenticate. Fortunately, passports share a common design based on authentication requirements from the International Civil Aviation Organization (ICAO). But in terms of national IDs, with more than 200 countries issuing passports and no consistent method for identification security, it would be very difficult for clubs to try to vet the authenticity of non-passport international IDs.
It is no wonder that many clubs have opted to simply refuse non-passport international IDs as a proof of age. These policies inevitably cause customer service issues, but they are an effort to curtail heavy liability from service of alcohol to underage patrons.
In the next part of this series, we’ll look at club liability issues presented by controlled and/or illegal substances.