Hoteliers are pleased with the U.S. Department of Labor’s decision to withdraw joint-employer guidelines, but an industry lawyer said the ruling shouldn’t change the way hotel businesses are operated.
*Editor’s note: This story was updated to include a statement from the American Hotel & Lodging Association.
REPORT FROM THE U.S.—The United States Department of Labor announced last week that it would withdraw guidance, put in place by the Obama administration, on the joint-employer issue, and hoteliers couldn’t be more pleased with the decision.
“I’m extremely relieved,” said Tarun Patel, principal at Pacific Hospitality. “It’s a notion of getting back to common sense government. For anyone to think, especially in our hotel space, (our) franchisee space, (that) our brand partners, the people we sign an agreement with to help us with marketing and things like that, would also be jointly involved in our hiring and firing decisions, just doesn’t understand how our business works.”
Organizations such as the American Hotel & Lodging Association and the Asian American Hotel and Owners Association echoed Patel’s sentiment in statements released on Thursday.
AAHOA President and CEO Chip Rogers told Hotel News Now that the “labor department and the administration have sent a strong message of understanding the realities of how businesses operate and have taken a crucial first step in creating certainty around legally defining what it means to be an employer.”
“(Wednesday’s) action begins a process of reining in attempts to rewrite the nation’s labor laws and practices by unelected bureaucrats who did not understand or appreciate the basic principles of business relationships, like franchising,” he said. “AAHOA members are proud business owners who personally manage and oversee their hotels. They undertake the financial risks and are responsible for staffing and the daily operations of their properties. These are first- and second-generation Americans who embraced the opportunities for small business ownership created by franchising to achieve the American dream … Withdrawal from the guidance forecloses one area of concern regarding the newly-defined joint-employer regime. It is now up to Congress to act to fully return to the traditional standard.”
Hotel News Now reached out to several hotel franchising companies for comment on this story but those companies (including Marriott International, Hyatt, Hilton, Choice Hotels International and InterContinental Hotels Group) either declined comment, did not respond or referred questions to the AH&LA.
*In a statement issued by AH&LA, Brian Crawford, VP of government affairs for AH&LA, said “with three out of every five lodging businesses considered small businesses and so many flourishing under the franchise model, it is critical that these employers have clarity and certainty as to who they employ and for whom they are liable under the law. This is an important first step to reinstating the long-standing joint employer definition to once again foster and incentivize job growth, free enterprise and a stable regulatory environment. We look forward to working with (Labor) Secretary (Alexander) Acosta and Congress to create a regulatory and legal framework that allows entrepreneurs to thrive and create more jobs.”
Effect on hotels
The withdrawal of joint-employer guidance will affect hotels down the road, but Dana Kravetz, managing partner at law firm Michelman & Robinson, said “the withdrawal of the guidance memo should not impact the way at hotel currently operates.”
“While enforcement concerns might lessen at the federal level, the (Browning-Ferris Industries) decision is on appeal, so we haven’t returned to a pre-BFI and pre-Weil standard of actual control,” he said. “Hotel operators should remain ever-vigilant and mindful of avoiding the exercise of indirect control both in the franchising and outsourcing contexts. This remains a fertile ground for plaintiffs’ attorneys, absent clear direction from the courts returning the standard to that of actual control.”
He added that employers should be cautious of the enforcement of the joint-employment issue by state and local governments.
“As we continue to see more regulation at these levels—possibly increasing further still with less federal enforcement—certainly those hotels operating in multiple cities and states must keep state and local regulations on their radars as exposure does exist at these levels,” Kravetz said. “This action taken by the (Department of Labor) also serves as a precursor to the Trump administration’s ultimate appointments (two candidates are currently being vetted) at the (National Labor Relations Board), wherein it is anticipated that there will be an unraveling of actions taken by the Obama administration involving issues like quickie elections, bargaining units and concerted activity.”
Rogers said rolling back the guidance is a sign that the government doesn’t “have its thumb on a scale against small business owners.”
“The administrator’s interpretation specifically targeted the hotel industry by manufacturing an example of hypothetical joint employment under the new standard through which a contractor at a hotel would qualify as having multiple employers,” he said. “The traditional standard defining an employer was based on clear rules of direct control over employment conditions—a reasonable standard that employees and employers had come to rely on for three decades.
“Returning to this common sense understanding of employer status will reassure hoteliers and franchisees that their businesses are truly their own and they will not lose control of their businesses through mandates imposed by bureaucrats in Washington.”