Legal experts at the Hospitality Law Conference explain how the National Labor Relations Board’s ruling last year on joint employers has set up potential pitfalls for owners and franchisors.
HOUSTON—The September 2015 joint-employer decision by the National Labor Relations Board still has hoteliers reeling and trying to figure out where they stand. Speakers at February’s Hospitality Law Conference offered attendees some direction on how to proceed.
During a session titled, “Impact of joint-employer rulings,” Dana Kravetz, managing partner at Michelman & Robinson, and Christian White, associate general counsel for AccorHotels, explained to attendees that there are a number of ways hotel franchisors can unintentionally find themselves considered a joint employer.
“One of the most sweeping changes is what we’re here to talk about today,” White said. “The BFI case is where the NLRB overturned 30 years of precedent.”
Watch for hidden triggers
To help explain, White told attendees to imagine that Kravetz was a major franchisor of fast food restaurants and decided to visit one of his burger joints. During his visit to the franchisee’s location, he sees trash in the parking lot, the employees don’t shout the slogan they’re supposed to when customers walk in, their uniforms don’t meet the brand standard, it takes 10 minutes to be waited on and his coffee is cold.
After seeing all that, he jumps on his computer and emails the franchisee to demand workers start cleaning up the parking lot twice a day, further instructs that employees need to meet the brand standard for uniforms and the slogan greeting, and customers shouldn’t wait more than three minutes in line. Also, naturally, the coffee must be hot.
“By doing that, are you now a joint employer with that franchisee?” White asked Kravetz.
Kravetz explained that writing an email like that and talking about the brand and system standards with the franchisee is generally not problematic in terms of joint-employer definitions. However, once the franchisor starts telling the franchisee how to handle personnel issues and offering solutions, those actions could lead to a finding of joint employment, he said.
“The issue is going too far,” he said. “I think most people, when they’re training workers, they’re encouraging them to be solutions-oriented. The problem is when you start to impact the employment relationship, you find yourself in a joint-employment context.”
Scrub the franchise agreements, Kravetz said. Anything that indicates indirect control that is not about the brand or system standards could lend itself to a potential finding for joint employment, he said. There are few ways to avoid this without looking at that contract, he said. Even if the franchisor doesn’t enforce such a provision in the contract, Kravetz said the context of the BFI case could mean it is joint employment.
White said he has seen buried provisions in vendor agreements with staffing companies that state the hotel can remove any person at any time for any reason they choose. That is indicative of a joint-employer situation, he said, and that’s fairly common language.
“It’s not that you’ve used that right,” White said. “It’s just that (it) can make you a joint employer, even if you haven’t used it.”
Horizontal and vertical employment
There are a number of ways to create joint-employer standings through business models, the speakers explained. An owner of several differently branded restaurants may have an employee work 25 hours a week at one and then 25 hours a week for the other, White said before asking attendees how the U.S. Department of Labor would view that arrangement.
Common ownership of these businesses could potentially lead to a finding of joint-employer status, Kravetz said. While the brands may be different, if there’s a common process or oversight, such as one human resources department for all brands, that could tip the scales, he said. With that employee working 25 hours at one location and 25 at another, there could possibly be an overtime issue that neither manager at each location would be aware of, he said.
Similarly, a housekeeper working 25 hours a week at one hotel may work 25 hours a week at a different hotel owned by the same company, White said. As the owner of that hypothetical company, he asked, how would one know that and what would trigger that knowledge?
“You wouldn’t know if HR would move one person from one to another as an owner,” Kravetz said. “How would you put that into play so you could be aware the employee is working at two locations? It’s not something most companies have put in place to discover.”
In terms of vertical joint-employer status, White asked when a housekeeper from a staffing company would be considered a joint employee. This goes back to the scenario the two created about the restaurant franchisor directing the franchisee in personnel decisions.
In a further scenario, White said, there could be one employee working for a staffing company that staffs two restaurants under the same ownership, which could create both horizontal and vertical joint employment.
What’s to come
While other topics discussed at the conference won’t be affected by the presidential election, such as minimum wage and white-collar overtime exemptions, White said joint-employer decisions could be. The National Labor Relations Board has five members who typically vote in split 3-2 decisions, he said.
“The election could change the construct of the board,” he said.
Kravetz warned attendees, however, that this doesn’t mean hoteliers should avoid this matter, believing that this year’s election could change everything for them. This is a confusing issue, he said, and there are multiple ways hoteliers can find themselves under attack.
White advised attendees to train their management teams and human resource directors to be aware and feel comfortable addressing these issues. He also suggested performing a self-audit.
“Pay now or pay later,” he said. “Do the analysis.”
Look at the franchise model and the agreement, Kravetz said. Scrub provisions that go to the issues of employment or personnel, he said, and leave only brand and system standards. Kravetz said indemnity is only as good as the money behind it.
As for making changes to agreements without alerting the other party there may be exposure, he said he doesn’t believe he’s calling out anything the law isn’t already addressing. All the owners and franchisors should do is try to create an environment where they are not controlling personnel decisions and only talking about brands, he said.
As a suggested explanation, Kravetz said, “I’m taking back any conceived control I would have and am giving it all to you so you can do what you need to make money.”