Joint employer, wages pressure hoteliers
Joint employer, wages pressure hoteliers
14 MARCH 2016 8:23 AM

The redefinition of “joint employer” and a push for higher wages both present issues for hoteliers going forward.

REPORT FROM THE U.S.—2015 was a year of change for labor issues in the U.S.hotel industry, including a basic redefinition of franchising as well as increasing pressures for employee costs.

Here’s a quick look at two of the biggest labor issues to arise out of the previous year.

Joint employer
The National Labor Relations Board changed the dynamics of the franchisee-franchisor relationship in August by issuing a ruling that defines both parties as “joint employers” under certain circumstances, opening up franchise companies to possible liability and collective bargaining issues. 

The move was immediately blasted within the hotel industry, with some saying it threatened the future of the franchising business model. Asian American Hotel Owners Association President Chip Rogers quickly came out in opposition of the ruling, calling it “short sighted” and “highly politicized.”

“We’ve talked to every major franchise about this, and we’re all on the same team,” he said in August. “They don’t want this; we don’t want this. Nobody actually in the franchise business wants this. The only group that wants this is organized labor.”

Reuters reported in December that Congressional Republicans were attempting to find a legislative workaround for the NLRB ruling but were facing significant oppositions from Democrats.

Since that point, the case at the core of the NLRB’s 3-2 decision has since been appealed in late January by California-based Browning-Ferris Industries. The waste management company had refused to negotiate with Teamsters Local 350 for employees who were hired by a staffing agency for a Milpitas, California, recycling facility.

Earlier that same month, the U.S. Labor Department issued new guidelines for companies now identified as joint employers, explaining their liability with labor violations. Those guidelines could ultimately be used in litigation involving franchising companies.

Minimum wage
Los Angeles became the poster child for wage issues in the hotel industry when, in late 2014, Los Angeles City Council voted 12-3 to increase the minimum hourly wage to $15.37 for workers at hotels with at least 125 rooms. That accounts for one of the highest minimum wages in the country, and is unique in that it targets a specific industry.

An AH&LA and AAHOA lawsuit opposing that wage increase was thrown out of court in 2015.

The new wage rules began rolling out for hotels with more than 300 rooms in July 2015, and will be in full effect by July 2016.

The hotel industry also faces wage pressures from more wide-spread pushes for wage increases. New York State, for example, has grown into a hot battleground for those seeking a higher minimum wage after Governor Andrew Cuomo announced plans in February to gradually increase the state’s minimum wage to $15 an hour. That state had increased its minimum wage as recently as December, bumping it from $8.75 to $9.

Kerry Ranson, president and COO of Expotel Hospitality, warned in a December HNN column that wage issues could loom over the hotel industry in 2016.

“Substantial minimum-wage increases could contribute to a vicious cycle of high turnover, high stress and high health care costs—all of which can compromise the ability of our entry-level staff to achieve leadership positions,” Ranson wrote. “This represents another difficult challenge for hotel owners.”


  • Kabal Virk March 14, 2016 11:55 AM Reply

    This is killing jobs as well as the owners. Small hotel owners have to face this either cut the jobs to make different in there bottom line or buy less supply to cut cost. But same time that does not take people off the welfare . Welfare is the one need to be cut so people wants to work .

  • Joel Ross March 14, 2016 1:18 PM Reply

    This is exactly why I keep saying it is NOI not Revpar that matters. It is irrelevant what revpar is if wages are going up faster. It only matters what reaches the NOI line and Obama has made that very hard to improve just when occupancy is declining. When is everyone going to wake up and pay attention to the numbers that really matter instead of revpar which for many outside of San Fran and a few top cities is already in decline

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