Hoteliers, associations slam NLRB decision
28 AUGUST 2015 9:15 AM
A Thursday National Labor Relations Board decision has the potential to completely recast labor relations at U.S. hotels, and it is already drawing the ire of many in the industry.
REPORT FROM THE U.S.—Hotel franchisors and franchisees in the United States are mobilizing following Thursday’s decision by the National Labor Relations Board to refine its standard for determining joint-employer status. As hoteliers gather more information about the effects of the ruling, many organizations are speaking out in opposition.
The 3-2 vote by the NLRB in the Browning-Ferris Industries of California Case, made strictly along party lines, defines franchisors and companies that hire contractors as “joint employers” and now allows unions, which had historically just interacted with franchisees, to bargain with franchisors directly.
While the decision was driven by issues in the waste management and fast food industries, the implications for hoteliers are wide, according to those familiar with the ruling, because it changes the nature of labor relations in franchised hotels and potentially opens up increased chances of unionization.
The American Hotel & Lodging Association in a statement condemned the ruling as “short sighted” and “highly politicized,” while Asian American Hotel Owners Association President Chip Rogers in a statement called the decision “reckless and shameful.”
Tarun Patel, principal at San Jose, California-based Pacific Hospitality Company, told Hotel News Now that he’s worried the ruling will ultimately mean losing control over the operations of his business.
“We got into this business as franchisees, but now we’re co-employers,” Patel said. “We didn’t sign up for this. Now I consider myself more of a manager than an owner-operator.”
Patel also worries the decision could drive an “us versus them” mentality between employees and hotels or even franchisees and franchisors, which he said would entirely miss the point.
“We have to remember this is not something any of us wanted,” Patel said. “This is bureaucrats in Washington telling us how to run our business.”
What about the franchisor perspective? As of press time, no major hotel brands had issued statements, while others deferred to the AH&LA statement.
Rogers told HNN that talking to its major franchise partners has been a big part of AAHOA’s agenda.
“We’ve talked to every major franchise about this and we’re all on the same team,” he said. “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.”
HNN’s calls to UNITE HERE were not returned by press time.
A big part of why groups such as AH&LA and AAHOA oppose this measure is because they view it as being anti-small business.
“With the 92% of lodging properties in the United States owned by franchisees and small businesses, we are very concerned that these changes to the joint-employer standard will have a profound negative impact on economic investment and job growth across our industry,” AH&LA leadership said in its statement, going further to say the decision “could severely limit opportunities by diminishing the autonomy of millions of small business owners.”
Patel agreed with that statement.
“I’m not anti-union at all,” Patel said. “There’s a place for unions, but it’s not at a 100-room hotel with 10 employees.”
He said most of the hotels in his company’s portfolio hover around 80 to 100 rooms with 10 to 15 employees. He said that small size allows the people involved in the business to operate almost like a family and gives employees opportunities to learn new skills and climb the ladder.
“We like to give the opportunity to cross train employees,” Patel said. “At one hotel, we had a housekeeper who was trained to work the front desk and is now working as our general manager. That’s how you get upward momentum. But with a co-manager you might not see things like that. … And that scares me, because then I’m not in charge of my business anymore.”
What happens next?
Rogers said the fallout of this decision depends largely on two things: interpretation and implementation. AAHOA leadership is considering what Rogers calls best-case and worst-case scenarios.
“The best-case scenario is that fees for franchisees will go up significantly, because franchisors will need to employ an army of attorneys to monitor the legal activity going on under their banner,” he said. “This will cost franchisees and franchisors a lot of money.”
The worst-case scenario, as he sees it now, is complete elimination of the franchise model altogether.
“The franchise model is based on entrepreneurship; it’s still about individual small businesses,” he said. “If you no longer control the single most important aspect of small business—your employees—then there’s no reason to start that business in the first place.”
He said existing franchisees will have a lot to consider moving forward as well.
“Why would I renew (my franchise) when I know my entire staff won’t be controlled by me, the business owner?” he said. “If I’m going to expand, why would I open another franchised hotel, instead of an independent, where I could control my own destiny?”
Charles Conine, principal with Excelor HR, calls the legal implications of this ruling on hotels “significant.”
He advised franchisee employers to “think about and talk through (the issues) with their labor attorney present, which policies and practices affecting employees are most likely affected by the NLRB ruling, and which could be open for interpretation.”
Conine wrote a column on the topic for HNN in February (“Joint employer: Two words can change a lot”) that examined the issue through the lens of a July 2014 decision by the NLRB that said McDonald’s could be held jointly liable with its franchisees for labor violations.
Rogers said AAHOA will continue to fight the ruling as its No. 1 priority. The U.S. District Court system could take it up, or it could be contested through the Congressional process. Either way, Rogers said the process will potentially take years and money to resolve.