Mr. Kravetz

Hospitality Law

The Hospitality Industry Under the Trump Administration

Reasons for Optimism

By Dana Kravetz, Managing Partner, Michelman & Robinson, LLP

Pro-employer stars are aligning in Washington, D.C., that can only benefit the hospitality industry. What began with President Donald J. Trump's appointment of conservative Alexander Acosta as the United States Secretary of Labor, has been followed by his nomination of Republicans Marvin Kaplan and William Emanuel to fill vacancies on the National Labor Relations Board - moves that are decidedly a boon to business. Under Secretary Acosta, the Department of Labor withdrew guidance put in place by the Obama administration on the joint employment issue, a positive step for hotel and resort owners, operators and franchisors. If confirmed, Messrs. Kaplan's and Emanuel's presence on the NLRB is certain to lead to the unraveling of various labor-related actions also deemed unfavorable to employers, hoteliers included.

Add to this the anticipated decision by the U.S. Court of Appeals for the District of Columbia Circuit in Browning-Ferris Industries of California, Inc. (BFI) - by which the court may reverse course on the current union-friendly standard for determining joint employment status under the National Labor Relations Act - as well as the recent introduction of a bill in Congress to limit the definition of joint employment under federal wage and labor law, and there can be no doubt that the labor-leaning tides in D.C. are shifting indeed.

By virtue of the changing of the guard in Washington - including a reshaped NLRB - joint employer liability and a breadth of associated union issues are squarely in the crosshairs of an administration bent on giving employers a leg up. Good news for those in the hospitality space to be sure, as is President Trump's undeniable interest in hotels and resorts. But as a practical matter, how will the landscape change for hoteliers, particularly when current pro-employer sentiments in our nation's capital are held in check by state and local activism that serves to protect employee interests?

Rescission of Obama-Era Guidance Defining Joint-Employers

The Labor Department's rollback of guidelines established by the Obama administration to determine when companies are joint employers of contract and franchise workers - the first change of labor policy under President Trump - was not unexpected and is a great indicator of things to come. The move narrows the previous joint employment standard that took into consideration a worker's level of "economic dependence" on a company and subjected franchisors to lawsuits even when they were not responsible for setting working conditions. In the wake of the DOL's action, these companies are once again deemed joint employers only when they have a role in hiring, firing and wage and supervision decisions - a cause for muted celebration among hotel and resort owners and operators.

Full-fledged cheers would be premature because the withdrawal of the guidance does not affect the NLRB's expansion of joint employment liability as articulated in BFI, which drastically eased the criteria for a company to be considered a joint employer. In lieu of the longstanding and traditional joint employer test that focused on governance, wage and supervision decisions and control, the NLRB in BFI adopted a much more lenient standard requiring that a business merely exercise "indirect" (or potential) control over workers to be held liable for labor violations committed by franchisees and contractors. However, given the political winds blowing at the moment, the position taken by the pre-Trump board in BFI will likely be short-lived.

The BFI case is under review by the D.C. Circuit Court of Appeals, and a ruling - one that could end up in lockstep with the Labor Department's rescission of the Obama-era guidance if the court kicks the matter back to the NLRB - is imminent. In the meantime, Congressman Bradley Byrne of Alabama has introduced legislation in the House of Representatives (the Save Local Business Act) that would amend both the National Labor Relations Act and the Fair Labor Standards Act to say that a business can be deemed a joint employer only if it exercises direct, actual and immediate "significant control" over essential working conditions of particular workers. As such, no matter the outcome in BFI, the Republican-held Congress may codify a standard consistent with the DOL's recent action on the joint employment guidelines. Many in the hospitality industry would welcome such a law with open arms, but expectations must be managed and hotel and resort owners and operators are cautioned not to rest too comfortably.

At present, the NLRB's edict as articulated in BFI is legally binding and requires joint employers to bargain with unions, among other things. What is equally troubling for management is that claims based upon joint employment liability have become a weapon of choice amongst the plaintiffs' bar, which seeks every opportunity to take aim at hospitality defendants. The takeaway: despite any favorable shift in the law, hotel and resort owners, operators and franchisors remain exposed to employee-related liability so long as they exert even a modicum of control over properties, even unwittingly.

The Redesigned NLRB

Any pro-employer bias on the part of NLRB nominees Marvin Kaplan and William Emanuel should be of no surprise. Mr. Kaplan is a conservative and formerly counsel to the House Oversight and Government Reform Committee. For his part, Mr. Emanuel is a management-side labor lawyer and member of the Federalist Society. In light of the backgrounds and politics these gentlemen bring to the table, and with their Senate confirmation highly probable (though when that might happen is anyone's guess), the NLRB will presumably take on a persona sure to be to the liking of hoteliers. As otherwise stated, the stage should soon be set for business-friendly rulings coming from the board, decisions that will not be limited to the issue of joint employment liability.

If the full Senate confirms Messrs. Kaplan and Emanuel (as expected), the NLRB will become Republican controlled, and with that, it can begin unwinding standing decisions that have simplified and been supportive of the formation of unions. Whereas the board under President Obama leaned heavily in favor of the rights of workers to organize, President Trump's NLRB is sure to frustrate such attempts. In that same vein, so-called "micro-unions" may no longer be recognized; workers could become subject to mandatory arbitration agreements that restrict class-action litigation; protected concerted activity (including the right of employees to complain and protest about employment issues) might be limited; and quickie elections - accelerated union elections that make it harder for employers to present their arguments against union representation - may not be so quick, giving management precious time to voice dissent.

While President Trump feigns support for the American worker, his appointments suggest otherwise, and the power of unions appears threatened as a consequence. By all means, hotel and resort owners and operators can consider the reformation of the NLRB to be an encouraging development in the making.

State and Local Activism

While the Trump administration shakes up the labor playing field, state and local governments are doing their fair share to challenge the federal powers that be and safeguard employees in the process. In fact, the minimum wage, paid family leave, sick time, background checks, employee safety and even an employer's right to inquire about the salary history of job candidates are all the focus of ongoing state and local activism and lawmaking. In New York, California, Chicago, Seattle and Washington, D.C., among other places, legislatures have been increasingly sympathetic to workers. This was so even before Trump's arrival in the White House, but because of his labor policies and the related appointments (DOL and U.S. Supreme Court) and nominations (NLRB) he has made, there is an absolute tension between federal laws and state and local regulation - tensions that could lead to some confusion and operational difficulties for hotels and resorts.

More than ever, hoteliers need local counsel in order to navigate laws that impact business and deviate from federal standards and differ from state-to-state and city-to-city. Without question, it is quite difficult for hotel companies to comply with such divergent rules and ordinances, especially from an employment law perspective. For this reason, hospitality executives should avail themselves of local counsel who can handle, for example, minimum wage requirements in Santa Monica, paid family leave law in New York State, or issues concerning a proposed panic button ordinance in Chicago.

Clearly, federal labor law under President Trump is trending favorably toward employers. That being said, state and local activism does serve to complicate matters for hotel and resort owners and operators.

In the End, it Comes Down to Enforcement

State and local laws notwithstanding, a retooled Labor Department and NLRB spells trouble for employees and unions, and points to potentially sunny skies on the horizon for hoteliers. This is particularly true because no matter how joint employment and related laws change under the current regime in D.C., these agencies are unlikely to aggressively pursue employers as they did during the Obama presidency, although the plaintiffs' bar will remain ever vigilant. In the end, it comes down to enforcement - or the lack thereof - and President Trump, a hotel owner/operator at heart, may well exert his influence accordingly.

Dana A. Kravetz is the Managing Partner of Michelman & Robinson, LLP (M&R) and leads the firm's Employment Litigation Practice Group. Mr. Kravetz focuses his practice on counseling and litigating on behalf of hotel and resort management. He routinely defends his clients in various employment matters, including discrimination, sexual harassment prevention, wrongful termination, reduction in workforce, hiring practices, and wage and hour issues, including class action litigation. Mr. Kravetz has significant experience with virtually every aspect of employment litigation. Mr. Kravetz can be contacted at 310-564-2670 or dkravetz@mrllp.com Please visit http://www.mrllp.com/professionals-Dana-Kravetz.html for more information. Extended Bio...

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