The Joint Employment Dilemma for Hotel Employers - Part III of III

By Michael C. Schmidt Partner, Cozen O'Connor | July 02, 2010

In the first two installments of this "Employment Classification Trilogy," the focus was on hotel employers who improperly (and, generally, inadvertently) classify workers as exempt employees for purposes of federal and state wage and hour laws, or classify workers as independent contractors rather than employees. However, there is a third classification to be considered, only this time a hotel employer will not be affirmatively classifying anyone itself. Instead, employers need to consider whether unintended liability may arise under particular circumstances when a court deems the company to be a "joint employer" .

The essential premise of joint employment is the recognition that an employee may be employed simultaneously by more than one employer. The problem is that a company may have been acting under the assumption that the particular worker who has been injured or has raised a dispute is not that company's "employee." For example, a hotel owner may enter into a management agreement with an outside management company and assume that it (the hotel owner) is not responsible for the injuries or complaints of those employed by the management company. Or, a hotel may outsource certain functions to outside contractors under the belief (and even with the intention) that those outside contractors bear all responsibility for its own workers.

Courts and legislatures have not been shy about interpreting the term "employer" broadly and liberally to comport with the expressed purpose of the law at issue. While courts in different jurisdictions will apply varying tests to determine whether a joint employment relationship exists, the primary focus is on the economic realities of the relationship and whether there is some measure of control retained by the entity claimed to be a joint employer. Indeed, a determination that an entity is a joint employer together with another entity in relation to a particular employee or group of employees can have significant consequences, as virtually all obligations under such laws as the Fair Labor Standards Act, the Family and Medical Leave Act, Title VII of the Civil Rights Act, and the WARN Act, arise only when an employment relationship is found.

Many regulations interpreting these statutes specifically address the joint employment situation. For example, section 791.2 of the Fair Labor Standards Act regulations provides that "where the employee performs work which simultaneously benefits two or more employers, or works for two or more employers at different times during the workweek," a joint employment relationship will be deemed to exist if there is an arrangement between the two employers to share or interchange employees, if one employer acts in the interest of the other employer in relation to the employee, or if the entities share "control" over the employee. Similarly, section 825.106 of the regulations interpreting the Family and Medical Leave Act expressly addresses the joint employment situation

  • (a) Where two or more businesses exercise some control over the work or working conditions of the employee, the businesses may be joint employers under FMLA. Joint employers may be separate and distinct entities with separate owners, managers and facilities. Where the employee performs work which simultaneously benefits two or more employers, or works for two or more employers at different times during the workweek, a joint employment relationship generally will be considered to exist in situations such as:

    1. Where there is an arrangement between employers to share an employee's
      services or to interchange employees;
    2. Where one employer acts directly or indirectly in the interest of the other
      employer in relation to the employee; or,
    3. Where the employers are not completely disassociated with respect to the
      employee's employment and may be deemed to share control of the employee,
      directly or indirectly, because one employer controls, is controlled by, or
      is under common control with the other employer.
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Eco-Friendly Practices: Corporate Social Responsibility

The hotel industry has undertaken a long-term effort to build more responsible and socially conscious businesses. What began with small efforts to reduce waste - such as paperless checkouts and refillable soap dispensers - has evolved into an international movement toward implementing sustainable development practices. In addition to establishing themselves as good corporate citizens, adopting eco-friendly practices is sound business for hotels. According to a recent report from Deloitte, 95% of business travelers believe the hotel industry should be undertaking “green” initiatives, and Millennials are twice as likely to support brands with strong management of environmental and social issues. Given these conclusions, hotels are continuing to innovate in the areas of environmental sustainability. For example, one leading hotel chain has designed special elevators that collect kinetic energy from the moving lift and in the process, they have reduced their energy consumption by 50%  over conventional elevators. Also, they installed an advanced air conditioning system which employs a magnetic mechanical system that makes them more energy efficient. Other hotels are installing Intelligent Building Systems which monitor and control temperatures in rooms, common areas and swimming pools, as well as ventilation and cold water systems. Some hotels are installing Electric Vehicle charging stations, planting rooftop gardens, implementing stringent recycling programs, and insisting on the use of biodegradable materials. Another trend is the creation of Green Teams within a hotel's operation that are tasked to implement earth-friendly practices and manage budgets for green projects. Some hotels have even gone so far as to curtail or eliminate room service, believing that keeping the kitchen open 24/7 isn't terribly sustainable. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.