The Outlook for Hotel and Resort Operators Post-BFI

Waiting to Exhale

By Dana Kravetz Firm Managing Partner, Michelman & Robinson, LLP | March 05, 2017

Eighteen months since the National Labor Relations Board (NLRB) revised its standard for the imposition of joint employer liability, and hoteliers remain in a state of legal limbo, unsure what 2017 and beyond have in store on the issue. For those hotel and resort operators whose best response to the question, "how should we continue to move forward in the wake of BFI?" is a shrug of the shoulders, a current scorecard for your consideration.

The BFI Decision

The NLRB shook the hotel franchisor/franchisee landscape with its jaw-dropping Browning-Ferris Industries of California (BFI) decision back in August 2015, 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 new and 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 franchisors and contractors. While BFI involved a waste management company and its interaction with a contractor hired to clean and sort recycled products, the implications of the NLRB's ruling are far-reaching and apply to all relationships in which tasks and responsibilities are outsourced. After BFI, Plaintiffs' attorneys are left licking their chops.

The BFI Appeal

Not surprisingly, BFI promptly appealed the NLRB's decision, seeking review by the United States Court of Appeals for the District of Columbia Circuit. The appeal is scheduled to be heard on March 9, 2017, though it is anybody's guess when a ruling will be handed down, hopefully by year's end. In the meantime, executives in a range of industries, including hospitality, sit at the edge of their seats, hoping the D.C. Circuit Court accepts the following argument as set forth in BFI's reply brief:

"The board's decision ignores the longstanding rule that joint employment does not exist absent the exercise of substantial direct and immediate control by the putative joint employer, improperly holds that 'indirect' or 'reserved' control are sufficient standing alone to establish joint-employer status under the common law, and interprets the concepts of 'indirect' and 'reserved' control to include notions of economic influence which the board is prohibited from considering under the distinctive history of the NLRA."

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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.