Get updates by email

Select Specific Blog Updates

Paul Zimmerman
pzimmerman@mrllp.com
(310) 564.2670

Photo of M&R Blog

V Goretsky © 123RF.com

Looming Pay Hikes, Unions and Enforcement: A Primer on LA’s Increased Minimum Hotel Wage

Article originally appeared in HALA Newsletter

Major metropolitan areas throughout the country have planned minimum wage increases to be implemented over the next few years. On June 3, 2015, Los Angeles joined a growing list of cities that includes San Francisco, Oakland, Seattle, Washington, D.C., and Chicago, to name just a few, making national headlines for pledging to enact significant pay hikes.

Yet, while all other business owners in Los Angeles have until the year 2020 to restructure operations so they can afford to pay minimum wage workers $15 an hour, (a 66% increase over the current rate), Los Angeles hotel owners and operators will be held to a higher standard in even less time.  On September 24, 2014, the Los Angeles City Council approved the Citywide Hotel Worker Minimum Wage Ordinance, which requires establishments with at least 300 guest rooms to raise their minimum wage to $15.37 by July 1, 2015. Those with 150-300 rooms have one additional year to comply, while only hotels that face severe financial hardships will be exempt.

Unionizing

Last year, two national hotel industry associations, the American Hotel & Lodging Association and the Asian American Hotel Owners Association, sued the city of Los Angeles over the ordinance. They argued that the hotel minimum wage increase unfairly targets the hospitality industry and that the law will result in unions pressuring non-unionized hotels to unionize, because the ordinance stipulates that only unionized employees can negotiate contracts that opt out of the $15.37 hourly wage.  In May, 2015, the U.S. District Court held that the City’s ordinance is permissible; stating that the new wage law “neither encourages nor discourages collective bargaining.” 

However, in light of the pending city-wide minimum wage increase, any decision by a hotel to join a union for the sole purpose of collective bargaining agreements may be short sighted.

Enforcement

Many have argued that raising the minimum wage necessitates a large enforcement team.  San Francisco has 25 full-time investigators as part of its Wage Enforcement Division, and labor groups anticipated that Los Angeles would follow suit. However, at least for now, the Los Angeles City Council has only approved $500,000 to pay for five enforcement analysts who will comprise its “Office of Labor Standards.” Council members have attempted to allay fears by promising to create as many as five more positions on the enforcement team by year end, after the wage hikes take effect.

Takeaways for Hotel Owners and Operators

  • Find out if the ordinance will or will not apply to your property, and seek legal counsel if you have questions regarding your union or non-union status.
  • The ordinance only applies to hotels located within Los Angeles city limits, not enclaves, such as Beverly Hills and West Hollywood, or other cities in Los Angeles County, such as Pasadena, Glendale, and Santa Monica.
  • The aforementioned hardship exemption will be limited and require submission of “compelling evidence” that compliance would lead to a major reduction in workforce in order to avoid bankruptcy or a complete shutdown.
  • Hotels with 300 or more guest rooms were required to comply as of July 1, 2015, while those with between 150 and 300 rooms have until July 1, 2016.

In the next issue, we’ll cover operational issues associated with hotels’ increased payrolls, how to budget appropriately, and ways to restructure in order to maintain your bottom line.

This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.