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Q&A: Los Angeles’ Hotel Minimum Wage

Article originally appeared in HALA Newsletter

Q. What is the legal status of Los Angeles’ hotel minimum wage ordinance?

A. The associations that sought to obtain a preliminary injunction, The American Hotel and Lodging Association and the Asian American Hotel Owners Association, were denied their motion to halt the ordinance. In its decision the court stated, “Plaintiffs have not met their burden that the Wage Ordinance’s $15.37 per hour minimum wage provision is anything but a permissible exercise of the City’s power to institute such economic policy.” The two hotel associations filed an appeal, but the ordinance moved forward earlier this month.

Q.  Will the minimum wage hike impact the existing LAX hotel ordinance?

A. Yes. In 2007, the Los Angeles City Council approved a wage ordinance that required hotels in the “LAX corridor” to pay employees at least $11.55 per hour. According to the plain language of that ordinance, the new law further raises the minimum wage for those hotels as well.

Q. Will hotels that outsource their staff be impacted by the wage hike?

A. It depends. Unless outsourced completely off-site, outsourced employees will be subject to the same rules as all other hotels that must adhere to the new minimum wage requirements. However, outsourcing may still reduce other costs, which will be discussed in the next issue.

Q. What about ancillary businesses? Will restaurants, gift shops, and other establishments on hotel properties be impacted?

A. Yes. The wage hike will in fact affect ancillary businesses. Given that many of these are small, mom and pop establishments, the increase could be significantly harmful to their bottom-line. Of course, larger establishments including franchises may choose to leave (and/or break their leases) for more competitive pricing.

Q. Are there any issues surrounding the ordinance that need clarification?

A. Yes, there are a number of issues in the new hotel minimum wage ordinance that are vague or unclear. HALA, working with M&R, has written a letter to Councilmember Paul Krekorian for further clarification. These issues include:

  • Whether a hotel employer, whose provision of time off (compensated and/or uncompensated) is currently more favorable than the requirements under the ordinance, is permitted to convert its provision of time off guidelines to meet the requirements of the ordinance
  • Whether hotel employers who currently have a collective bargaining agreement (“CBA”) with hotel workers need to re-draft their CBA to include an explicit waiver of the ordinance’s service charge and time off provisions and, if so, whether the language of the waiver must reference the ordinance specifically, or whether it can just generally address the topics covered in the ordinance
  • Whether a hotel employee who meets the minimum requirements under the Family and Medical Leave Act (“FMLA”) or any other relevant federal laws may take compensated leave provided for under the ordinance concurrently with the FMLA or other federal or state leave
  • Whether non-hotel tenants or business owners, who have their place of business in a building that houses both a hotel and other shops or stores, are subject to the ordinance’s provisions
  • Whether tipped-employees in hotel restaurants and bars will be treated differently than their counterparts at restaurants and bars not located in hotels, with respect to application of the ordinance and the calculation of total compensation
  • Whether the city will consider on a case-by-case basis hardship requests that fall below, but are close to, the city-approved one-year hardship waiver threshold requirements

While the ordinance has many moving parts, at least for now, owners and operators with 300 or more rooms were required to comply  as of  July 1, 2015, when the law was implemented. Stay tuned for further updates regarding how the ordinance will impact your hotel’s business. 

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.