Get updates by email

Select Specific Blog Updates

Paul Zimmerman
pzimmerman@mrllp.com
(310) 564.2670

Photo of M&R Blog

sweetok © 123RF.com

Anticipating Trump’s Impact on Labor Relations in the Hotel Industry

Unlike his oval office predecessor, President-elect Donald Trump is expected to limit federal labor and employment agency activism in wage and hour and other employment-related matters. Hotel owners and franchisors, which in recent months have experienced numerous workforce-related challenges, are likely to witness significant labor and employment policy shifts, a few of which are detailed below.

New Policymakers, New Policies

With the election of Donald Trump, we expect a decidedly pro-business shift in labor and employment policy. Republicans will gain control of not only the oval office, but also both houses of Congress in 2017. Mr. Trump will likely move quickly to appoint a conservative justice to the Supreme Court to replace Antonin Scalia, and will control federal agencies that govern wage and hour laws, union formation, and other significant employment issues. Notably, two of the five slots on the National Labor Relations Board (NLRB) are currently vacant and another member's five-year term will expire next December. Mr. Trump will almost certainly fill the two immediate vacancies on the NLRB with Republicans, thus shifting majority control of the agency very early in his presidency.

We will also see the appointment of other key employment policy positions within the federal labor agencies, including the Secretary of Labor, Solicitor of the U.S. Department of Labor, Assistant Secretary for Occupational Safety and Health, and Administrator of the Wage and Hour Division. Just last week it was announced that Mr. Trump had selected Andrew F. Puzder as Secretary of Labor. Mr. Puzder is chief executive of the company that operates the fast food outlets Hardee’s and Carl’s Jr. and an outspoken critic of the worker protections enacted by the Obama administration. During his career, he has opposed efforts to expand eligibility for overtime pay, has resisted significant minimum wage increases, and argued that the Affordable Care Act is responsible for a “restaurant recession.”

Joint Employer Liability Under the Microscope

The sense of unpredictability and anticipation that this election has generated in the business community is perhaps no more pronounced than in the hospitality industry, where recent rulings by the NLRB have upended the traditional hotel franchisor/franchisee model by lowering the bar for a finding of joint-employer liability.

The NLRB’s decision in the Browning-Ferris Industries (BFI) case (currently on appeal) could create myriad issues in the hotel industry, including conflict between franchisors and franchisees over which is liable when lawsuits arise, as well as increased liability when working with contractors. This has been an area of high priority for hotel operators and their legal counsel over the past year, but it is possible that the NLRB and EEOC under a Trump regime will adopt a more franchisor- and employer-friendly stance on the issue.

In its highly controversial BFI decision, the NLRB revised its test for the joint employer doctrine, dramatically easing the criteria for a company to be considered a joint employer. For many decades, the traditional joint employer test focused on governance, wage and supervision decisions, and control. The test excluded “limited and routine” oversight and supervision, because “hiring, firing, discipline, supervision, and direction” were not considered essential or meaningful to the employment relationship. Under the new standard, a finding of joint employment is much broader, and only requires that a business exercise “indirect” (or potential) control over workers. Hence, under the new test, a company may not only be held liable for its own labor violations, but also for those of the other entity.

The recent joint employer rulings affect all companies that outsource any aspect of their business. This includes contractors, suppliers or even outsourced cleaning or IT work. Unfortunately for hoteliers, the appellate court is unlikely to adjudicate the matter before year end, thereby ensuring that joint employment will remain a critical labor issue in the interim.

It remains to be seen how the appeal will play out in the courts, and to what extent the Republican administration will relax this joint employer standard. In its appeal, BFI contends that the NLRB’s new joint employer standard runs counter to the prevailing definition of “employee” under federal law, destabilizes collective bargaining relationships and is “hopelessly vague.”

Hotels and resorts should immediately evaluate the following: 1) Employment Practices Liability Insurance (EPLI) policies, to ensure franchisees are covered; 2) Policies concerning which positions are filled by full-time or part-time employees; 3) Employee benefits, including holiday pay and sick leave; and 4) How work is assigned and job duties are delegated.

Minimum Wage and Overtime Move Front and Center

Employee wages are always a pressure point within the hospitality industry. While some states and municipalities have recently increased the minimum wage, the federal minimum wage remains at $7.25 per hour. While, early in his campaign, Mr. Trump suggested that he would support a federal minimum wage increase to $10 per hour, it is more likely that a Trump administration will choose to leave the issue to state and local legislatures rather than pushing Congress to act at the federal level.

With respect to overtime, earlier this year the U.S. Department of Labor (DOL) published a final rule updating the regulations governing the exemption of executive, administrative, and professional employees from the minimum wage and overtime pay protections of the Fair Labor Standards Act (FLSA). This rule doubles the annual salary threshold that generally determines who qualifies for overtime pay under federal law from $23,660 to $47,476.

This rule dramatically impacts hotels and restaurants with mid-management employees. The rule had been scheduled to go into effect on Dec. 1, 2016, however, in September, 21 states joined together to file a lawsuit alleging that the new overtime regulations are an unconstitutional exercise of power and on November 22, 2016, a Texas federal judge blocked the rule nationwide. As Trump transitions into power it remains relatively unclear what his position will be on the matter. Some have predicted that the Trump administration might reverse course and adopt a more business-friendly approach to the “white collar” employee overtime threshold, while others anticipate that Trump may support the significant extension of overtime pay, as it stands to positively impact many of his core voters.

Conclusion

There are many other employment-related issues triggered by the recent presidential election, but the topics addressed above should be front-of-mind for the hospitality industry. For now, hotel owners, operators and franchisors should watch agency appointments and pending federal lawsuits closely, as they will have a substantial impact on your business. 

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