The National Labor Relations Board is proposing changes to the standard for determining joint-employer status, a decision that would reverberate throughout the hotel industry, which now depends almost exclusively on franchising for growth.
This notice of proposed rulemaking proposes to rescind and replace the final rule entitled “Joint Employer Status Under the National Labor Relations Act,” which took effect on April 27, 2020. The proposed rule would revise the standard for determining whether two employers are joint employers of particular employees. The proposed changes, which can include wages, benefits, scheduling, hiring, firing, discipline and workplace health and safety, are designed to ground the joint-employer standard in established common-law agency principles.
Put simply, changes could, for example, deem franchisors, such as Wyndham Hotels & Resorts or Choice Hotels International, liable for employees hired by a franchisee or appointed by a hiring agency to work at a hotel. The franchisee could also be open to liability from something committed by the staffing agency. In addition, hotel owners who appoint management companies to operate their assets could come under scrutiny.
The existing standard, set in 2020, was narrower and set the status to only where the franchisor had direct control over a franchisee’s employees.
FLIPPING THE SCRIPT
“What this ultimately deals with is collective bargaining and who sits across the table negotiating between organized labor and an employer,” a hotel industry source close to the matter told HOTELS. “And their goal is to create new liability and, therefore, a new entity that will come across and sit on the other side of the table.”
In the hotel industry now, the hotel owner is the employer and the one that controls working conditions. The new rule would redefine what working conditions are. “In the existing rule, there was a finite list of what constitutes a working condition and everybody understood what that meant,” the industry source said. “This new rule is going to create a lot of vague new terms on what working conditions actually are; it’ll be subjective.”
The ramifications for organizing labor would now potentially be in play should the rule change. Hotel brands, for instance, are not responsible for paying employees of hotels they don’t own. “Let’s say you have a Hampton Inn or a Comfort Inn, where you might have 10 to 20 full-time employees. Trying to organize those is very difficult for union purposes. But now, if instead of the owner sitting across the table for an individual property, suddenly Hilton or Choice must sit on the other side of the bargaining table, they are not just bargaining for the individual Hampton or Comfort, but every employee that is working under those brand flags. Now, that’s a whole different ballgame,” the source said.
Last week, the NLRB tossed out a Trump administration that barred many workers from engaging in union organizing and picketing on private property.
AHLA CONDEMNATION
The American Hotel & Lodging Association has roundly opposed the NLRB’s proposed regulations. “If implemented, NLRB’s proposed joint-employer rule would have a chilling effect on the hotel industry and the entire U.S. franchising model,” said AHLA President & CEO Chip Rogers. “It would minimize franchisees’ control over their own businesses, severely complicate hotels’ ability to contract with independent vendors and allow courts and government bureaucrats to subjectively determine joint-employment liability. We strongly oppose these proposed changes and urge the NLRB to keep in place the current joint-employer standard. It provides predictability and stability for a successful franchising model that’s one of the top pathways to the American Dream for minority business owners.”
In a letter dated Dec. 6, 2022, and addressed to NLRB Executive Secretary Roxanne Rothschild, Chirag Shah, AHLA SVP of federal affairs and policy counsel, wrote: “AHLA is concerned that the proposed rule would improperly expand the definition of ‘joint employer’ and beyond the common law to include entities that possess irrelevant forms of ‘indirect’ or ‘reserved’ control over another entity’s employees’ terms and conditions of employment. Such an expansion would place substantial and unwarranted burdens on our members’ ability to enter into routine contracts for needed services with third-party vendors, such as to provide cleaning and landscaping services, among other things, and would inject uncertainty into the economy when it teeters on the edge of a recession.”
A rule change could also be deleterious to small-business owners and lead to hotel franchisors only working with specific owners to limit risk. “The opportunities for small-number-unit owners could go away because if a liability regime comes in, then the brands could now be responsible for things that take place at a property and only work with those people they are comfortable with and know they are running the property exactly how it needs to be,” the source said.
“In an economy where employment relationships are increasingly complex, the Board must ensure that its legal rules for deciding which employers should engage in collective bargaining serve the goals of the National Labor Relations Act,” said NLRB Chairman Lauren McFerran. “Part of that task is providing a clear standard for defining joint employment that is consistent with controlling law. Unfortunately, the Board’s joint employer standard has been subject to a great deal of uncertainty and litigation in recent years. Rulemaking on this issue allows for valuable input from members of the public that will help the Board in its effort to bring clarity and certainty to these significant questions.”
PARTISAN POLITICS
Support or opposition to changes in the rule is falling down political fault lines in Washington. Last week, members of Congress submitted two letters to the NLRB. One letter was signed by U.S. Senate members and the other by senators and members of the House of Representatives.
“As members of Congress, we have sought to protect the franchise model through legislation due to the opportunity franchises provided workers and entrepreneurs,” the Senate letter, which was signed by U.S. Sens. Mike Braun, R-IN, Susan Collins, R-ME, Angus King, I-ME, James Lankford, R-OK, Joe Manchin, D-WV and Kyrsten Sinema, I-AZ, stated. “We fear the proposed rule would do the opposite, leading to an increase in litigation and, therefore, putting the franchise model at risk. Businesses should not be liable for entities they do not control.”
The NLRB is accepting comments on the proposed changes until Dec. 21 and a final decision is expected several months after.