The National Labor Relations Board has reverted the joint-employer standard back to only direct control, but that doesn’t mean hoteliers should relax just because they find the ruling favorable.
REPORT FROM THE U.S.—The National Labor Relations Board’s recent decision to reverse its 2015 ruling in the Browning-Ferris case on joint-employer status comes as a relief to the U.S. hotel industry, but that doesn’t mean it’s time to be less vigilant about what might constitute a joint-employer relationship.
Dana Kravetz, managing partner at Michelman & Robinson, said the ruling means joint-employer status will return to how it was for 30-plus years, with direct control acting as the trigger rather than having indirect control as well, but employers might misread this decision as a cue to ignore the subject altogether.
“As much as indirect standards laid out in Browning-Ferris will be no longer, that doesn’t mean there won’t be a focus on direct control,” he said.
This is the time for employers to look at their franchise model and outsourcing components at their hotels, he said. Many were likely holding their breath, hoping the decision would be reversed, he said, so it’s likely many hoteliers didn’t take a strong look at their contracts to make sure they only included components to protect them from joint-employer status, such as checking that the contract only maintains franchise standards rather than exerting control.
“There are still things in the outsourcing and franchise agreements that are drafted in a way that cause concern and potential exposure as it relates to direct control,” he said, adding that just because the standard has returned to what it was before doesn’t mean employers were doing it correctly back then.
“In my opinion, the issue is heightened regardless. It’s a good time to look at contracts for direct control,” Kravetz said.
The NLRB’s decision was at the federal level, Kravetz said, but there has been activity at the state and local government levels. He advised hoteliers be mindful of where they operate.
Upon the news of the board’s decision, the American Hotel & Lodging Association released a statement from Katherine Lugar, AHLA president and CEO:
“Two years ago, the NLRB redefined what it means to be a joint employer, creating uncertainty and confusion for (AHLA) members and other small and large employers in various industries throughout the country. The decision handed down today by the NLRB in the Hy-Brand case is an important step in bringing back much-needed clarity in labor law for our nation’s job creators and those they employ. While AHLA applauds the NLRB’s decision, we will continue to seek a more permanent solution and urge the United States Congress to pass common-sense legislation that codifies the Hy-Brand definition of joint employer under the major labor statutes.”
Chip Rogers, president and CEO of the Asian American Hotel Owners Association, similarly applauded the board’s decision.
“This is a major victory for small business owners and the millions of Americans they employ,” he said in a statement. “Returning to the common-sense definition of joint employer brings much-needed certainty and stability to hoteliers across the country. The reinstatement of the historical joint-employer definition ensures that employers are directly responsible for their employees, and that the franchise business model, which is responsible for creating millions of jobs and paving the way for tens of thousands of hoteliers to achieve the American dream will remain a reliable avenue to economic freedom. While AAHOA applauds today’s decision, we will continue our efforts to pursue a change to the law so that the joint-employer definition is statutory and cannot be changed arbitrarily by the next administration without Congressional approval.”
Jagruti Panwala, an AAHOA board member, also said this was a victory for business owners. She and her husband own six hotels, and her immediate family owns more than 100. After she and her family came to America when she was 15, her family purchased their first hotel in Allentown, Pennsylvania.
“We took all the risk—all of the struggles and everything that comes with it,” she said.
The American dream is that by working hard and surviving through difficult times, the business becomes something previously thought to be impossible, she said. That is what she felt the hotel industry is about, she said.
The NLRB’s 2015 decision changed how running a business felt, she said
“It kind of made business owners feel like they were no longer a business owner, like they were working for somebody else,” she said. “They were trying to make us a partner with someone without them taking the risks. The franchisor doesn’t understand the relationship I have with my employees.”