Global Hospitality Advisor: The Employer Wins! Union Withdraws Complaint Union Withdraws Complaint Against Hotel: NLRB Concludes Owners Do Not Have to Re-hire Workforce.

JMBM hotel labor lawyer Marta Fernandez writes about The Hotel Group’s successful attempt to hire the workforce of their choice upon re-opening a renovated hotel. Ms. Fernandez represented The Hotel Group before the NLRB.

As the demand for hotel rooms continues to grow, hotel developers and owners across the country are acquiring, renovating and repositioning properties for better performance. Despite the positive response of hotel guests—and the positive response of local business communities where the projects are located—the unions that represent a hotel’s workforce can throw a wrench into efforts to improve performance.

This is precisely what happened to The Hotel Group (THG), whose executives were determined to hire the workforce of their choice following the renovation of their recently purchased property in Norwalk, Connecticut. When the Group did not rehire the unionized workers who worked at the property prior to its purchase and renovation, UNITE HERE’s Local 217 filed a complaint with the National Labor Relations Board (NLRB), charging THG with unfair labor practices.

THG—which had never employed the union employees—purchased the underperforming hotel in August 2004 and closed it during a $6.5 million renovation. The Group acted on its right to hire a new workforce, while making it clear that former workers were welcome to apply for open positions. About two-dozen of the hotel’s former workers were not re-hired, and UNITE HERE’s Local 217 announced a boycott of the hotel in July 2005 and filed a complaint with the NLRB. Amidst this controversy, the hotel reopened in September 2005, under the Doubletree flag.

Pickets and Politics

The union was successful in garnering political support for their position, despite the reality that the owners were acting within their legal rights. The city’s mayor and its local council members lined up behind the union, as did some state legislators. Even Connecticut’s attorney general pressured THG to rehire the previous owner’s workforce.

Picket lines appeared in front of the newly opened hotel causing police to be present, and the press covered the story. But—in spite of picketing and politics—travelers and guests patronized the hotel. The local business community patronized the hotel, as well. In fact, the president of the Greater Norwalk Chamber of Commerce publicly supported the hotel’s position on hiring, and praised the hotel’s new facilities.

When it was clear that THG would not buckle under political pressure, UNITE HERE demanded the hotel sign a “neutrality agreement,” designed to keep the hotel from interfering with attempts to organize workers as well as to avoid traditional NLRB elections by secret ballot.

Convinced that their legal position was sound, THG did not sign the neutrality agreement. Instead the company focused on the day-to-day business of running the hotel, all the while contributing to the local economy and moving forward on the property’s successful “turnaround” plan.

Determining “Successorship”

While the legal analysis is rather complex, the ultimate question that the NLRB had to answer to satisfy the discrimination claim was this: Is the new employer (THG, in this case) a successor to the previous owner of the hotel?

The year long standoff ended in April 2006, when the NLRB brought the union’s action to a conclusion. The NLRB determined exactly what THG knew along: that because the Group is not a “successor” to the former owner of the hotel, it did not have to re-hire the employees that were in place when it purchased the property.

"Closing for renovation or conversion is an
opportune time to examine workforce issues.”

Successorship issues are not as easy to determine as it might seem. Sometimes the law dictates successorship and sometimes the existing labor contract imposes the previous owner’s obligations. THG’s situation was even more complex than most. For a brief time after purchasing the hotel in Norwalk, THG leased it to an independent third party that continued to operate it as a union hotel. UNITE HERE charged that the lease of the hotel was somehow deceptive, clouding the successorship issue.

“The absence of legal successorship can and will
allow hotel owners to hire the workforce of their choice.”

The NLRB was careful in its consideration, taking almost a year to make a determination. When it did, it was clear that THG was within its rights to hire its own workforce, and the workforce could be union or non-union. In this case, the Norwalk Doubletree is now union-free.

Working with the NLRB

When UNITE HERE charged THG with “unfair labor practices”—specifically with failure to rehire union employees and failure to bargain with the union—the NLRB began to investigate the charges.

During such an investigation, labor counsel will work with the NLRB, responding to requests for information in a balanced manner. Experienced labor counsel will provide the NLRB with the information it needs to investigate the charges, while at the same time protecting its client by not disclosing information that is confidential, proprietary or a trade secret. Counsel will also continue to provide appropriate submissions— and supporting documentation—of the hotel’s position.

In this case, the union withdrew the charges. When cases are not withdrawn, the NLRB can issue a complaint that would proceed to an administrative trial before an NLRB judge. In this case, the NLRB could have ordered the reinstatement of all prior union employees along with back pay, and also could have ordered the hotel to bargain with the union.

Opportunity for Workforce Changes

The closing of a hotel property, whether for renovation or conversion, is an opportune time for hotel owners to examine the property’s workforce and to make plans for needed changes, if the absence of successorship makes it possible for them to do so. The closing of a hotel property is also a time when unions will bargain to maintain the status quo in terms of benefits, seniority and job security. If these are threatened, they are within their rights to picket, boycott and take their claims to the NLRB.

In the case of THG’s Norwalk Doubletree, it was clear that the hotel owner had the legal right to make changes. Even so, some hotel owners in this scenario would decide to negotiate with the union, avoiding the possibility of a strike as well as avoiding the ensuing negative publicity—both of which can affect a hotel’s ability to attract guests.

But THG stood their ground, proving that—at least in one case that was put to the test — the absence of legal successorship can and will allow hotel owners to hire the workforce of their choice.

For more information, contact Marta Fernandez at 310.201.3522 or MFernandez@jmbm.com.