Hospitality Labor and Employment Law Blog

Hospitality Labor and Employment Law Blog

Employers Under the Microscope: Is Change on the Horizon? – Attend Our Annual Briefing (NYC, Oct. 18)

LinkedIn Tweet Like Email Comment

Employers Under the Microscope: Is Change on the Horizon?

When: Tuesday, October 18, 2016 8:00 a.m. – 4:00 p.m.

Where: New York Hilton Midtown, 1335 Avenue of the Americas, New York, NY 10019

Epstein Becker Green’s Annual Workforce Management Briefing will focus on the latest developments in labor and employment law, including:

  • Latest Developments from the NLRB
  • Attracting and Retaining a Diverse Workforce
  • ADA Website Compliance
  • Trade Secrets and Non-Competes
  • Managing and Administering Leave Policies
  • New Overtime Rules
  • Workplace Violence and Active-Shooter Situations
  • Recordings in the Workplace
  • Instilling Corporate Ethics

This year, we welcome Marc Freedman and Jim Plunkett from the U.S. Chamber of Commerce. Marc and Jim will speak at the first plenary session on the latest developments in Washington, D.C., that impact employers nationwide.

We are also excited to have Dr. David Weil, Administrator of the U.S. Department of Labor’s Wage and Hour Division, serve as the guest speaker at the second plenary session. David will discuss the areas on which the Wage and Hour Division is focusing, including the new overtime rules.

In addition to workshop sessions led by attorneys at Epstein Becker Green – including some contributors to this blog! – we are also looking forward to hearing from our keynote speaker, Former New York City Police Commissioner William J. Bratton.

View the full briefing agenda here.

Visit the briefing website for more information and to register, and contact Sylwia Faszczewska or Elizabeth Gannon with questions. Seating is limited.

Union Organizing Gets a Boost from New York City “Labor Peace” Executive Order

LinkedIn Tweet Like Email Comment

A new Act Now Advisory will be of interest to many of our readers in the hospitality industry: “Union Organizing at Retail and Food Service Businesses Gets Boost from New York City ‘Labor Peace’ Executive Order,” by our colleagues Allen B. Roberts, Steven M. Swirsky, Donald S. Krueger, and Kristopher D. Reichardt from Epstein Becker Green.

Following is an excerpt:

New York City retail and food service unions got a boost recently when Mayor Bill de Blasio signed an Executive Order titled “Labor Peace for Retail Establishments at City Development Projects.” Subject to some thresholds for the size and type of project and the amount of “Financial Assistance” received for a “City Development Project,” Executive Order No. 19 mandates that developers agree to a “labor peace clause.” In turn, the labor peace clause will compel the developer to require certain large retail and food service tenants to enter into a “Labor Peace Agreement” prohibiting their opposition to a “Labor Organization” that seeks to represent their employees. …

If the objective of the Executive Order is to assure labor peace by way of insulation from picketing, work stoppages, boycotts, or other economic interference, it is not clear how its selective targeting of retail and food service tenants occupying more than 15,000 square feet of space—and the exclusion of other tenants and union relations—delivers on its promise. There are multiple non-covered tenants and events that could occasion such on-site disruptions as picketing, work stoppages, off-site boycotts, or other economic interference.

As a threshold matter, there is no particular reason why a labor dispute with a tenant occupying space shy of 15,000 square feet—among them high-profile national businesses—somehow is less disruptive to the tranquility of a City Development Project than one directed at a tenant whose business model requires larger space.

Also, the Executive Order does not address the rights or responsibilities of either landlords or their tenants that are Covered Employers bound to accept a Labor Peace Agreement when faced with union demands for neutrality that go beyond the Executive Order’s “minimum” neutrality requirements. There could be a dispute over initial labor peace terms if a union, dissatisfied that the Executive Order’s Labor Peace Agreement secured only a Covered Employer’s “neutral posture” concerning representation efforts, were to protest to obtain more ambitious and advantageous commitments that are coveted objectives of union neutrality demands, such as …

Read the full Advisory here.

Louisiana Publishes New Poster for Hospitality Employers

LinkedIn Tweet Like Email Comment

The State of Louisiana has passed a new law requiring hospitality employers to display a poster in their workplace with information regarding the National Human Trafficking Resource Center (“NHTRC”) hotline. The law, which currently requires certain businesses (such as strip clubs, massage parlors, full service fuel facilities adjacent to an interstate highway or highway rest stop, and outpatient abortion facilities) to display information regarding the NHTRC hotline, has been expanded to include hotels.

Beginning August 1, 2016, all hotels in Louisiana must display a poster regarding the NHTRC hotline. The new law defines a “hotel” as “any establishment, both public and private, engaged in the business of furnishing or providing rooms and overnight camping facilities intended or designed for dwelling, lodging, or sleeping purposes to transient guests and does not encompass any hospital, convalescent or nursing home or sanitarium, or any hotel-like facility operated by or in connection with a hospital or medical clinic providing rooms exclusively for patients and their families.”

The law specifically exempts camps and retreat facilities owned and operated by non-profit organizations and bed and breakfasts.

The State of Louisiana has provided a model poster, but employers may choose to create their own, so long as it follows the following guidelines: the poster must, in 14 point bold font on an 8 ½ x 11 sheet of paper, state: “If you or someone you know is being forced to engage in any activity and cannot leave, whether it is commercial sex, housework, farm work, or any other activity, call the National Human Trafficking Resource Center hotline at 1-888-373-7888 to access help and services.” Employers must post this information in English, Louisiana French, and Spanish.

Employers who fail to display the poster may be fined up $50 to $500 for the first offense, $250 to $1000 for the second offense (if occurring within three years of the first offense), or $500 to $2500 for the third offense (if occurring within three years of the first offense).

The poster should be displayed along with all other workplace posters, including the new Fair Labor Standards Act and Polygraph Protection Act Posters, which were recently updated by the U.S. Department of Labor.

Things to Come at the NLRB: The General Counsel’s Plans

LinkedIn Tweet Like Email Comment

On March 26, the General Counsel (“GC”) of the NLRB signaled that he will be asking the Board to overturn or modify many precedents that negatively impact unions when it comes to organizing and collective bargaining. In Memorandum GC 16-01 (“GC Memo”), the GC directed the Regional Directors in the Board’s offices across the country, who are charged with investigating unfair labor practice (“ULP”) charges and deciding which cases to take to trial, to forward all charges involving issues identified in the GC Memo to the GC’s Division of Advice (“Advice”). It is clear that Advice will instruct the Regional Directors to issue complaints and to follow legal theories advanced by Advice as part of this coordinated effort. The areas identified in the GC Memo include the following:

Cases That Favor Union Organizing and Employee Rights in Non-Union Companies

Increased Employee Access to Employer Email Systems

Regional Directors are now required to refer any case involving the application of Purple Communications, 316 NLRB No. 126 (2014), absent a showing by the employer of “special circumstances” that justify specific limitations. In Purple Communications, the NLRB adopted a presumption that employees with work-related access to an employer’s email system can use the employer’s e-mail to discuss their terms and conditions of employment or union organizing while on non-working time. The GC indicates an interest in expanding access to systems other than email, limiting employer claims of special circumstances justifying restrictions on the use of employer email systems, and curtailing employers’ rights to review employees’ workplace email use on the grounds that such monitoring constitutes illegal surveillance of employee concerted activities protected by Section 7 of the National Labor Relations Act (“NLRA”).

Expansion of Weingarten Rights

The GC also seeks to review cases involving the applicability of Weingarten principles (the right of an employee to have a representative or witness at investigatory interviews that can potentially result in disciplinary action) to non-union workplaces. The NLRB previously held, in IBM Corp., 341 NLRB 1288 (2004), that an employee in a non-union workplace does not have a statutory right to be represented by a coworker in a disciplinary interview.

Broader Union Protection During Organizing Campaigns

Regional Directors must now refer to Advice all cases where remedies for ULP activity could include enhanced access to employer electronic communications systems and non-work areas and providing unions with “equal time” to meet with employees on company premises to respond to so-called captive audience speeches by employers to assembled workers during organizing campaigns.

Review of English-Only Rules

The GC will now more closely scrutinize cases addressing whether English-only rules violate Section 8(a)(1) of the NLRA by limiting employee rights to communicate with coworkers concerning terms and conditions of employment.

Redefining On-Demand Workers and Contractors as “Employees”

The GC’s interest in the employment status of workers in the on-demand, or gig, economy and independent contractors is another effort to expand the scope of the NLRA to individuals traditionally not considered employees.

Limitations on Employer Speech

Regional Directors must now refer to Advice all cases involving the application of Tricast Inc., 274 NLRB 377 (1985), which held that an employer does not violate the law by informing employees that unionization will alter the relationship between employees and management.

The GC also now requires a review of cases involving plant closure threats to a small number of employees in a large workforce. In Springs Industries, 332 NLRB 40 (2000), the NLRB held that a threat made to only one or two individuals is not presumed to have been widely disseminated and thus will not be presumed to have been learned of by all employees in the unit. The GC will likely ask the Board to abandon this rule.

The General Counsel Is Seeking to Dilute Employer Defenses to Strikes

Regional Directors have been directed to refer to Advice any case involving “an allegation that an employer’s permanent replacements of economic strikers had an unlawful motive” and is likely looking to curtail employers’ ability to protect itself from the impact of an economic strike. Notably, in a May 31 decision, the Board agreed with the GC’s argument that the right of employers to hire permanent replacements in an economic strike should be narrowed.

It has always been a principle of NLRA law that employees are protected from discrimination when they strike, but the NLRA does not handcuff an employer’s ability to function or continue production with newly hired strike replacements where employers exercise their right to permanently replace economic strikers. In Hot Shoppes, 146 NLRB 802 (1964), the NLRB held that it was not a ULP for an employer faced with an imminent strike threat to hire permanent replacements and to refuse to oust the replacements when strikers offered to come back to work, absent evidence of an independent unlawful motive. The GC is likely seeking to increase the use of the “unlawful motive” theory to challenge employer decisions to hire permanent replacements for economic strikers.

Whether these initiatives to overrule prior precedent will continue to succeed will play out in NLRB decisions depending largely on the appointments to the NLRB by the next President of the United States.

What Hospitality Employers Should Do Now

In addition to generally being mindful of the principles above, hospitality employers should do the following:

  • Evaluate whether policies limiting the use of company email by employees violate the ruling in Purple Communications, and revise such policies, as necessary, to conform to the ruling.
  • Review whether English-only rules limit employee rights to communicate with coworkers concerning the terms and conditions of employment. If such rules limit employee rights, then consider whether revising those rules to apply only to limited locations (like public areas) is appropriate.
  • Vet any statements to be given to employees regarding whether unionization will alter the relationship between employees and management.

A version of this article originally appeared in the Take 5 newsletter Five Key Issues Facing Employers in the Hospitality Industry.”

Are You a Joint-Employer with Your Suppliers? NLRB Examines Corporate Social Responsibility Policies

LinkedIn Tweet Like Email Comment

Our colleague Steven M. Swirsky, a Member of the Firm at Epstein Becker Green, has a post on the Management Memo blog that will be of interest to many of our readers in the hospitality industry: “Can Your Corporate Social Responsibility Policy Make You a Joint-Employer With Your Suppliers? The NLRB May Find That It Does

Following is an excerpt:

The National Labor Relations Board (NLRB or Board), which continues to apply an ever expanding standard for determining whether a company that contracts with another business to supply contract labor or services in support of its operations should be treated as a joint employer of the supplier or contractor’s employees, is now considering whether a company’s requirement that its suppliers and contractors comply with its Corporate Social Responsibility (CSR) Policy, which includes minimum standards for the contractor or supplier’s practices with its own employees can support a claim that the customer is a joint employer. …

Employers are well advised to review the full range of their operations and personnel decisions, including their use of contingent and temporaries and personnel supplied by temporary and other staffing agencies to assess their vulnerability to such action and to determine what steps they make take to better position themselves for the challenges that are surely coming.

Read the full post here.

Seventh Circuit: Title VII Does Not Cover Sexual Orientation Bias

LinkedIn Tweet Like Email Comment

Our colleague Linda B. Celauro, Senior Counsel at Epstein Becker Green, has a post on the Financial Services Employment Law blog that will be of interest to many of our readers in the hospitality industry: “Seventh Circuit Panel Finds That Title VII Does Not Cover Sexual Orientation Bias.

Following is an excerpt:

Bound by precedent, on July 28, 2016, a panel of the U.S. Court of Appeals for the Seventh Circuit held that sexual orientation discrimination is not sex discrimination under Title VII of the Civil Rights Act of 1964. The panel thereby affirmed the decision of the U.S. District Court for the Northern District of Indiana dismissing the claim of Kimberly Hively, a part-time adjunct professor at Ivy Tech Community College, that she was denied the opportunity for full-time employment on the basis of her sexual orientation.

The importance of the Seventh Circuit panel’s opinion is not in its precise holding but both (i) the in-depth discussion of Seventh Circuit precedence binding it, the decisions of all of the U.S. Courts of Appeals (except the Eleventh Circuit) that have held similarly, and Congress’s repeated rejection of legislation that would have extended Title VII’s protections to sexual orientation, and (ii) the multifaceted bases for its entreaties to the U.S. Supreme Court and the Congress to extend Title VII’s prohibition against sex discrimination to sexual orientation discrimination.

The Seventh Circuit panel highlighted the following reasons as to why the Supreme Court or Congress must consider extending Title VII’s protections to sexual orientation …

Read the full post here.

Navigating Federal and State Laws for Transgender Workers’ Restroom Access

LinkedIn Tweet Like Email Comment

Complying with employment law has become increasingly difficult given that various states and municipalities have passed legislation that seemingly contradicts federal guidance.[1] One state law that has been in the spotlight is North Carolina’s House Bill 2, the “Public Facilities Privacy and Security Act” (“HB2”), which was passed in an emergency legislative session on March 23, 2016, to overturn a local ordinance that was set to extend anti-discrimination protections to lesbian, gay, bisexual, and transgender (“LGBT”) individuals and would have allowed transgender individuals to use the restroom facilities that corresponded with their gender identity.

There are a number of legal challenges to these laws. Notably, the Department of Justice (“DOJ”) has filed a complaint, in United States v. State of North Carolina et al., against the state of North Carolina, the University of North Carolina (the largest employer in the state), and the North Carolina Department of Public Safety (“DPS”), alleging that they are discriminating against transgender individuals in violation of federal law as a result of the state’s compliance with, and implementation of, HB2.

Separately, Lambda Legal, the American Civil Liberties Union, the American Civil Liberties Union of North Carolina, and Equality North Carolina have jointly filed a lawsuit against North Carolina’s governor (Carcano v. McCrory), challenging HB2 in a North Carolina federal court. The complaint, brought by a student, employee, and professor at three separate North Carolina state colleges, alleges that HB2 is unconstitutional because it violates the Equal Protection and Due Process clauses of the Fourteenth Amendment by discriminating on the basis of sex and sexual orientation and invading the privacy of transgender people. The complaint also alleges that the law violates Title IX by discriminating against students and school employees on the basis of sex. The Carcano complaint alleges that “[e]mployers subject to Title VII also will violate the U.S. Equal Employment Opportunity Commission’s [EEOC’s] decree that discriminating against transgender people with respect to restroom use is impermissible sex discrimination.”

Following the news of these two lawsuits, Governor McCrory issued an executive order affirming the right of private-sector employers to establish their own restroom and locker-room policies. While this executive order alleviates the tension between state and federal law for private employers, public employers and employers that have restroom facilities for customers still face differing standards under state and federal law.

Indeed, the EEOC has offered specific guidance (“EEOC Guidance”) on restroom facility access rights for transgender employees that is contrary to the laws of North Carolina and other jurisdictions. The EEOC Guidance specifically refers to two cases addressing discrimination on the basis of gender identity, both of which offer direction for employers:

  • In Macy v. Dep’t of Justice (Apr. 12, 2012), the EEOC ruled that discrimination based on transgender status is sex discrimination in violation of Title VII.
  • In Lusardi v. Dep’t of the Army (Mar. 27, 2015), the EEOC held that denying an employee equal access to a common restroom corresponding to the employee’s gender identity is discrimination on the basis of sex.

The EEOC Guidance states that an employer cannot condition the right to use the restroom corresponding with the employee’s gender identity on the employee undergoing or providing proof of surgery or any other medical procedure, and an employer cannot avoid the requirement to provide equal access to a common restroom by restricting a transgender employee to a single-user restroom instead. See EEOC Fact Sheet: Bathroom Access Rights for Transgender Employees Under Title VII of the Civil Rights Act of 1964. Notably, the fact sheet states that contrary state law is not a defense under Title VII (citing to 42 U.S.C. § 2000e-7).

In addition to those protections promulgated by the EEOC, OSHA also recently issued guidance indicating that restroom access is a health and safety matter. Under OSHA’s sanitation standard, 29 C.F.R. § 1910.141, employers are required to allow employees prompt access to sanitary facilities. This standard is “intended to protect employees from the health effects created when toilets are not available.”

The OSHA standards, which laws such as HB2 appear to directly conflict, hold that employees should not be required to use a segregated facility apart from other employees because of their gender identity or transgender status. OSHA guidance also has several “model practices” that “all employees should be permitted to use the facilities that correspond with their gender identity.” OSHA advises that the best policies also provide additional options, which employees may choose, but are not required, to use. These include the following:

  • Single-occupancy gender-neutral (unisex) facilities
  • Use of multiple-occupant, gender-neutral restroom facilities with lockable single occupant stalls

The District of Columbia Office of Human Rights issued guidance in early June addressing restroom usage for transgender and cisgender employees. Washington, DC, enacted a law requiring that all single-stall restrooms be gender neutral. Even though this option is available to all employees, the DC guidance reiterates the position of the EEOC and OSHA that employers may not direct transgender employees to use only single-stall restrooms.

What Hospitality Employers Should Do Now

  • Comply with federal law even though it may contradict some state and municipal laws and until there is resolution in either United States v. State of North Carolina et al. or Carcano v. McCrory.
  • Consider creating policies or practices regarding transgender employees’ use of restroom facilities (including following OSHA’s guidance providing numerous restroom options, such as single-occupancy gender-neutral (unisex) facilities), and the use of multiple-occupant, gender-neutral restroom facilities with lockable single occupant stalls.
  • Conduct training for human resources and line managers so that they are aware that they may not require transgender workers to use a particular restroom.

A version of this article originally appeared in the Take 5 newsletter “Five Key Issues Facing Employers in the Hospitality Industry.”

[1] While this article focuses on restroom facilities access for transgendered workers, please note that in the hospitality industry, these issues are also relevant with regard to the appropriate use of restroom facilities for customers.

OSHA’s New Electronic Recordkeeping Rule: New Burdens for the Hospitality Industry

LinkedIn Tweet Like Email Comment

On May 12, 2016, the Occupational Safety and Health Administration (“OSHA”) published its long-awaited electronic recordkeeping rule (“final rule”). The final rule creates numerous new recordkeeping obligations and additional administrative burdens for hospitality and other employers. Many employers will now be required to submit injury and illness information to OSHA electronically. OSHA will then attempt to remove identifying information from the records and publish them on a searchable database on its website. The final rule also includes several new anti-retaliation provisions that provide new protections for employees reporting work-related injuries and illnesses.

The Basics

The final rule requires certain employers to electronically submit to OSHA the injury and illness information that they are already required to keep under existing regulations. Specifically, establishments with 250 or more employees that are currently required to keep injury and illness records must electronically submit information from OSHA Forms 300 (Log of Work-Related Injuries and Illnesses), 300A (Summary of Work-Related Injuries and Illnesses), and 301 (Injury and Incident Report). Establishments with 20 or more employees but fewer than 250 that conduct work in industries that OSHA considers highly hazardous must electronically submit information from Form 300A annually.

Importantly, hospitality is included in the list of industries that OSHA deemed highly hazardous. Entities within the hospitality industry subject to the requirements of the final rule include a laundry list of facilities, such as hotels, motels, casino hotels, hotel management services, health spas that offer accommodations, and tourist and motor lodges, just to name a few.

The final rule will be phased in. New anti-retaliation protections included in the final rule will become effective by August 10, 2016. All establishments required to submit electronic records must submit their annual Form 300A to OSHA by July 1, 2017. On July 1, 2018, establishments with 250 or more employees must submit Forms 300A, 300, and 301. Establishments deemed highly hazardous with 20–249 employees will continue to submit only Form 300A. Beginning in 2019, the submission deadline will change from July 1 to March 2. OSHA State Plans must adopt rules that are substantially identical to the final rule within six months of its publication.

Hospitality Employers’ Obligations to Employees

Hospitality employers must involve their employees in the injury and illness recordkeeping process by informing them of how to report a work-related injury or illness within the establishment and the procedure used by the employer to report such incidents to OSHA. Employers must establish “a reasonable procedure” for employees to report work-related injuries and illnesses promptly and accurately—that is, the procedure cannot have the effect of discouraging employees from reporting a workplace injury or illness. Accordingly, an employer must also inform employees that (1) they have a right to report work-related injuries and illnesses, (2) they will not be discharged or in any manner discriminated against for reporting work-related injuries and illnesses, and (3) the employer is legally prohibited from discharging employees or discriminating against them in any way for reporting a work-related injury or illness.

Hospitality Employers’ New Challenges and Concerns

The final rule presents numerous challenges and concerns for hospitality employers. First, OSHA has stated that it will use the information that it collects as employers comply with the rule to identify new bad actors—if an employer has a higher-than-average injury and illness rate, the chances of its establishment being visited by compliance officers will dramatically increase.

Second, although hospitality employers are required to submit the recordkeeping forms to OSHA on a secure web-based application, if the application is hacked, the personal information of countless employees could be exposed before OSHA has the opportunity to remove such information from the records. Once the forms are received by OSHA, the agency will “scrub” any personal identifiers from them and place them on a publicly available searchable database on OSHA’s website. This step also opens the door to an inadvertent disclosure of private employee information.

Third, the public exposure of work-related injury and illness information gives OSHA another avenue with which to continue its campaign of shaming employers that it believes are bad actors before they are able to defend themselves, as the press will have access to this information.

Fourth, the public dissemination of work-related injury and illness information will aid unions in targeting businesses for unionization—that is, unions will have unfettered access to the lists of businesses that have higher injury and illness rates and may, therefore, find employees more interested in becoming unionized.

Last, the final rule gives OSHA a new weapon against employers—broad discretion to issue citations if the agency considers any part of an employer’s procedures for reporting a work-related injury and illness to be “unreasonable.”

What Hospitality Employers Should Do Now

  • Train employees on the requirements of the final rule and when they go into effect.
  • Ensure that employees understand that they will not be retaliated against for reporting work-related injuries and illnesses and are, in fact, encouraged to report them.
  • Retrain the employee(s) responsible for injury and illness recordkeeping on the basics of recordkeeping and provide thorough training on the final rule with an emphasis on protecting personally identifiable information to the maximum extent possible while remaining in compliance with the new regulatory requirements.

A version of this article originally appeared in the Take 5 newsletter “Five Key Issues Facing Employers in the Hospitality Industry.”

Workforce Management Issues in Mergers and Acquisitions

LinkedIn Tweet Like Email Comment

With the financial crisis and recession behind us, mergers and acquisitions have picked up dramatically over the past several years. In 2015, more than 25,000 M&A deals were announced in the United States, valued at trillions of dollars, primarily involving companies in the hospitality, health care, pharmaceuticals, energy, and technology industries. This year and next, most financial experts foresee an increasing number of these transactions taking place.

In an M&A transaction, the buyer must determine whether it will acquire only the assets of the target company or acquire both the assets and liabilities of that company. Based on that determination, the transaction can be structured as an asset acquisition or a stock acquisition. In a stock transaction (including the typical merger), there is no technical change other than pure ownership. The new owner merely steps into the shoes of the selling shareholders and inherits all assets and liabilities of the business.

In an asset deal, however, a new owner may accept or reject specific assets and liabilities. While this structure typically leaves the buyer free to terminate many of the seller’s employees and bring in its own management team, there are circumstances under which an asset purchaser may nevertheless be liable if care is not taken.

Buyers and sellers alike should carefully consider the labor and employment implications of a proposed transaction and not merely focus on business and financial issues. Otherwise, the parties may walk into multimillion dollar class and collective action lawsuits, incur serious benefit plan obligations, and create unnecessary employee morale issues.

Some of the more serious issues facing hospitality entities might include employee misclassification (as independent contractors or as exempt white-collar employees not entitled to overtime pay), non-compete and trade secret agreements, union collective bargaining agreements, immigration matters, discrimination in employee layoff and retention, individual employment agreement issues, executive compensation plans, and federal and state facility closing and mass layoff laws.

When an M&A transaction is contemplated, in-house counsel and outside corporate counsel must consider all employment and labor implications of the transaction early in the planning process. As part of their due diligence, counsel for the buyer should solicit and acquire copies of, among other things, all of the target company’s individual employment contracts, executive compensation plans, employee handbooks and personnel manuals, union collective bargaining agreements, benefit plan documents, and information with respect to all of the target’s pending federal, state and local governmental employment lawsuits, administrative proceedings, and other matters.

From a hotel buyer’s perspective, all of the employment and labor implications should be considered quite early in the transaction process, while the buyer still has the opportunity to withdraw from the transaction. A buyer must decide whether it is willing to assume the target business’s labor and employment-related liabilities and union obligations (if any), and how these considerations might impact the purchase price. To accomplish its objectives, the buyer will have to carefully negotiate with the seller and then draft the necessary purchase agreement language to identify the significant assets.

Whether to buy a unionized hotel or restaurant will depend upon the strength and weaknesses of the unions involved, language in the collective bargaining agreements, and collateral obligations that might arise under any currently outstanding orders or from pending proceedings before the National Labor Relations Board (“NLRB” or “Board”). Further, in some locations, with respect to certain industries (e.g., the building service and maintenance industry in New York), local governments have enacted laws, rules, and regulations requiring an acquiring company to continue to employ the seller’s employees for 60 or 90 days. Pursuant to those laws, prospective buyers might not legally be able to bring in their own workforce to take over the acquired operations for many months, if at all.

The Employee Retirement Income Security Act (“ERISA”) creates significant potential liability upon an acquiring company with respect to multi-employer pension plans that have been created and maintained pursuant to the Taft-Hartley Act. For example, upon a hotel or restaurant shutdown or mass layoff, ERISA imposes upon buyers in some circumstances the obligation to absorb a withdrawal liability that normally would attach to a seller. Buyer’s counsel in these cases must carefully consider whether the buyer wishes to assume such liability and whether to insist upon a reduction in the purchase price to cover the potential cost of that liability. And, counsel for the seller, of course, will want to insure that any such liability is shifted to the buyer. In a stock transaction on the other hand, aside from the change in ownership, there is no legally cognizable change in the business. Thus, a withdrawal liability will not be triggered (although the new stock owner will inherit ongoing pension fund obligations). Once the decision has been made with respect to whether the transaction will be a stock or an asset transaction, labor and employment law counsel for both seller and buyer must pay careful attention to the drafting of the purchase agreement, its representations and warranties, indemnities, disclosures, and related matters.

Additionally, employers intending to downsize a workforce after an acquisition must pay particular attention to obtaining a census of employees to avoid allegations of selective discrimination in the process. Once the dust settles after an acquisition has been implemented, housekeeping and front-desk employees, managers, and others may find themselves facing a brave new world. The consequences of a restructuring often are unintended as to employee morale and employment policies. Employees treated with dignity are less likely to become class action plaintiffs than those quickly shown the door. In any subsequent litigation, jurors tend to be less sympathetic to employers that fail to consider the impact of the transaction upon employees and their families. Many of these issues should be dealt with upfront early during the sale and acquisition process.

As the U.S. economy rebounds and corporations pick up the pace of restructuring, acquisitions and mergers, it is essential that complex and subtle labor and employment implications of these transactions be considered and dealt with at an early stage, so as to avoid or limit potential liabilities.

What Hospitality Employers Should Do Now

As part of the due diligence process in any acquisition or merger, hospitality employers should do the following:

  • Have your employment counsel request from the company to be acquired or merged with:
  • all individual employment and union collective bargaining agreements, confidentiality and non-compete agreements, employee handbooks and personnel manuals, executive compensation plans, and benefit fund documents, including summary plan descriptions;
  • all files pertaining to any currently open or pending federal, state, and local governmental employment lawsuits and administrative proceedings, as well as to recently closed matters;
  • a complete census of current employees, their job titles, compensation levels, and, to the extent available in company records or by visual observation, their ethnicities, ages, disabilities, and other legally protected characteristics; and
  • information regarding the economic valuation of different properties, facilities, and related assets in order to target asking prices if a decision were to be made to dispose of any.
  • Assemble a team of legal and human resource professionals to focus on the details of the acquisition or merger.
  • Consult with outside labor and employment law counsel with respect to any or all of the above matters.

A version of this article originally appeared in the Take 5 newsletter “Five Key Issues Facing Employers in the Hospitality Industry.”

NLRB Multiplies Impact of Expanded Joint Employer Test: Requires Bargaining in Combined Units Across Multiple Employers

LinkedIn Tweet Like Email Comment

Our colleagues Adam C. Abrahms and Steven M. Swirsky, attorneys at Epstein Becker Green, have a post on the Management Memo blog that will be of interest to many of our readers in the hospitality industry: “NLRB Drops Other Shoe on Temporary/Contract Employee Relationships: Ruling Will Require Bargaining In Combined Units Including Employees of Multiple Employers – Greatly Multiplies Impact of BFI Expanded Joint Employer Test.”

Following is an excerpt:

The National Labor Relations Board (“NLRB” or “Board”) announced in its 3-1 decision in Miller & Anderson, 364 NLRB #39 (2016) that it will now conduct representation elections and require collective bargaining in single combined units composed of what it refers to as “solely employed employees” and “jointly employed employees,” meaning that two separate employers will be required to join together to bargain over such employees’ terms and conditions of employment.” …

The potential for confusion and uncertainty is enormous. In an attempt to minimize these concerns, the Board majority stated that the so-called user employer’s bargaining obligations will be limited to those of such workers’ terms and conditions that it possesses “the authority to control.”

Read the full post here.