(This column recently appeared in Hotel News Now where Randall Pullen is a columnist for their on-line publication)
I attended the annual Hospitality Law Conference recently concluded at the Houston Omni Hotel. Besides meeting with many of the leading labor attorneys across the country, it is an opportunity to learn about the latest legal issues and rulings that are affecting hotel human resources and labor markets. This year was no different; there are a lot of new developments that are or will impact the hospitality industry now and in the near future.
It would take several columns to just deal with the many unknowns of the Patient Protection and Affordable Care Act also known as Obama Care, or the proposed changes to the immigration laws that are now being discussed in Congress, or with the many labor union contract negotiations scheduled to occur in 2013. While all three of these issues are very important to the Hospitality industry, I am going to focus on the upcoming negotiations between hotel companies and the labor union, UNITE HERE. There is much that can be learned from the last round of negotiations to prepare for this new round of union contract negotiations.
UNITE HERE represents the most hotel workers of any union with over 100,000 hotel workers in almost 1,000 hotels across the country. The union currently has contracts with several of the major hotel companies that expire later this year. The negotiations for the current contracts started in 2009 when the prior contracts expired, and were not signed until last year. The negotiations were contentious and drawn out due to many of the contracts expiring during the great recession. Management companies were looking for wage freezes, longer work hours as well as employees picking up a portion of the healthcare premium costs. Now, a year later the process will start all over.
In the prior negotiations, UNITE HERE made several changes in the tactics it used. The most notable was negotiating on a regional or national level with individual hotel companies instead of using the multi-employer model market by market previously used. Once they achieved a concession from one employer, they would use it in negotiations with the other companies to accept a similar concession. Although carrying on multiple negotiations at one time made it more complex, the tactic appeared to work as they played management companies off against each other as well as in individual markets.
Also notable in several current contracts is the requirement that a successor company purchasing the hotel must honor the existing contract with the union. This clause was added due to the many sales of hotels over the last 5 years where the contracts with the unions were ended and employees were rehired without a contract. This expanded interpretation of succession was approved by the NLRB, which is quite different to how succession is typically determined. There have already been a number of hotel sales that have been cancelled due to this requirement.
Going forward this year, we will see a number of new tactics as well as some that were tried in the last round and will likely be front and center this time. Management companies successfully used poor financial performance as a tactic, which will not be available this time. The strong recovery of the hotel industry with record occupancies and continued strong financial performance forecasted for 2013 and 2014 generally will preclude such a defense, even though RevPAR still lags. For those markets not recovering as quickly as the major markets, hotel companies that make this argument will likely have to produce financial statements for all affiliated companies to prove there is a financial hardship.
We have already begun to see the counter arguments being made by the unions. They are claiming that hotel companies have recovered and are making record profits. The only ones left out of the recovery are the workers. A good example of this tactic is what occurred in Seattle last April. In a report issued by SAGE (a union supported non-profit), Seattle Hotels Do Not Pay a Living Wage, they claimed that many hotel workers in downtown Seattle did not earn a living wage, had no benefits and a housekeeper’s job was more dangerous than working in a coal mine. Of course none of these claims were true, but it became a national news story. The AH&LA, with the help of WageWatch, was able to refute all of these claims. No doubt, we will see this played out again and again this year and next as negotiations drag on into 2014.
UNITE HERE will intensify its efforts to negotiate one-on-one with management companies. The example they have made of Hyatt Hotels over the past 2 years is what awaits other management companies who refuse a union contract for all their hotels. Flash mobs (Lady Gaga Flash Mob), boycotts (Hyatt Hurts) and employee lawsuits brought against individual hotels (Hyatt Settles Complaint) with the backing of the NLRB await those who don’t play ball.
Labor lawyers also believe a number of other provisions will become more mainstream in negotiations including: expanded successor language to require new owners to honor existing union contracts; more limitations on subcontracting of services including such things as prepackaged food, wedding cakes, arguing that such purchases equate to subcontracting culinary services; extended length of contract to 7 years; and significant wage increases to “catch-up” with wage freezes implemented during the recession.
Looking ahead, hotel companies will face an entirely new bargaining landscape in union negotiations this time around. Some of the lessons learned from the prior contract negotiations will likely shape the new negotiations, bargaining goals, concessions, and tactics employed. As more unions move toward the UNITE HERE model of nationally-focused bargaining strategies, employers that operate in multiple markets will be forced to take a “big picture” approach to their negotiations as well as to unique circumstances in individual markets. Smaller hotel companies that operate in a few markets or in a single market will be forced into accepting provisions negotiated with the major hotel companies or face the consequences.
Randall Pullen is President and CEO of WageWatch, Inc., which he founded in 1999 to design and implement Web-based wage and benefit surveys. Mr. Pullen’s work experience includes over 30 years of software development and consulting to the hotel industry. Mr. Pullen is a certified public accountant and a member of the AICPA. He earned a Bachelor’s Degree in mathematics and an MBA from Arizona State University. He serves on the boards of a number of companies and associations, and is currently the Treasurer of the Arizona Housing Finance Authority.
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