Owners of the tony Hotel Bel-Air in Los Angeles have had a very expensive lesson in how not to navigate the legal obstacles facing any unionized employer wishing to shed its union obligations. In an 11-plus-year legal odyssey that’s still not over, the hotel’s owners have come up on the losing end of National Labor Relations Board (NLRB) and court rulings over the tactics employed following a two-year closure for renovations. Here is what happened.
The Labor Law Principles: Many employers erroneously think that the employer has a say in whether the business continues to be unionized. In actuality, the National Labor Relations Act (NLRA) prohibits an employer from severing ties with a union representing its employees, absent objective evidence that a majority of the unionized employees no longer wish to be represented by the union. Even then, this cannot be accomplished in most cases where there is a union contract in effect.
The Hotel Bel-Air tried to leverage the hotel’s intended two-year closure for renovations to do just that. The hotel's union contract was set to expire during the renovation. UNITE HERE! Local 11, the hospitality labor union that represents most of the hotel’s hourly employees, fought back by filing unfair labor practice charges with the NLRB challenging the hotel’s actions. This commenced an 11-plus-year legal fight which the hotel eventually lost each step of the way. The NLRB ruled that the hotel illegally tried to shed its ties with the union, with the most recent ruling coming last month from three Trump appointees to the NLRB.
Background. In July 2009, the five-star hotel announced to the union that it would be closing on September 30, 2009 for 18 to 24 months to renovate the property. As the NLRA requires, the hotel commenced bargaining with the union over the “effects” of the closure on its unionized workforce. Typically, such discussions address severance pay and the recall rights of employees upon the hotel’s resumption of operations.
These bargaining discussions stalled over whether the laid off union employees would be recalled to their prior jobs when the hotel reopened. Seeing little reason to continue the negotiations that had been ongoing for almost a year, the hotel shut down the discussions without having concluded a deal. That was their first mistake.
The law requires an employer in this situation to continue bargaining with a union either until an agreement is reached or until the employer in good faith determines that further bargaining would be fruitless. If a true bargaining impasse is reached, an employer may implement its final offer. Seasoned collective bargainers know that this is a treacherous legal standard and that quitting talks too soon can upend any employer actions which follow. That is exactly what happened here.
After the hotel declared an impasse and implemented its final offer, which the union had rejected in April 2010, the union responded by filing a charge with the NLRB alleging that the hotel cut off the bargaining prematurely. The hotel’s final offer included severance pay for employees that signed a waiver of their recall rights. Although at least 179 of the 220 bargaining unit employees accepted the severance pay and signed the waiver, the NLRB ended up invalidating all of those agreements because the hotel pulled the plug on the bargaining too soon. Some four years later, in a 2014 ruling, the NLRB ordered the hotel to rescind the employee waiver agreements and to recommence bargaining with the union over the effects of the hotel closure. The hotel refused to do so and appealed that order in court, where it lost again. In 2016 the U.S. Court of Appeals upheld the NLRB order.
Reopening the Hotel. Meanwhile, in preparing to reopen the hotel in October 2011, management held a job fair to fill 306 positions. Approximately 172 former employees (all union members) applied, but only 24 were hired. The hotel implemented new wage rates, benefits, and other terms and conditions of employment, and refused to recognize and bargain with the union.
Once again, Local 11 filed an unfair labor practice charge against the hotel. The union claimed this time that the former union members were purposely de-selected to ensure that a majority of the post-renovation workforce was not made up of former (union) employees. Under established legal principles, it is illegal to refuse to hire a job applicant because of their union ties. The union claimed that the hotel’s prior work force was indeed qualified to fill the positions they had vacated due to the temporary shutdown and that the hotel’s refusal to hire them was a blatantly illegal effort to ensure that fewer than 50% of the workforce were former union members. The union asserted that it was patently absurd to think that most of the long-term union employees became unqualified to do their former jobs during the renovation. To add to the pressure on the hotel, the union and some of the former employees picketed the hotel and promoted a boycott of the employer’s luxury hotel portfolio.
Discriminatory Hiring. Due to delays in the litigation in the first NLRB case (over the hotel’s premature end to the effects bargaining), the trial in the second case was postponed until 2017. The hotel had been open with new employees for almost six years by that time. During the second trial, an HR manager admitted under cross examination that the hotel’s preparations for reopening included “preventative kind of work” to ensure that employees would not need to be represented by a union. In finding that the hotel acted unlawfully, the NLRB administrative law judge pointed to the HR manager’s testimony and the hotel’s “clearly preposterous” reasons for not rehiring employees. Examples included the hotel claiming that many former bargaining unit employees:
- “lacked minimum skill level” for the positions for which they applied, even though they had successfully performed those same positions at the hotel for 5 to 25 years;
- “demonstrated unacceptable job stability,” when they had successfully worked for the hotel in the jobs for which they were reapplying for 10 to 20 years.
Further pointing to the flimsiness of the hotel’s proffered excuses for not hiring the incumbents, evidence presented at trial showed that nearly all the former bargaining unit employees had received positive job evaluations prior to their layoff. Faced with this compelling evidence, the judge had no trouble finding it incredible that the hotel would opt to hire unknown, less qualified candidates over known, qualified candidates. The Board unanimously agreed with the judge’s conclusions.
Heavy Price to Pay. The Board ordered the hotel to recognize and bargain with Local 11, to offer employment to all employees that it failed to rehire, and to make all the former employees “whole” (i.e., pay to them the wages and benefits they did not receive, less earnings received from replacement employment) because of the hotel’s actions. It also ordered the hotel to pay the union’s benefit funds contributions for the entire time since 2011, to pay interest on all sums owed, to reimburse employees for their expenses in searching for interim work, and to compensate employees for any adverse tax consequences of receiving a lump sum payment of backpay.
On February 3, 2021, the hotel filed yet another appeal in court to challenge the Board’s most recent order. Absent success in that appeal, the hotel’s financial obligations under the NLRB order will only increase.
Significantly, even if the hotel’s hiring decisions had been found to be lawful, the strategy to sever ties with the union was likely doomed before it began. As the judge explained, the number of employees rehired was “actually irrelevant” to the issue of union representation because there is a “rebuttable presumption” that the union enjoyed majority support after expiration of its collective bargaining agreement with the hotel. Thus, absent objective evidence that a majority of the employees no longer desired to be represented by the union, the hotel was not at liberty to end the relationship.
Employers wishing to end their relationship with the union representing their employees should heed this case and get expert legal assistance to understand the great many legal landmines which lie before it. The law is set up to ensure that the union remains in place following a temporary closure or even upon the sale of the business. While there is a narrow path to accomplish this objective in certain circumstances, doing so raises many complex legal issues which must be managed, as this employer found out the hard way.
If you have any questions about the matters discussed in this issue of Compliance Matters, please call your firm contact or visit us online at www.brgslaw.com.
Richard S. Rosenberg
Matthew T. Wakefield
Ballard Rosenberg Golper & Savitt, LLP