Identifying, mitigating joint-employer liability remains crucial for hotels

It’s possible to have too much authority over specific employees, opening owners and operators to new liability concerns.

In a 2015 ruling against Browning-Ferris Industries, the National Labor Relations Board determined that two or more entities are joint employers of a single workforce if they are both employers within the meaning of the common law and “they share or co-determine those matters governing the essential terms and conditions of employment.” 

Since then, every industry with a franchisor/franchisee relationship has been forced to re-evaluate its status as a joint employer, and due to hospitality’s reliance on hiring contractors to maintain operations it is at risk for stepping on the joint employment landmine. So how do hotels know where—to and where-not—to step? 

According to Don Schroeder, partner at international law firm Foley & Lardner, it is crucial for an employer to determine who is in control with regard to employees. “Now is a good time for both parties in a relationship to review their contracts in view of the [Browning-Ferris] decision as it is currently constituted,” he said. “Ensure you are consistent in how you apply the contractual provisions to the extent that you can avoid blurring the line between the two entities.” 

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The relationship between franchisors and franchisees is the most apparent for consideration with regards to joint employment concerns, but Marta M. Fernandez, partner, co-chair, partner, labor & employment department for business law firm Jeffer Mangels Butler & Mitchell, said it is a hotel’s relationship with smaller contractors that can become the most problematic over time. In addition, she said hotels that outsource aspects of their business to outside companies pose significant joint-employer risks as an operator continues to operate, but attempts to exclude the potential for employee-related liabilities. 

“The test for joint employment is hyper-focused on the day-to-day facets of the employee-employer relationship, not the structure of the management agreement or what an outsourcing agreement might say,” Fernandez said. 

Fernandez said that active owners sometimes can demand to have a say in operations over top management teams in place at a property, such as GMs, food-and-beverage directors and assistant GMs. This can be an issue because if joint employment is found in a property that is associated with a union, it could open up other non-unionized properties within that owner’s portfolio to be held to the same standards. 

“Hotels are ripe for this kind of situation, where the owner/operator gets blindsided and somehow sucked into labor agreements in which they are not signatories to,” Fernandez said. “The union, in this case, could hold them accountable for a separate issue, open the property to card check neutrality agreements or collective bargaining agreements.” 

For operators seeking to mitigate the possibility of a joint-employer situation being found at their properties, Andrea M. Kirshenbaum principal at attorneys Post & Schell, P.C., said to have the entity overseeing operators provide general templates as to what should occur on property, as opposed to frequent, specific mandates. 

“The less actual or potential control the better [because] even high degrees of potential control over employees not directly working for a specific entity could be a red flag,” Kirshenbaum said. “The less control that a franchisor has, the fewer specific mandates and requirements they provide, that would help mitigate risk.”