Philadelphia Hotel, Airport Hospitality, and Event Center Businesses Face Significant New Recall and Retention Obligations

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Philadelphia has imposed significant new recall and retention obligations on hotel, airport hospitality, and event center businesses as they struggle to recover in this uncertain COVID-19 economy.  The new obligations are contained in a legislative package, styled as the Black Workers Matter Economic Recovery Package, which became law in January 2021.1  The new laws are expected to affect over 12,000 employees in Philadelphia.

The legislation is similar to laws recently enacted in Minneapolis, Baltimore, the District of Columbia, and the California cities of Los Angeles, Carlsbad, Pasadena, and Oakland.  Similar legislation is being considered in other jurisdictions, including Chicago and Nevada.  Employers in the hotel, hospitality, and travel industries should remain watchful for the emergence of these new laws in other jurisdictions and ensure compliance with those in place. 

The Travel and Hospitality Worker Recall and Retention Ordinance

The Travel and Hospitality Worker Recall and Retention Ordinance imposes recall obligations on airport hospitality operations, hotels, and event center employers operating within the City of Philadelphia.  It requires covered employers to offer certain employees who were laid off due to the COVID-19 downturn any position that becomes available for which the laid-off employee is qualified.  The Recall and Retention Ordinance specifies the order in which offers must be made and how long the laid-off employee has to consider the offer. Covered employers must give notice to laid-off employees within 30 days if they hire someone other than a laid-off employee due to lack of qualifications.

Covered Employers

Covered enterprises under the Recall and Retention Ordinance include airport hospitality operations, hotels, and event centers, defined as follows: 

  • Airport Hospitality Operation:  a business that is located in the Philadelphia International Airport and prepares, delivers, inspects, or provides any service in connection with the preparation of, food or beverage for aircraft crew or passengers at the Philadelphia Airport, or that provides food and beverage, retail, or other consumer goods or services to the public at the Airport. Air carriers certified by the Federal Aviation Administration are not covered.     
  • Hotel:  a residential building, and ancillary premises, that are designated or used for lodging and other related services for the public, including, but not limited to, food and beverage preparation and service and meetings, as well as tradeshows and conventions, and that contains 50 or more guest rooms.    
  • Event Center:  a structure containing more than 15,000 seats used for public performances, sporting or similar events. It includes concert halls, stadiums, sports arenas, and convention centers.  Importantly, “event center” is defined to include any contracted, leased, or sublet premises “connected to or operated in conjunction with an event center’s purpose,” including food preparation facilities, concessions, retail stores, restaurants, bars, and structured parking facilities.

The Recall and Retention Ordinance applies even if a covered employer (a) undergoes a change in ownership (or asset purchase) but the enterprise conducts the same or similar operations as before January 31, 2020; (b) undergoes a change to its form of corporate organization after January 31, 2020; or (c) the employer relocates its operations at which it employed any laid-off employee before January 31, 2020 to a different location within Philadelphia.     

Covered Employees

The Recall and Retention Ordinance applies to certain laid-off employees.

“Employee” is defined as those who work for or at a covered enterprise within the geographic boundaries of the City of Philadelphia, whose job duties include the provision of retail trade services or food or hospitality services, and who are:

  • Overtime Eligible:  under state or federal law; or are
  • Commissioned employees in a retail or service establishment:  those who provide food and beverage service and make more than 50% of their income from service charges or commissions. This includes, for example, banquet service employees who are classified as overtime exempt under Section 7(i) of the Fair Labor Standards Act and the Pennsylvania Minimum Wage Act.

Although the law applies only to employees and not to independent contractors, employers bear the burden of proof that an individual is an independent contractor under applicable law. 

A “laid-off employee” is defined as an employee who was employed during a one-year look-back period from the onset of the COVID-19 pandemic, who then was separated from service due to the impact of the pandemic.  Specifically, laid-off employees includes those who were employed by a covered employer for at least six months between January 31, 2019, and January 31, 2020, and whose last separation from active service was between January 31, 2020, and January 31, 2022, and whose separation was due to a government shutdown order, lack of business, reduction in force, or other economic, non-disciplinary reason.  Laid-off employees also include seasonal employees working at event centers if they were: employed at an event center for at least 12 weeks between January 31, 2019, and January 31, 2020, and then were not scheduled by the employer for customary seasonal work between January 31, 2020, and January 31, 2022, due to a government shutdown order, lack of business, reduction in force, or other economic, non-disciplinary reason.2

Laid Off Employees Have a Right of Recall

The Recall and Retention Ordinance requires covered employers to offer laid-off employees positions that become available for which they are qualified.  Laid-off employees are deemed qualified for an available position if they: (a) held the same or similar position at the time of separation from active service, or (b) could become qualified by receiving the same training the covered employer would provide a new employee hired into the same position.  If a covered employer hires someone other than a laid-off employee on the basis that a laid-off employee is not qualified for the available position, the covered employer must, within 30 days, provide the laid-off employee a written notice identifying the individual(s) hired into the position and the reason for the decision. 

The Ordinance dictates which laid-off employees have priority in receiving offers.  A covered employer must first make offers of available positions to those laid-off employees who held the same or similar position at the time of their layoff.  If none of those employees accepts the open position, the covered employer must then offer the position to those laid-off employees who would be qualified for the position through the same training that would be provided to a new hire.  Where multiple laid-off employees qualify to receive an offer, priority is given to those with the greatest length of service with the covered employer, defined as the total of all periods of time the laid-off employee was in active service, including any leave or vacation time.   

Covered employers must make offers to laid-off employees through the medium by which they most typically communicate with employees, including by email, text message, or other electronic communication.  The method of communicating the offer must allow laid-off employees to confirm receipt of it, and covered employers must be able to show that laid-off employees confirmed receipt of offers. 

The Ordinance also dictates how long offers must be left open, and the time by which the laid-off employees must begin work after accepting an offer.  Covered employers must provide at least five days from the laid-off employee’s confirmed receipt of an offer to accept or decline it.  If an offer is accepted within the five-day period, the laid-off employee has seven days from the end of the five-day period to return to work, unless an agreement is reached on a different period.  The Ordinance is silent on a covered employer’s obligations if a laid-off employee does not confirm receipt of an offer.  This may be clarified by regulation.

Significantly, a covered employer is permitted to make simultaneous conditional offers to laid-off employees for an available position.  Such offers must be conditioned on application of the priority system set forth in the Ordinance.  If the work needs to be done before the end of the five-day period, covered employers may temporarily fill the position with a laid-off employee who accepts a conditional offer, but the employer must comply with the priority system in permanently filling the position once the five-day offer period ends. 

No Provision for Waiver of The Ordinance in a Collective Bargaining Agreement

Significantly, unlike many Ordinances imposing obligations on employers in Philadelphia, the Recall and Retention Ordinance has no provision permitting waiver of its provisions in a collective bargaining agreement.  As a result, the obligations created by this Ordinance may significantly impact the bargain struck in existing collective bargaining agreements and complicate administration of seniority provisions that differ from the rehiring priority scheme in the Ordinance.

Anti-Retaliation Provision

Covered employers are prohibited from taking any adverse action against any individual for exercising their rights under the Ordinance, for participating in proceedings under it, or opposing any practice that it prohibits.  Significantly, the Ordinance creates a “rebuttable presumption” of retaliation in the case of an adverse employment action that occurs within 60 calendar days of the employee’s exercise of rights under the Ordinance. 

Enforcement and Penalties and Sunset Provision

The Recall and Retention Ordinance allows employees to bring individual or group actions in court for violations.  Before filing in court, however, employees must submit a complaint to the Philadelphia Department of Labor, and the Department must provide a certification to employees of a determination of reasonable cause to go forward.  If a court finds a violation, it may award injunctive relief (including rehire), back pay (including the value of lost benefits), compensatory damages, and attorneys’ fees and costs.  Penalties of up to $1,000 per employee per day of violation may be imposed.  

The Ordinance’s provisions will expire on December 31, 2025.  

Retention of Hotel Workers Ordinance

The new Retention of Hotel Workers Ordinance requires hotels in Philadelphia that undergo a change in control to make job offers for open positions to certain employees and to provide job protection to the employees it hires for 90 days.   

Coverage

The following definitions determine coverage under the Ordinance.

  • Hotel:  The Retention of Hotel Workers Ordinance applies to a business that is a “hotel,” defined the same as under the Travel and Hospitality Worker Recall and Retention Ordinance, discussed above.
  • Change in Control:  A “change in control” is any sale, assignment, transfer, contribution, or other disposition of a hotel, or of all or substantially all of the assets used in the operation of a hotel, or a discrete portion of a hotel, that continues to be operated as a hotel following disposition. 
  • Incumbent and Successor Hotel Employers: An “incumbent hotel employer” is defined as the entity that owns, controls, or operates a hotel prior to a change in control.  “Successor hotel employer” is the entity that owns, controls, or operates the hotel after the change in control.  
  • Eligible Employee:  Eligible employees include any individual (who is not a managerial, supervisory or confidential employee) who performs work at a hotel, whose primary place of employment is a hotel that undergoes a change in control, and whose length of service (defined as the total of all periods of time during which the employee has been in active service, including leave) with the incumbent hotel employer is at least six months in the time period prior to the execution of the transfer document (defined as the purchase agreement or other document that creates a binding commitment to effect a change in control).  this includes workers who are employed by an entity with which the incumbent hotel employer contracts to provide services at the hotel, such as a staffing agency. 

Obligation to Provide / Post Notice of the Change in Control

Within five business days of execution of a transfer document, the incumbent hotel employer must notify its employees of the change in control by posting written notice of it in a conspicuous location readily viewable by employees and applicants.  The notice must remain posted during any closure of the hotel and for six months after the hotel begins operations under the successor hotel employer.  If the hotel is closed or substantially reduced in operations at the time the transfer document is executed, the incumbent hotel employer must send notice to eligible employees to their last known mailing address, and by email and text message if possible. 

The notice must contain the names of both the incumbent hotel employer and the successor hotel employer, their contact information, and the effective date of the change in control. 

Incumbent Hotel Employer Must Provide Eligible Employee List to Successor Hotel Employer

In addition to posting notice, the incumbent hotel employer must, within 15 calendar days after the transfer document is executed, provide the successor hotel employer the name, address, date of hire, and occupation classification of each eligible employee.  “Occupational classification” is undefined in the Ordinance, but is likely to be defined by regulation.

Successor Hotel Employer Must Maintain and Follow a Preferential Hiring List and Retain Eligible Employees for at Least 90 Days, When it Must Issue a Written Performance Review

The successor hotel employer must maintain a preferential hiring list of eligible employees based on the information provided by the incumbent hotel employer.  For six months following execution of the transfer document, the successor hotel employer must extend employment opportunities to the individuals on the preferential hiring list for all positions established.  The offer of employment must be in writing and remain open for 10 days.

If, within the six-month period following execution of the transfer document, the successor hotel employer determines that it requires fewer employees than those employed by the incumbent hotel employer, then the successor hotel employer must first offer available positions to eligible employees in the same occupational classification with the greatest length of service with the incumbent hotel employer. 

If a successor hotel employer makes an offer of employment to an eligible employee, the successor hotel employer must retain written verification of the offer for at least three years from the date of the offer.  The verification must include the name, address, date of offer, and occupation classification of each eligible employee. 

Significantly, a successor hotel employer must retain each eligible employee it hires for at least 90 days from when the employee begins work for the successor hotel employer.  The successor hotel employer may not discharge the eligible employee within the 90-day period without cause.  The law provides no detail on what constitutes “cause,” but this may be clarified by regulation.  At the end of the 90-day period, the successor hotel employer must provide a written performance evaluation of each retained eligible employee and maintain a copy of the performance evaluation for at least three years.    

Exemption for Collective Bargaining Agreement

The provisions of the Retention of Hotel Workers Ordinance may be waived in a collective bargaining agreement, but only if the waiver is explicitly set forth in clear and unambiguous terms. 

Anti-Retaliation Provision

The Retention of Hotel Workers Ordinance has an identical anti-retaliation provision to the one contained in the Travel and Hospitality Worker Recall and Retention Ordinance, discussed above. 

Enforcement and Penalties

Unlike the Travel and Hospitality Worker Recall and Retention Ordinance, the Retention of Hotel Workers Ordinance has no requirement that employees first file a complaint with Philadelphia Department of Labor before filing a lawsuit in court.  If a court finds a violation, it may award injunctive relief (including reinstatement), back pay (including the value of lost benefits), compensatory damages, and attorneys’ fee and costs against the employer.  Penalties of up to $1,000 per employee per day of violation may be imposed. 

Conclusion

The obligations imposed by the new Travel and Hospitality Worker Recall and Retention Ordinance and the Retention of Hotel Workers Ordinance present significant compliance challenges to hotel, hospitality, and travel industry employers as they struggle to recover in the COVID-19 economy.  Employers that do not follow the Ordinances’ required steps regarding notice, retention, recall and rehiring could face steep penalties.  For those employers with unionized workforces, the new obligations may conflict with processes, practices, seniority rosters, and recall rules previously negotiated.  For non-unionized employers, the focus on seniority in hiring will require significant adjustment.  Hotel, airport hospitality, and event center businesses should carefully review these requirements as workers are called back to work and in advance of any change of control.

 

Footnotes

1 The legislative package introduced two new Ordinances – the Travel and Hospitality Worker Recall and Retention Ordinance and the Retention of Hotel Workers Ordinance, which are discussed in this article.  The third item in the legislative package was an amendment of the Protection of Displaced Contract Workers Ordinance.  The amendment extended that Ordinance’s protections to employees who are displaced by the outsourcing of their jobs to service contractors for security, janitorial, building maintenance, food and beverage, hotel services, or health care services, and is discussed in a separate article. 

2 “Customary Seasonal Work” is defined as “work performed by an employee at an event center during approximately the same part of each calendar year, such as summer or winter.” 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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