What the fight for a small hotel in Gowanus says about HTC’s future

Perfect storm of circumstances spurred 9-month-long fight with another union and a developer over just 30 employees

TRD New York /
Jan.January 31, 2019 07:00 AM

Marc Freud (left) and Peter Ward arm wrestling in front of Fairfield Inn at 181 3rd Avenue in Brooklyn (Credit: Marc Freud, Hotel Trades Council, iStock, and Google Maps)

The New York Hotel and Motel Trades Council (HTC) is riding high these days. A few months after securing a City Council vote to restrict Airbnb in the city, New York’s largest hotel union received more good news last month when the Council voted to put a damper on hotel development in light manufacturing zones, where a growing number of the city’s hotels are built.

Despite these recent successes, HTC still has an Achilles’ heel in the outer boroughs. While HTC represents over 40 percent of Manhattan hotels, it covers just 4 percent of hotels in Brooklyn and Queens – seven out of more than 180, according to an analysis by The Real Deal.

That’s partly because HTC has deliberately sidestepped those areas, as it weighs spreading its resources across a rapidly increasing number of new hotels in the city.

But in March, the Hotel Trades Council did something highly unusual when it attempted to organize 30 employees of the Fairfield Inn and Suites by Marriott at 181 Third Avenue in Gowanus, Brooklyn, which lies in precisely the same type of zoning area the union wants the city to crack down on.

After nine months, two votes, a few accusations of intimidation and several procedural miscues, the Gowanus case made it all the way to Washington, D.C., where the hotel developer Troutbrook Company’s last-ditch attempt to overturn a successful unionization vote was finally struck down at National Labor Relations Board (NLRB) headquarters.

The Gowanus case opens a window into the sort of drawn-out disputes HTC might face throughout the outer boroughs, if it devoted the time and resources to organizing them. It also helps explain the thinking that underlines HTC’s push to severely limit the development of new hotels in these areas: if they aren’t likely to gain members in light manufacturing zones, it’s better that there be no hotels there at all. HTC declined to comment for this story.

A fragmented landscape

In the early 2000s, hotel unions nationwide “made a decision that it was a better strategy to go top-down, and try to organize from the brand level, than to try and convince employees and deal with a management campaign” at individual hotels, said David Sherwyn, a professor of hospitality human resources at Cornell University. These days, the hotel industry’s increasingly dispersed franchisee market makes that strategy much more difficult to pull off.

The grueling fight to convince individual employees at the Gowanus hotel represents a number of firsts for the union. If HTC succeeds in securing a union contract, it would be the the only outer borough union hotel located in a light manufacturing (M1) district – an area where hotel construction is likely to be all but shut down by special permit requirements.

It’s also the first time HTC had sought to organize employees at an outer borough hotel via secret ballot election. The previous handful of HTC wins in Brooklyn, such as the unionization of InterContinental Group’s EVEN Hotel on Nevins Street last year, avoided the bureaucratic headache of a NLRB election by resorting to a process called “card check.”

Card checks, where union support is tallied over a longer period of time and without the privacy of a secret ballot, are often criticized as “undemocratic” by anti-union right-to-work advocates. Employers are not universally required to recognize card checks unless they are party to an agreement that would require them to do so—which is exactly the kind of agreement HTC has in place with a large segment of the Manhattan hotel industry.

“It’s significantly more work, and it’s significantly harder to be successful,” Sherwyn said of the traditional NLRB card check election process. “Because once the election is set, the employer can start arguing and campaigning against the union, and the union will lose support. Card check neutrality allows unions to give their side of the story with no counter, and elections allow both sides.” While unions will argue that management intimidates and threatens employees to sway the election, employers will argue that unions simply don’t have much to sell, Sherwyn said.

HTC’s current industry-wide agreement with landlord group the Hotel Association of New York City (HANYC), periodically renewed and now valid through at least 2025, requires hotel owners to give the union access to their employees, let them sign cards to certify interest in organizing, and recognize the union if a card count shows a majority of employees have signed on.

 If HTC succeeds in securing a union contract, it would be the the only outer borough union hotel located in a light manufacturing (M1) district – an area where hotel construction is likely to be all but shut down by special permit requirements. 

It also includes a kind of developer kryptonite called the “accretion clause,” which states that if new hotels become owned or managed by current signatories, those hotels also become “accreted to the collective bargaining unit.” This means a new hotel owner can become subject to the agreement if they hire a management company that also operates union hotels – and then spread the “accretion” to companies that manage its other properties. It’s an added reason why a developer like Troutbrook will fight the unionization at its first New York City hotel with particular vigor.

Marc Freud, managing partner of Troutbrook, both declined to comment for this story. But in a 2014 lawsuit against HTC, hotel developer John Lam said the accretion clause “is contrary to basic principles of contract formation, and to the text of and public policies animating America’s labor laws. The net result of Defendant’s legal position for the New York City hotel market is that all non-union hotels eventually would be forced out of the City.”

While that lawsuit is still ongoing, many major hotel brands have accepted the accretion principle in practice. For example, prior to opening the EVEN in Brooklyn, InterContinental Group already owned several union hotels in Manhattan – which is why EVEN Brooklyn’s employees were able to organize via card check.

The hotel industry in the outer boroughs, however, is much more fragmented than that of Manhattan, and has proven more resistant to accretion. With an average staff of just over 20 employees (compared to more than 100 per hotel in Manhattan), the potential gains from organizing a single hotel in Brooklyn or Queens are also much smaller – another key reason for HTC’s lack of activity in the area.

(Source: County Business Patterns: 2016, Census Bureau)

If it weren’t for the perfect storm of circumstances, HTC probably wouldn’t have bothered with the Fairfield Inn in Gowanus, either.

(Location of the Fairfield Inn and Suites at 181 3rd Avenue, Brooklyn. Source: Google Earth)

Union v. Union

Unlike owners and operators, the accretion clause does not apply to franchises. So even though Fairfield Inn and Suites is a Marriott brand, the Gowanus hotel’s owner, Marc Freud’s Troutbrook, was not subject to the industry-wide agreement with the Hotel Trades Council. Neither was the management company, Waterford Hotel Group.

This meant that HTC didn’t have access to the employees at the Fairfield Inn. But a union known as Local 811 did.

Local 811, Warehouse Production Sales And Allied Service Employees Union, is a Gowanus-based operation with just three employees – President Jose Merced, his son and secretary treasurer Kevin, and a recording secretary.

Founded in 2012, Local 811 had organized employees at various businesses in the New York metropolitan area, but just one hotel – the Glen Cove Mansion Hotel on Long Island. Union filings with the Department of Labor show that the union had 500 members as of 2016 (though numbers from last year mysteriously show zero).

The union’s ambitions at the Fairfield appear to have been modest at first. In February, Local 811 petitioned NLRB to organize four fire safety directors at the hotel, who were employed by Front Line Business Services. After succeeding, Local 811 then set out to organize the 30 other employees of the Fairfield Inn and Suites.

This appears to have caught the attention of HTC. On March 16, just two days after the initial petition, the Trades Council joined the process as an “intervenor.” This was the first in a long series of complications that would cause the proceedings to drag on for nine months.

The first hurdle in the unionization process was that both Local 811 and HTC, though vastly different in size and resources, are both members of AFL-CIO, the country’s largest federation of unions. Now that two member unions were competing for representation of a single workplace unit, the federation’s internal dispute resolution procedures came into play, and AFL-CIO requested that NLRB put the election off for almost two months while the dispute resolution ran its course.

An election was finally scheduled for May 31. But Troutbrook had a trick up its sleeve that labor organizers say is par for the course for developers fighting off unionization: the company fired the hotel’s management company, Waterford Hotel Group, the Friday before the election. NLRB officials were not informed of this change in management until after the Memorial Day weekend, two days before the election was to be held. Finally, NLRB cancelled the election and rescheduled it for June 26.

While Troutbrook would later claim that they wanted the election to go forward as planned, HTC filed a complaint with NLRB claiming illegal tactics and intimidation, alleging that Troutbrook attempted to bribe employees into voting for Local 811, whose labor agreement would be more landlord-friendly, by promising the employees higher wages. More specifically, they claimed Freud confronted employees over the Memorial Day weekend to warn them that there would be strikes if HTC won, that he would refuse to negotiate with HTC, and that he would address employees’ concerns if they voted for Local 811 instead.

Troutbrook has denied all of these allegations, though it settled the complaint. Local 811 did not return numerous requests for comment.

 
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A post shared by Kevin Merced (@mercedkevin811) on

 
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Jose Merced speaking at national union conference in Florida:

 
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A post shared by Kevin Merced (@mercedkevin811) on


On top of union politics and management maneuvers, NLRB’s own bureaucratic missteps also contributed to further delays, including notices with incorrect start times.

HTC won a June 26 election with 18 votes to Local 811’s nine, but Troutbrook filed an objection because of these irregularities, which were deemed severe enough to call for a rerun election.

In July, between the two elections, Local 811 withdrew from the unionization process. NYHTC won the rerun on Sept. 9 with 18 votes, against 8 votes for “No Union.” The union was certified as the representative of the hotel’s staff, and the case was closed – but not really.

With hopes that the Trump administration’s NLRB would be more employer-friendly than in years past, Troutbrook in October submitted a request for review to the board’s headquarters in Washington, which caused the case to be reopened.

“We are awaiting a decision, after which the Company will decide next steps in light of that ruling,” said a representative for Troutbrook in an email at the time. “In the meantime, negotiations will not go forward while the Union’s certification is under challenge.”

A few months later, the request for review was summarily rejected. Since then, Troutbrook has not responded to further requests for comment. Representatives for HTC have also declined multiple requests for comment.

With a total duration of nine months and a day from petition to certification, the Gowanus election drive was one of the longest HTC has had to deal with. According to NLRB records, seven of the eight other representation cases HTC has been involved in since 2015 – all in Manhattan – have ended successfully just around a month after the initial petition. The one exception was the Cassa Hotel in Times Square, which also involved two unions and dragged on for nearly a year, before ending with an HTC win last summer.

Even with NLRB certification in hand, the Fairfield’s employees might still have to wait quite a while for a union contract. On Dec. 18, the union filed a new NLRB complaint against Troutbrook, alleging “Refusal to Bargain/Bad Faith Bargaining.” It appears that Troutbrook is determined to hold out to the bitter end.

HTC’s first big outer borough win is still on hold for now.

Will Parker contributed reporting.


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