Hotel owners lose bid to defeat severance law

Federal judge upholds city measure requiring payments up to $15,000 for ex-workers

New York /
Apr.April 07, 2022 05:00 PM

Hotel Association of New York CEO Vijay Dandapani (Getty Images, iStock)

The forlorn hotel industry has suffered another blow as a judge upheld a city law requiring severance payments for laid-off workers.

The Hotel Association of New York’s challenge to the hotel severance bill was struck down in federal court, Crain’s reported. The industry trade group doesn’t have any plans to appeal the decision.

The owners group brought the case in October, arguing that the law illegally forced city hotels to create an employee benefit plan requiring administrative services. Judge Paul Oetken disagreed, writing that the law “likely does not obligate an employer to create a plan because it does not require an ongoing administrative program to deliver mandated severance pay.”

The Roosevelt Hotel made a similar individual claim about the lawsuit. According to Crain’s, the judge denied its request for an injunction as well. Severance fees add various other problems facing the hotel.

The bill signed into law last fall by then-mayor Bill de Blasio, an ally of the hotel workers union that advocated for the measure, forced the city’s closed hotels to either reopen or pay severance of up to $500 per week for 30 weeks to furloughed staff. The law applies to hotels that cut at least 75 percent of service employees. Hotels had until Oct. 11 to recall employees and Nov. 1 to reopen.

Several hotels opted to reopen, avoiding the severance payments. Days after the bill passed, the New York Hilton Midtown and the Grand Hyatt in Midtown both announced they would resume operations. The since-renamed Hotel Trades Council said the 1,900-key Hilton would bring back approximately 30 percent of its staff, while the 1,300-key Hyatt was looking to bring back about 25 percent of its staff — just enough to comply with the law.

The law also prompted the Omni Berkshire Place, a 399-key Midtown hotel closed since June 2020, to welcome back guests. The president of Omni Hotels & Restaurants told Crain’s, “Paying the severance would have cost more than reopening.”

[Crain’s] — Holden Walter-Warner





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