New York hotel owners on the hook for $500M severance

Arbitrator’s ruling comes as sector is ravaged by pandemic

Hilton Times Square at 234 West 42nd Street and Roosevelt Hotel at 45 East 45th Street (Google Maps; Pixabay)
Hilton Times Square at 234 West 42nd Street and Roosevelt Hotel at 45 East 45th Street (Google Maps; Pixabay)

Hotel owners in New York City are on the hook to pay more than $500 million to employees who lost their jobs due to the pandemic, the Wall Street Journal reported.

It’s a victory for tens of thousands of former hotel employees, but a setback for owners whose businesses have been ravaged by the coronavirus.

About 200 hotels in the city are operated by unionized workers, and under the ruling, owners of about 75 of them are responsible for severance payments, according to the Journal, which cited people familiar with the ruling. The hotel owners’ trade association and the hotel union both agreed to the ruling, which was issued by an arbitrator.

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Under the ruling, workers are entitled to severance payouts based on seniority levels, along with seven months of health benefits. Severance payments would stop if an employee is rehired by the hotel.

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At least one hotelier is challenging the ruling: The owner of the Renwick Hotel in Midtown is appealing the decision in the U.S. District Court in New York, and claims that the ruling violates a collective-bargaining agreement that makes severance pay applicable only for permanent closings, not for shutdowns caused by the pandemic, according to Paul Rosenberg, a partner at law firm BakerHostetler.

The city’s hotel occupancy level in October was less than 40 percent, according to STR, a hotel data provider.

The occupancy rate, however, would have been even lower if hotels did not have agreements with the city to house the homeless, according to hotel owner Richard Born.

Some of the biggest hotels have already shuttered because of the pandemic: The Hilton Times Square and Roosevelt Hotel will close permanently. And things could get worse: As many as 20 percent of the total hotel rooms in the city may never reopen. [WSJ] — Akiko Matsuda