Hospitality Industry: Labor & Legal Issues

Instructor: Scott Tuning

Scott has been a faculty member in higher education for over 10 years. He holds an MBA in Management, an MA in counseling, and an M.Div. in Academic Biblical Studies.

Lawsuits and negative press are detrimental to any business, but particularly for companies that rely on their reputations, such as in the hospitality industry. Common labor and legal issues can include discrimination, unfair pay practices, workplace safety, and retaliation.

A Case Study in Labor Law

Tony, the general manager of a 350-room hotel, was becoming concerned as he read an email from his company's attorney. Despite having been terminated for well-documented insubordination and job abandonment, a former housekeeper named Tracy had lodged a wrongful termination complaint alleging that Tony had subjected her to gender and age discrimination, illegal pay practices, and retaliation for having protested unsafe working conditions.

As he began to collect and review the data in Tracy's employee file, Tony knew that the outcome of the case would be determined based on the quality of his record-keeping in five of the most important categories of labor law including discrimination, pay practices, labor unions, employee safety, and retaliation.

Was Tracy Wrongfully Terminated Based on Discrimination?

In the United States, labor laws and regulations come from multiple (and sometimes overlapping) government agencies. Tracy's complaints ultimately involved three separate agencies, but her first complaint was filed with the Equal Opportunity Employment Commission (EEOC). The EEOC is the gatekeeper for employee complaints of discrimination, sexual harassment, and any retaliation associated with these complaints. The EEOC would likely side with Tracy if she could prove that she had been terminated because of her race, ethnicity, national origin, religion, gender, or age. A few states would also protect Tracy based on sexual orientation.

On the other hand, the EEOC would likely side with Tony's company if Tony can prove that Tracy's termination was the result of misconduct or insubordination and not because of discrimination or retaliation. To prove this, Tony should have maintained meticulous documentation of Tracy's performance problems. In most cases, a pattern of poor performance backed up by solid documentation of events like remedial training, coaching, write-ups, or final written warnings is enough to satisfy Tony's requirement to dispute Tracy's claim.

Regardless of who the EEOC sides with, Tracy can still sue Tony's company in federal court, but she cannot file that suit until the EEOC has exhausted its efforts to resolve the problem. If the EEOC does not find evidence of discrimination or retaliation, Tracy is presented with a document called a 'right to sue.' When the 'right to sue' letter is issued, the EEOC has formally concluded their investigation and the parties have the right to file suit in court.

Were Tracy's Wages Paid in Accordance with the Law?

Tracy's allegations of unlawful pay practices would be evaluated considering the single most important law governing labor practices at the federal level - the Fair Labor Standards Act (FLSA). Almost all hospitality organizations must comply with the provisions of the FLSA. Tracy must prove that her employer violated one or more of the major provisions of the FLSA. Among other things, Tracy could try to prove that:

  1. Tony had failed to pay her overtime at a rate that's at least 1.5 times her regular salary when she worked more than 40 hours per week.
  2. She had not been paid the federal minimum wage.
  3. She was incorrectly paid the lower minimum wage applicable to tipped employees that earn tips even though she did not qualify as a tipped employee.
  4. Deductions for things like uniforms, missing or damaged company property, or tools and equipment reduced her paycheck to an amount that made her effective pay rate less than minimum wage.

The FLSA does not require that Tony's company give Tracy paid time off, rest periods, incentive pay, or benefits. In addition to those matters that are excluded from the FLSA, the law does not require Tony's company pay Tracy for unused time off nor does it require that the company provide her with a specific reason for her termination. In many states, an 'at will' employment law explicitly states that both the employee or employer are permitted to terminate the employment relationship for any reason or for no reason at all. In states where this is law, employers usually benefit from being cautious in providing reasons for a termination. Many hospitality industry employers would opt for a generic statement such as 'it just isn't working out.'

Was Tracy Terminated in Retaliation?

Tracy's allegations included a few elements not covered by her claims of discrimination and illegal pay practices. Specifically, Tracy claimed she was illegally terminated in retaliation for having complained about unsafe working conditions. Concerns about workplace safety are the responsibility of the Occupational Safety and Health Administration (OSHA). OSHA issues and enforces regulations related to workplace safety. It also investigates workplace accidents resulting in serious injury or death. The law universally protects Tracy from retaliation for making complaints to OSHA or for participating in their investigations.

Tracy's claim of retaliation requires Tony's company to provide evidence that Tracy's termination was not because of complaints made to OSHA or for cooperating with their inquiries. Employees and employers should remember that allegations of employer misconduct made in 'good faith' do not have to be true to establish that retaliation occurred. If Tracy lodged a complaint in good faith about what she thought was an unlawful practice and was subsequently fired for making the complaint, it does not matter if her original allegation is unfounded. Her termination may still constitute unlawful retaliation.

What if Tracy Was a Member of a Union?

Some hospitality employees are members of a labor union. In most cases, union employees work under a collective bargaining agreement (CBA) that outlines specific conditions for employment.

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