July 8, 2013

Court Upholds Management Deal with Union on Hotel Operations

Underscores Rights of Parties to Reach Private, Special Purpose Agreements
Holland & Knight Alert
Joseph A. Guay

In an important decision upholding the right of hotels to make pragmatic agreements with unions on hotel operations, the United States District Court for the Southern District of New York dismissed a claim brought by banquet servers at the St. Regis New York who had claimed that assigning certain banquet-like events to restaurant waitstaff and room service servers violated their contract rights. In granting dismissal, the court upheld the right of hotels and unions to reach private, special purpose agreements allocating work opportunities to different job classifications without fear that disfavored employee groups could sue for breach of the underlying labor agreement.


The lawsuit arose from the hotel’s practice of using room-service servers (rather than banquet servers) for certain private meetings held in hotel guest rooms that were temporarily converted to meeting room space. The hotel had also previously reached an agreement with the union that restaurant wait staff could serve all private parties held in the hotel’s signature restaurant. A group of union-represented banquet servers demanded that the union file a grievance on their behalf against both practices claiming that they, effectively, created a separate, second banquet department and deprived them of the right to work all banquet events — a right they claimed had been granted by both the labor agreement and by a prior settlement agreement resolving certain past grievances.  

After the union failed to file the grievance requested, the banquet servers brought a claim against both the union and the hotel under a provision for federal labor law that allows individual union-represented employees to sue in federal court over alleged violations of the labor agreement governing their employment. The banquet servers alleged that the hotel violated their rights under the applicable labor agreements and conspired with the union to deprive them of work opportunities.

The District Court Ruling

Judge J. Paul Oetken of the Southern District of New York disagreed with the banquet servers on all counts. In support of his decision granting the St. Regis’ motion to dismiss, the court ruled that the plaintiffs could not bring a claim against the hotel because they had not adequately pled that the union breached its duty of fair representation, which is a precondition of any claim by union-represented employees against their employer.

In language that will likely benefit both labor and management in all cases governed by federal labor law, the court accepted the hotel's argument that unions can enter into special arrangements with employers and otherwise deal with management, even if that results in economic benefits flowing to one group of workers rather than others. It also ruled that conclusory allegations of conspiracy based only on unions and companies jointly agreeing to do things that disfavor the plaintiffs do not properly show the bad faith needed to challenge such agreements in federal court. The court also held that the hotel had not violated any contract rights granted to the banquet servers in the prior settlement agreement, accepting the hotel’s argument that the agreement, considered as a whole, could not support the plaintiffs' interpretation.

This victory for hotel operators is noteworthy because it underscores the broad rights that management and unions have to reach pragmatic agreements affecting hotel operations without fear of collateral attack from disaffected workers who did not benefit from the special agreement.

Holland & Knight represented the hotel in this matter.

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