Contract Vendors – Who Has The Liability for Employment Claims?

As we transition into another new year, the consensus from many in the Hospitality Industry is one of optimism, as guestroom demand remains positive. If the economy continues to improve with the recent change of administration, results may be even better than anticipated.

Hoteliers have not forgotten the lessons learned during the tumultuous years of 2008-2009. While operating results for 2016 were outstanding overall, hotel owners and managers were still focused on cutting costs and keeping expenses in line. Because labor is the single largest expense, many properties, to control costs, have outsourced their work forces either partially or completely, in departments such as housekeeping, stewarding, landscaping and engineering. The savings realized by outsourcing, for many properties, has been substantial when factoring in the cost savings garnered when eliminating such expenses as payroll taxes, worker’s compensation insurance, work comp claims and fringe benefits from overall payroll expenditures. This savings coupled with a tight labor market in many locations across the country, has only served to fuel the growing demand for an outsourced work force across the nation.

As this trend continues to grow, it is important to note that all contract labor agencies are not created equal. It is imperative that hotels and resorts do their research and properly vet any contractor they are considering, to provide housekeeping, landscaping, stewarding, contract labor, engineering, security, etc. to the property.

An excellent article in the December 19, 2016 Hotel Management Magazine highlights the importance of selecting the correct vendor. The article points out, “A big issue facing hotel owners is who is the employer – is it the owner or manager, the franchisor or the franchisee, the client of the contractor? Who has the liability for employment claims?”

The article goes on to state “Led by the National Labor Relations Board, there is a trend to hold multiple parties accountable, not only for their own employees, but also for the employees of their contractors, with whom they do business.” The article shares, “Some states like California have gone even further expanding the scope of liability for employers who contract with temporary staffing agencies. Under California Labor Code 2810.3, affected California employers now “share” civil responsibility with their “labor contractors” regarding wages and worker’s compensation coverage of assigned temporary workers.”

While there are many things to consider when selecting a contractor, including these items outlined in this article, an outsourced contractor company is a viable labor solution to hotels and resorts all over the country. It is important to select a company that understands your business and will partner with you by providing talent specific to your labor needs, and with the financial backing to provide you with everything needed to safeguard the assets of your property. This would include staffing that has been background checked and drug tested prior to assignment at your hotel, and fully covered by generous general liability and worker’s compensation insurance policies, so that the hotel property or owner will not be held liable for any labor employment claims or work comp claims against the contractor. It is important to note again, that even if the hotel does not have direct control over the contractor’s employees, it can still be held to be a “joint employer”. Because of this, it is more important than ever to only do business with contractors you can trust. Hotel Cleaning Services is just such a company, with over 25 years of hospitality experience, we will be a true partner with you. Contact us today to discuss your labor needs.

Whether you are a hotel owner, a franchisor or a manager, please look for our next blog where we will share different ways for you to mitigate your risk of liability when working with contract labor.