L.A. considers laws on service charges at airport-area hotels
Business leaders say plans are intrusions
By Dan Laidman
COPLEY NEWS SERVICE
November 12, 2006
LOS ANGELES ? A labor-related spat at hotels near Los Angeles International Airport has prompted a package of innovative and controversial city laws that are inspiring workers' advocates and worrying business executives around the region.
The City Council will soon consider several changes, including a law ? believed the first of its kind for a U.S. city ? that would require private airport-area hotels to pass along to workers all ?service charges? that appear to customers to be gratuities.
Other proposals would require the more than a dozen hotels to pay workers a ?living wage? of at least $10.33 per hour ? $9.08 if health benefits are provided ? and make it more difficult for the hotels to fire workers immediately after an ownership change.
The service charge proposal has been the emotionally charged center of the debate, with business leaders statewide calling it a precedent-setting intrusion into their operations. Others, such as Los Angeles City Councilwoman Janice Hahn, say they support the new laws because they were angered to learn that some hotels are taking cuts out of service charges intended for workers.
?Everyone ? I know I did ? assumes that those people who work picking up the plates, serving the food and moving through those banquets, were getting the money,? Hahn said. ?When they told me that they were lucky if they got 5 percent or 8 percent (of a 20 percent service charge), I was absolutely shocked.?
California Hotel and Lodging Association chief Jim Abrams sees the law as a twist on a trend of labor unions persuading their allies in city governments to pressure employers through burdensome ordinances.
?This is the first time we've seen an effort to have a city council get into the day-in and day-out management of business and say, 'We're going to start telling you how to handle money you get from your customers,'? he said.
While cities such as Berkeley, Emeryville and Santa Monica have adopted living-wage rules for certain hotels within their borders, representatives of the American Hotel and Lodging Association weren't aware of any cities besides Los Angeles that have targeted service charges. Massachusetts has a state rule requiring such charges be passed on to employees. So does Hawaii, which allows businesses to take a cut if that is specifically disclosed to customers.
The Los Angeles proposal comes amid a long-running battle by the city's powerful labor community to organize about 3,500 workers at the nonunion, airport-area hotels. The effort has involved vigils and mass arrests at a demonstration.
Meanwhile, city panels and activist groups have heard complaints from hotel workers such as Ana Mendez, who said she makes $6.75 per hour as an on-call banquet server. Banquets typically include a 20 percent service charge. Managers have told Mendez and her colleagues that they will pass along 8 percent to the staff, she said.
?We're not asking for anything that we don't work for and we don't deserve,? she said. ?It's our money; it's what we work for.?
Cindy Boulton, general manager of the Radisson LAX Hotel, said workers benefit from the entirety of the service charges no matter how they're divided. It's common for the hotels to give some directly to workers in the form of tips, she said, and to put the rest into the ongoing salary budget.
Abrams of the California Hotel and Lodging Association said most hotels pass along the bulk of their service charges to workers, but it's common for some money to go to the sales managers who bring in events.
There is a clear distinction between tips or gratuities and service charges in state law, Abrams said.
?The money belongs to the employer,? he said. ?The employer pays income tax on it; if the employer pays it out to employees, they run it through payroll taxes. Now, L.A. is saying, 'We don't care, we're going to start deciding.' ?
City officials have justified the proposed regulations by noting the hotels are dependent upon the city-operated airport for their business. The proposed ordinance says proximity to the airport gives the hotels a ?responsibility to support the local work force.?
Business leaders from across the city say that rationale could lead to regulation of private enterprises near other municipal assets, such as a port, convention center or even parks or fire stations.
The issue has been challenging for Los Angeles Mayor Antonio Villaraigosa, a former union organizer. He has come under intense pressure from the business community, which he has courted as an ally recently.
Villaraigosa broke a long silence on the subject this week, calling on the council to delay its decision until the end of the month to give the business community more input.
?While I believe that the protections established by these ordinances are fair and essential for the affected hotel workers and the health of the hotel industry overall,? Villaraigosa wrote, ?I also believe that it is important for both the business and labor communities to have full confidence that they had a fair voice.?
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