Antitrust Law Daily Housekeeper plausibly alleged that hotel franchisor and hotel owner were joint employers
Monday, April 8, 2019

Housekeeper plausibly alleged that hotel franchisor and hotel owner were joint employers

By Harold S. Berman J.D.

A housekeeper could bring an overtime suit against both the hotel owner and the national chain that franchised the hotel. She sufficiently alleged that the franchisor maintained significant control over the hotel’s operations to be her joint employer.

A housekeeper at a Clarion Hotel in Pennsylvania could proceed with her FLSA and state-law overtime claims against both the hotel owner and the national chain that franchised the hotel under a joint employer theory, a federal district court in Pennsylvania ruled. The employee alleged that the franchisor maintained significant control over the hotel’s operations, including maintaining mandatory rules and regulations that could have caused the overtime violations. Therefore, the court denied the franchisor’s motion to dismiss. The court also denied the franchisor’s motion to strike the housekeeper’s class claims, as she sufficiently alleged the owner and franchisor might jointly operate more than one hotel, and discovery would clarify that issue (DiFlavis v. Choice Hotels International, Inc., April 5, 2019, Pratter, G.).

Too many rooms to clean. The housekeeper alleged she was paid for 36 hours per week, yet regularly worked 50-55 hours per week and was not paid overtime. Housekeepers were scheduled to work five 8.5-hour shifts each week, with a 30-minute break each shift. However, they were required to work until they cleaned all of their assigned rooms. Consequently, they typically worked 10-12 hours per day, including working through unpaid meal breaks.

Overtime suit. The housekeeper brought a class and collective action against both Rama Construction Company, which owned and operated the Clarion Hotel where she worked, and Choice Hotels International, the national Clarion Hotels franchisor. She alleged the defendants were joint employers because Choice Hotels International exercised significant control over all Clarion Hotels, including those owned by Rama Construction. Among other allegations, she maintained that both defendants were aware of the alleged wage-hour infractions because they maintained the "Rules and Regulations" that resulted in the violations—namely, the practice of calculating housekeepers’ pay based on the work hours and room totals that hotel supervisors entered into the payroll system, and not on actual recorded time or room service records.

Choice Hotels moved to dismiss the complaint, arguing that she did not adequately allege that it was a joint employer. Alternatively, it moved to strike the collective and class claims.

Franchisor control. The housekeeper pointed to several factors demonstrating that Choice Hotels and Rama Construction were joint employers. The franchisor provided all Clarion Hotels with consulting services. It required every franchise hotel to agree to give Choice Hotels oversight over significant aspects of the hotel’s operations and to comply with Choice Hotel rules and regulations. Choice Hotels also required franchises to use its automated property management and reservation systems; maintain and produce certain financial records; pay affiliation and royalty fees; and honor Choice Hotels’ discount and promotional programs. Hotel owners and general managers were required to attend Choice Hotels training programs and complete online operations training. The franchisor prohibited Clarion Hotels from hosting or sponsoring any activity that could negatively impact the chain’s image.

Joint employer? The court denied Choice Hotels’ motion to dismiss. The housekeeper sufficiently alleged that the franchisor exercised significant control over all aspects of Clarion Hotels’ operations, maintained financial data on the business, visited the hotel properties to ensure compliance with its rules and regulations, and mandated owner and manager training.

Although the franchise agreement stipulated that Rama Construction was responsible for all personnel issues, Choice Hotels cited to no case law supporting its argument that the franchise agreement, without more, could conclusively show there was no joint employer relationship. That Choice Hotels allegedly exerted such significant oversight over its franchisees could have led to the alleged overtime violations. Further, given the FLSA’s broad definition of "employer," using a franchise agreement to protect a franchisor from FLSA litigation appeared to be self-serving at such an early stage in the case.

Choice Hotels also argued to no avail that in order to avoid dismissal, the housekeeper was required to allege whether it or Rama Construction was her primary employer. The housekeeper named two employers and alleged that she worked at a hotel operated by Rama Construction, so she clearly described who she reported to directly, and who supervised her work. She also sufficiently alleged that the franchise agreement gave Choice Hotels extensive control over the terms and conditions of her employment. Consequently, Choice Hotels was adequately notified concerning the basis of the housekeeper’s claims, and she minimally satisfied the requirements for the notice pleading standard.

Class and collective claims. The court also denied the franchisor’s motion to strike the housekeeper’s class and collective claims or, in the alternative, to limit her claims to similarly situated workers at the Clarion Hotel where she worked.

Choice Hotels argued that the housekeeper alleged only that it was a joint employer with Rama Construction at one location, yet the housekeeper believed the two might jointly operate other hotels, which could be determined through discovery. Although some of her allegations concerning this issue lacked clarity, it was premature to strike her class or collective allegations before discovery had taken place. The housekeeper plausibly alleged that a class or collective action could be warranted, and discovery would permit the court to make an informed ruling concerning class certification.

The case is No. 18-3914.

Companies: Choice Hotels International, Inc.; Rama Construction Company, Inc.

MainStory: TopStory FranchisingDistribution PennsylvaniaNews

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