Welcome Considerations for Hospitality Concerns

Transcript

Laura Mitchell

Principal, Denver

Hello, welcome to the next episode of our pay transparency podcast series. I'm Laura Mitchell, principal in the Denver office of Jackson Lewis and co-leader of our Pay Equity group. I am joined today by Diana Lerma, one of our California attorneys and a member of our Hospitality and Leisure group. Welcome, Diana.

Diana Lerma

Principal, Los Angeles

Thank you so much for having me.

Mitchell

It's a pleasure. I'm excited for our chat today. Before we dig into pay transparency, can you tell us a little bit about the Hospitality and Leisure group and how we support our clients here at JL?

Lerma

Absolutely, the Hospitality and Leisure group is one of our industry groups here at JL, and it's really specialized to ensure our clients get very specific, industry-based business. Hospitality and leisure operate differently from many other businesses, based on job categories and job types, and they share many of the same people and culture issues.

It's really important for us here at JL to be intimately aware of the operation and really leverage that knowledge across all of our offerings, whether that's advice and counsel, litigation, or otherwise.

Mitchell

Fantastic. Today, our topic has been the subject of our past episodes: how employers in this industry are navigating the patchwork of state pay transparency laws. Let's start off with what kind of issues you're seeing from your clients in this industry, specifically as they're trying to navigate compliance in this area.

Lerma

People from within are transferring between hotels or properties. Then, the other aspect is external. How are you recruiting the best talent and putting your best foot forward, given the question of whether there is a nationwide brand-wide directive or way of doing things that everyone follows, or whether it's location by location?

Mitchell

That internal mobility issue, where employees move within properties or brands, is really an interesting concept because it's not just within a specific location, like a city. That mobility is really built into the nature and the culture of roles within, specifically, the hospitality industry with respect to lodging.

Talk to us if you can provide a little bit about some unique situations, and those unique challenges presented by that population that's really open to and, in fact, is seeking out a kind of mobility within their jobs.

Lerma

It's really interesting. The hospitality workforce is really different in that it inherently seeks movement. It's a population where if I need to move across the country for the job I want, that is okay. They're used to moving pretty regularly because they're in the hospitality industry. People who work here are very okay with being agile and mobile, picking up and moving somewhere else. 

That creates some inherent risks, even from a recruitment standpoint. If we’re recruiting newer leadership from hospitality schools across the country, you're getting kids who are coming out of Cornell or UNLV and are willing to go anywhere. That really becomes an issue given how different brands are providing the wage transparency information. If I am in a metro area and looking to make my next career move up the management chain, I'm going to look at wage ranges. If I'm looking at a more rural property that doesn't have wage transparency laws or doesn't provide that data, versus a more metro or urban location where it is provided, or where pay is higher, your people are going to be funneled in a certain direction rather than another.

Mitchell

Naturally, I would think that would push properties and employers in states without mandatory wage transparency toward transparency. Is that actually what you see?

Lerma

It's not actually what I see, because it's not just hospitality in general; it's also where the employer is with regard to pay in their small neck of the woods. Sometimes you're just dealing with large metro areas. I'm based in Los Angeles – the city of Los Angeles has a very different minimum wage standard than places that are in the county, but not in the city. If you have a location that doesn't have to post, posting becomes an issue of whether I'm disclosing too much. Is this going to lead to candidates not coming my way because I'm too low compared to other employers in the area? It's a complicated issue that a lot of my clients are grappling with.

Mitchell

Interesting. They're not actually leaning into wage transparency, but they're shying away from it because it could potentially make them look less attractive in this market where they're trying to attract talent.

Lerma

Exactly, because it can highlight those issues. Sometimes clients can take the perspective of, if I don't have to put a wage on there, let me bring them in, and then I have some buy-in from them. I can emphasize the culture, publicize it, and then you can get to the wage talk, rather than putting the wage in the job posting right from the get-go and turning away talent.

Mitchell

A lot of employers use these job advertisements as just that, an advertisement to incentivize or entice applicants to apply for the role. I could see the logic: if it looks like it's going to turn off a particular candidate or population, you may not want to disclose it if you don't have to.

Lerma

Exactly. Another major issue that wage transparency has brought up for many of my clients is wage compression, especially if you are in a non-exempt role and you're working hourly. There are some very lucrative positions in hospitality. A banquet server where your hourly rate can increase quite a bit because of that built-in service charge. That necessarily puts compression on people who want to go from a non-exempt to an exempt manager position, because that pay jump may not be what they expect.

Mitchell

That raises an interesting point about what you are really disclosing in that required pay range for companies that have to disclose. Are you actually adding the service charge to those positions that are subject to it? Or do you not? In part, that's a compliance question, but for these properties, based on our conversation, it's also a strategic question. How are you advising your clients?

Lerma

It's such a good point. Again, it's just so difficult because of the patchwork. The laws throughout the United States, and really also internationally, each one requires something different. In New York, for example, there is the New York City wage transparency law. There's also a New York State wage transparency law. They're not always identical. You have to be very thoughtful as to what you're going to follow and why you're going to follow it.

Complexity makes it very difficult for nationwide brands, especially, to issue a directive on how to proceed. When it comes to what you disclose, there are some states that just require, or cities even, that just require a reasonable range of earnings. There are some that require a lot more, where you have to summarize the benefits. Some of you have to summarize paid time off. All of them are very different, and they each operate at a different granularity, which makes it very difficult to apply a uniform rule to a corporation or hospitality brand.

Mitchell

Specifically, with these service charges or these tips, you don't want to artificially inflate what you're reporting as the wage or the range because, at the end of the day, the employer doesn't really control those service charges or those tips because it's based on how well the service is performed or the type of event. I would think that part of the calculation is that you have to be careful that you're not overstating what the pay could be to misrepresent or set those expectations incorrectly. However, to that point, we're trying to attract talent, so we want to incentivize them to apply for our role with the opportunity for this additional compensation. To your point, I could imagine that would be really hard to navigate on a one-off, piecemeal basis.

Lerma

Absolutely. It's one thing when you set a reasonable range. We've seen some employers, even in hospitality, try to what I call get cute and say, my range is going to be $50,000 from the beginning to end. It comes down to, is that defensible? Push comes to shove, if someone decides to exercise whatever private right of action a statute may have, are you able to defend that range?

Hospitality is tough because service charges, specifically, you're talking about banquet servers. Your banquet functions differ based on the contract. A midday lunch that doesn't offer a beverage selection will have a much lower service charge than your 400-person wedding. In hospitality, there are so many different types of pay; it's not your stereotypical nine-to-five. You have a lot of this non-discretionary pay that's standard in the hospitality industry, and service charges are just one of them. They just tend to be a percentage of the total contract. Depending on the year, the days, and the events, there can be a lot of differences in what someone makes from one event to another.

Mitchell

Disclosing that again is kind of a strategic, compliance landmine, and you have to make sure you're really balancing both your obligations, your risks, your defensibility, and also attracting that talent.

One other nuance I want to touch on quickly before we wrap up is that, unlike in some other industries, in hospitality we also have an added layer of complexity with respect to ownership: properties within the same brand may actually be owned by the same owner. You can have a franchisee or corporate ownership. Then, there are different decision-makers on how to comply with these pay transparency laws. It looks like the property is the same kind, and it should be uniform, but you're seeing different things in the job descriptions. Is that like an actual problem or one that I'm just thinking is a problem?

Lerma

It's definitely a problem in talent acquisition because hospitality has a couple of different layers. Who owns the land, who owns the building, who operates and who's that employer?

Also, sometimes operators will do what's called fly the flag. They may not be operated by the entity shown on the flag, but it's a franchise, or they're allowed to fly the flag as long as you're meeting certain thresholds and meeting certain standards. If you have what can be considered a nationwide brand that manages some of its properties and licenses its flag to others, your national compliance standpoint is likely to be the same for those properties managed by the big brand, but your franchisees are going to do something totally different. That's where it comes to if you have two hotels in an area, one is managed by the big brand, one just flies the flag, how are you positioning yourself in comparison to them in order to attract the best talent, assuming you're posting the same positions? There's even that inherent push and pull within what, seemingly from the outside, looks like the same brand.

Mitchell

I imagine that could lead to confusion on the applicant side as well. As a closing, what is a parting piece of wisdom that you would give employers who are trying to balance all of these interests?

Lerma

A couple of things. Sign up for all of our offerings and subscriptions online. We do a really great job of providing the information you want in a hospitality-focused way.

The other thing I would say is we need to look at pay transparency, not in a vacuum. It has to be part of a larger cultural issue and a larger pay equity issue. It's hard to make a decision on pay transparency without looking at culture and pay equity. I would recommend making those decisions in that kind of ecosystem.

Mitchell

Both of those are fantastic pieces of advice. This has been such a pleasure. Thank you so much, Diana, for taking a few minutes to talk with us about pay transparency for the Hospitality and Leisure group. We hope everybody joins us again for our next episode. Take care. Thank you.