In a blow to hotels near Los Angeles International Airport already suffering from high vacancies, a state appeals court has ruled against them in a fight over tips.
The Second District Appellate Court upheld a 2006 city ordinance requiring that hotel managers turn over “service fees” they collect to banquet staff, porters and other employees.
Hotel executives haven’t decided whether to pursue a state Supreme Court appeal of the ruling, which could result in retroactive payment of millions of dollars. The ruling, which reverses a district court’s rejection of the ordinance, sends the case to Superior Court for trial, where damages and back payment will be determined.
The ruling is the latest development in a class-action lawsuit filed three years ago on behalf of more than 1,000 hotel workers at five airport-area hotels. The suit centers on a practice that many hotels have adopted: tacking on service fees or tips to banquet bills. The fees range between 15 percent and 20 percent. The ordinance requires that hotels give the fees to the workers.
“This isn’t just about workers getting their fair share,” said Randy Renick, partner in the Pasadena law firm Hadsell Stormer Keeny Richardson & Renick LLP and the lead attorney for the hotel workers. “It’s a consumer issue, too: All these hotels have this practice of imposing a service fee. Customers think that money is going to the employees and, as a consequence, they don’t tip the employees personally.”
The hotels claimed that the ordinance unfairly singled them out and violated their rights to determine distribution of service fees. They also say managers give employees the vast majority of service fees they collect.
Marta Fernandez, a partner in the Century City law firm Jeffer Mangels Marmaro & Butler, which is representing the Four Points by Sheraton at LAX, said the ordinance poses a financial hardship for the hotels.
“This kind of decision would hurt the bottom line,” she said. “It would be felt first with cutbacks in the hours worked by employees.”
In late 2006, the occupancy rate for L.A.-area hotels was about 83 percent; this year it’s about 70 percent.
Besides the Four Points by Sheraton, the other hotels in the worker lawsuit are the Hilton Los Angeles Airport, the Marriott Los Angeles Airport, the Renaissance Montura Hotel at Los Angeles Airport and the Radisson Hotel LAX.
The tipping ordinance was passed at the same time the city extended its living wage ordinance to the hotels, but didn’t get as much attention. Some of the hotels – led by the Hilton – unsuccessfully challenged the living wage law all the way to the state Supreme Court.
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