A group of New York City hotel owners is suing the city over a new law requiring them to pay workers severance benefits if they were fired under circumstances related to the pandemic.
The lawsuit, which was filed Friday by the Hotel Association of New York City in Manhattan federal court, alleges that the law, which Mayor de Blasio signed off on Tuesday, attempts to supersede already existing federal law on employee benefit plans.
The city law, which goes into effect Monday, requires that hotels with more than 100 rooms pay $500 a week to out-of-work employees for at least six months if the hotel has fired more than 75% of its employees during the pandemic.
“This is adding salt to the wounds of an industry that’s already battered,” said the Hotel Association President Vijay Dandapani. “We are sympathetic, but owners don’t have interminably deep pockets.”
Dandapani argued that while the new law will help some unemployed workers in the short term, it will cripple the industry over the long term and will ultimately hurt the unionized service workers it’s designed to help.
He noted that over the last year, hotel occupancy in the city averages out to about 40% — an improvement from the 14% occupancy rate the industry witnessed in the early weeks of the pandemic — but a far cry from what owners want to see.
“Hotels aren’t closed because they want to be closed,” he said. “There’s simply no business.”
The Hotel Association notes that before being signed into law, the new severance provisions flew through the City Council’s approval process — “circumventing the standard process of debate and deliberation typical for a bill of this magnitude” — and that they mean hotel owners will now have to set aside “millions of dollars in reserves.”
“The Severance Law imposes on hotels hundreds of millions of dollars in liabilities, given that the industry has been forced to lay off approximately 30,000 employees as a result of the pandemic,” the lawsuit states.
The Hotel Association also contends that because the law requires what amounts to a new employee benefit plan, it is preempting the U.S. Employee Retirement Income Security Act, which was enacted in 1974 and which, according to the lawsuit, prohibits state laws from superseding it.
De Blasio raised hackles earlier this week when he signed the City Council’s severance bill into law at a crowded ceremony in the City Hall rotunda. During the event, de Blasio appeared side by side with dozens of members of the Hotel Trades Council, a powerful union and long-time political ally of his.
For months, de Blasio has eschewed such events out of concern about spreading the coronavirus, but Hizzoner now appears to be gearing up a run for governor, and the Hotel Trades Council, which was the only big union to endorse him in his 2019 presidential run, would be an endorsement worth having in that endeavor.
Upon learning of the Hotel Association’s lawsuit Friday, the union slammed the move.
“It’s disappointing that these big hotel corporations have chosen to spend money on lawsuits instead of on paychecks to bring back their loyal and long-term employees,” HTC President Rich Maroko said. “But what’s especially curious is why an association that represents the hotel industry would try to stop legislation aimed at encouraging hotels to reopen.”
Nick Paolucci, a spokesman with the city’s Law Department, said the city would review the lawsuit.
