U.S. Labor Department Fixes Enforcement Sights on the Hospitality Industry

The unemployment rate in North Carolina and around the country may be flirting with double digits, but that isn’t preventing the U.S. Department of Labor from tight enforcement of employment laws.

U.S. Secretary of Labor Hilda Solis signaled as much during her swearing-in ceremony when she said, “to those who have for too long abused workers, put them in harm’s way, denied them fair pay, let me be clear, there is a new sheriff in town.” The Service Employees International Union heralded Solis’ confirmation, saying it was a “momentous occasion” that organized labor had been “fighting for.”

Armed with additional funding in the FY 2011 budget, Solis has gone on a hiring spree, adding 710 enforcement staff, including bilingual investigators. The number of inspectors has increased by more than one third. The department’s $14 billion discretionary budget request includes a 4 percent increase for worker protection programs, with the goal of restoring funding and staffing for these programs to FY 2001 levels.

The U.S. Wage and Hour Division’s request of $244 million is more than $20 million higher than the prior year’s budget and will be used to both enforce wage and hour laws and crack down on employers who misclassify employees as independent contractors.

The hospitality industry is under the microscope. In June and July, employment law firms began issuing legislative alerts to hospitality industry clients, warning them of plans by Wage and Hour Division officials to launch investigations of the hotel and motel industry beginning Oct. 1. These investigations will center on compliance with H-2B visa program requirements and the Fair Labor Standards Act. The H-2B visa program allows businesses needing one-time, seasonal, peak-load, or intermittent staffing to use foreign workers as temporary labor.

Dolores Quesenberry, a spokeswoman for the N.C. Department of Labor, told Carolina Journal that she was unaware of any increased complaints, but did say the hospitality industry is “always on the radar” for potential violations because it is known to employ large numbers of H-2B and younger workers nationally.

Paul Stone, president of North Carolina Restaurant and Lodging Association, told CJ that the lodging and restaurant industry is North Carolina’s second largest employer, with approximately 500,000 workers, accounting for 10 percent of the state’s total workforce. Of the 1,600 hotels in North Carolina, only a few employ H-2B workers, Stone said, mostly because the program is so restrictive. Before hiring an H-2B worker, for example, an employer must certify there are no domestic applicants qualified for the position.

Apart from industry and legislative alerts, Stone has discovered little else about potential investigations, despite attempts to learn more from both state and federal labor officials.

Stone wonders why hospitality employers are being targeted with the economy mired in recession. Wage and hour audits and similar investigations disrupt operations and increase costs, especially if an employer has to engage outside counsel or auditors, said Stone.

Aggressive agenda

Mike D’Aquino, a public affairs spokesman for the Labor Department, confirmed to CJ that the Wage and Hour Division plans to investigate the hospitality industry later this year to ensure compliance with H-2B visa requirements. D’Aquino said it is the division’s responsibility to ensure compliance and the hospitality industry uses a great number of H-2B workers.

Andria Lure Ryan, chair of the Hospitality Industry Practice Group and partner in the Atlanta law office of Fisher & Phillips, told CJ that Labor Department officials have been secretive on this issue and described their attitude as “militant.” The American Hotel and Lodging Association requested a closed-door session with Wage and Hour Division officials in Washington, hoping to find out why they consider the industry “high risk” and what measures were used to make that determination, Ryan said.

Those two questions weren’t answered. Ryan said they did learn that the “Hotel and Motel Resort Pilot Initiative” will target H-2B users for review and investigate all employers on the property, including separately owned and operated restaurants, cafes, and the like. The investigations also will target staffing firms that supply workers to the hospitality industry, and investigators will look at compliance with the Fair Labor Standards Act, including child-labor limitations, not just H-2B compliance.

Employment law experts say the strategies outlined in DOL’s semiannual regulatory agenda, dated April 26, will create an avalanche of new regulatory and enforcement actions and impose compliance requirements that will lead to federal enforcement actions or private lawsuits.

CJ contacted general managers from several hotels across North Carolina, but none would comment. Stone said NCRLA members are reluctant to speak for fear of becoming a target.

New enforcement initiatives

After taking office, Solis promised to focus on new regulatory and enforcement initiatives. She assembled a team of deputies and advisors who are veterans of the organized labor, workplace safety, and immigration reform movements to help execute this mission. Earlier this year, Esther Kaplan, writing for The Nation, praised DOL’s new leadership, saying, “Solis has formed a rump group that’s fighting on the right side of the class war.”

Prior to being confirmed as labor solicitor, the nation’s top enforcer of labor laws, former New York Labor Commissioner Patricia Smith led a successful enforcement battle against businesses misclassifying employees as contractors. Among Smith’s tactics was a pilot program called Wage Watch, which trained members of churches, immigrant groups, and labor unions as informants to report wage and other possible labor law violations.

Other notables are Joe Main, the first former union leader to head the Mine Safety and Health Administration Division, and Mary Beth Maxwell, senior advisor to Solis, who founded American Rights at Work, a national group advocating passage of the Employee Free Choice Act and that successfully lobbied for the Lilly Ledbetter Fair Pay Act.

David Michaels, assistant secretary of labor for the Occupational Safety and Health Administration, authored a book denouncing voluntary compliance of occupational health standards and calling for tough new regulations on industry.

Under Michaels’ leadership, OSHA has supported H.R. 2067, the Protecting America’s Workers Act, which seeks to expand OSHA’s coverage to federal, state, and local government employees and increases penalties for violators.

Karen McMahan is a contributor to Carolina Journal.