“It's like the first round of a heavyweight championship, when everybody's feeling each other out,” says Joe McInerney, president and chief executive officer, American Hotel & Lodging Association, Washington, D.C., speaking about the battle brewing between hotel employers and the employee union, Unite Here, over worker contracts that will expire in six major cities in 2006.

First in line is Toronto, where contracts at 23 hotels were set to expire January 31. At press time, negotiations had not begun, and the likelihood of an agreement by deadline was nil, according to Paul Clifford, president, Unite Here Local 75, Toronto.

Clifford said it was “far too early to tell” if strikes, lockouts, or pickets would occur in Toronto, adding that hotel management has a “very large hand in determining” if any of that occurs.

Industry experts believe that labor unrest is probable in 2006 in one or more of the six cities in which contracts expire in 202 hotels. After Toronto, Honolulu and New York are next (June 30), followed by Chicago (August 31), Los Angeles (various dates April through November), and Boston (November 30). In San Francisco, workers have been without a contract since September 2004.

“Not good at all,” is how Peter J. Hurtgen, a former chairman of the National Labor Relations Board and now a partner at the Washington, D.C. — based law firm of Morgan, Lewis, and Bockius, which is representing AH&LA, summed up the chances of negotiations going smoothly across the board. “If I were handicapping this, I would put my money on confrontation,” he said, speaking at a seminar at the Professional Convention Management Association's annual conference in Philadelphia last month.

Card Check Neutrality

Why is confrontation likely? In 2004, one of the main obstacles was the length of the contract. Hoteliers pushed for a multiyear deal, while Unite Here sought a two-year deal so that contracts would be aligned with the cities that are up for renewal this year. “Our members realized that increasingly, they were not bargaining on a city-by-city basis with local owners and operators when it came time to renew contracts,” states Jason Ortiz, research analyst at Unite Here. “Instead, they realized that they were increasingly dealing with billion-dollar, multinational corporations, and that dealing with them city by city was akin to fighting a heavyweight boxer with one arm tied behind your back.”

In 2006, the major issue, says McInerney, is “card-check neutrality,” which relates to the process by which hotel employees become unionized. Currently, employees hold elections to decide if they want to be represented by the union, based on at least one-third of employees signing union cards. Under the card-check neutrality agreement, elections would be eliminated, he says. Instead, if a majority of employees signs union cards, the union automatically becomes their bargaining agent. Also, if the hotel owner buys or builds another hotel in the geographic area, the new property is subject to the card check neutrality agreement.

This agreement would make it easier for the union to increase its penetration in the hotel industry, added Hurtgen.

The hotel side is opposed to this provision. “We don't want to give up the employees' right to a free election,” explains McInerney, adding that unions only win a portion of elections.

In January, Unite Here released the Meeting Planner Resource Manual, designed to “protect your group and negotiate the best reservation agreement possible.” The 17-page guide includes negotiating tips and contract language for force majeure, relocation, cancellation, and attrition clauses as they relate to strikes, pickets, and other labor-related disruptions. (See box at left.)

The hotel side is doing its own outreach. Hotel employer groups in New York and Chicago have tapped public relations firms Burston-Marsteller and Edelman, respectively, to assist with communications. Edelman's Bill Keegan, spokesman for the 24-member Hotel Employers Labor Relations Association in Chicago, says the firm will communicate related news and information to all major stakeholders, including planners.

Do Your Due Diligence

“Plan for the worst and hope for the best.” That's the advice from Laurie Sharp, president, Sharp Events, a San Francisco — based meeting management company. She urges fellow planners to get as much information as possible about the situation (dates, hotels involved, issues, whether the hotel is unionized) from a variety of sources, including the employer group, union, CVBs, industry associations, and conferences. “It is up to planners to do their research and try to balance a perspective from the propaganda coming from both sides.”

For planners, it's critical to educate attendees. “The fact that someone is picketing won't keep you from meeting. That's a communication remedy,” said Cozzi Goedert, partner at law firm Barnes and Thornburg LLP, Chicago, speaking at PCMA last month. First, communicate with attendees and inform them that there may be picket lines in front of the hotel. Put a positive spin on it; simply tell them that the workers are exercising their First Amendment rights.

Second, she said, groups should be prepared to have their own people in front of the hotel when there is picketing. The group representative will not only be there to welcome guests, but can keep an eye on the demonstration and report any aggressive activity.

In addition, planners should communicate with the hotel to see what plan it has to deal with picketing and if it will provide alternate entrances, hotel security, and supplemental staffing if necessary. Pickets and strikes or lockouts not only affect the hotel work force, they may also affect workers belonging to other unions who honor the picket lines. So, if there is a strike or picketing, other union members who work on meetings might not show up for work. Planners should address these issues with service contractors in advance to see what kind of backup plan they have. Also, planners should be aware that even if the hotel is operational and staffed with replacement workers, service could suffer.

Put It in Writing

Force majeure and cancellation clauses can provide some protection to planners affected by labor disputes, but not always. The wording of a traditional force majeure clause does not adequately guard against labor disputes and strikes, says Goedert. She recommends adding language that offers protection if labor disputes cause “prevention or delay” in services.

Lisa Sommer Devlin, a Phoenix-based hospitality lawyer, says that a strike does not necessarily give the group the right to cancel. “The only time that that would be covered (under force majeure) is if, as a result of the strike, the hotel is not in operation,” she says. “A lot of planners mistakenly assume that if there's a boycott or a strike they have the right to cancel — and they don't.”

Of course, planners can negotiate clauses that protect themselves, but that doesn't mean that hotels will agree to them. “Force majeure clauses have become one of the most negotiated clauses in meeting contracts,” says Devlin. In the cities in which labor disputes could occur in 2006, hotels are going to be reluctant to put restrictive language in the contract because they are already doing contingency planning to make sure that the hotel is operational in the event of a strike.

Weathering the Storm

So far, Sharp says her corporate clients are not avoiding cities in which labor disputes are brewing. Since contracts expired in San Francisco, for example, seven large conventions and a handful of smaller meetings have canceled, at an economic impact of $50 million, says Mark Theis, vice president, convention division, San Francisco CVB. However, San Francisco was able to make up the deficit through in-year bookings and managed to break even. “We ended 2005 healthy, and as we look at 2006, we have more than 15,000 more room nights on the books with the conventions at Moscone Center alone, not to mention the in-house meetings, which are already stronger than they were in 2005,” he says.

Most of the cancellations occurred in the first half of the year, but things settled down as awareness of the situation among planners grew.

Communication, says Theis, was a big challenge for the bureau, which had to do some damage control and reach out to planners who thought the city was “turned upside down” by a strike. In reality, the strike lasted only two weeks, and since then, employees have been working without a contract. So the challenge has been to educate clients that service levels are intact. “The bureau is an apolitical organization, and we're not taking one side or the other, but when it directly impacts the visitor potential, then we have to get involved. We had to be more proactive in educating clients that San Francisco is open for business and that the hotels are delivering the service that they would expect and need.”

When the dispute started, bureau officials were contacting group clients three to four months out, but soon, the timetable moved further out to one year. In some cases, says Theis, the union had already contacted them. “Our approach was merely to convey both sides, give them the issues coupled with the fact that it only affected 14 hotels. Equally important, we directed them to both the union and the 14 hotels' Web sites.”

Although the issues are not resolved in San Francisco, the city weathered the storm in 2005 and is preparing for the potential for another storm in 2006 — only this year, Theis says, “a slew of cities will be in the boat with us.”

Unite Here's Contract Clauses: Should You Consider Them?

We asked meeting industry lawyer James M. Goldberg of Goldberg & Associates, Washington, D.C., to review three contract clauses put forth in Unite Here's new Meeting Planner Resource Manual (www.hotellaboradvisor.com). Here's what he had to say.

Clause: EXCUSED NONPERFORMANCE

If either Hotel or [your Group] is prevented from or delayed in performing any act required of it hereunder and such prevention or delay is caused by disruption due to construction activities, strikes, labor disputes, Acts of God, government restrictions, judicial orders, fire or other casualty, civil commotion, or causes beyond its reasonable control, or if performance hereunder would foreseeably involve either party in or subject it to the effects of a labor dispute and the party therefore withholds or delays performance, it shall have no liability there from.

Goldberg: This is an expansion of the type of force majeure clause commonly found in most hotel meeting contracts. The language only requires that the enumerated causes prevent or delay a party in performing its contractual obligations, a standard that is broader than that agreed to by many hotels, i.e., that the listed causes make performance “illegal, impossible, or commercially impracticable,” all terms that have a well-established legal meaning. As such, it might be rejected by many hotels.

The term “labor disputes” is vague. The term is defined in the National Labor Relations Act, the federal law that covers collective bargaining situations, but without a specific reference to that definition, the term could be misconstrued to include disagreements between individual employees and management, which is beyond what most hotels would accept.

Finally, the proposal would seemingly permit a hotel to terminate an agreement without liability if it faced a strike or labor dispute, which would negate the meaning of this kind of provision, designed to cover situations beyond the reasonable control of the party seeking to use it.

Clause: CANCELLATION OF COMMITMENT

Notwithstanding anything in the Agreement to the contrary, if within two (2) weeks prior to the commencement of, or at any time during, the event, the Hotel is being picketed or is involved in a labor dispute, [Group] may cancel this commitment by giving written notice to the Hotel. In the event of such cancellation, neither [Group] or its members shall have any future obligation under this Agreement, and any deposits made to the Hotel by [Group] to reserve rooms or other space for use, and/or for services to be provided, shall be refunded.

Goldberg: This provision gives the Group the unilateral right to terminate a contract without liability if, within two weeks of or during the meeting, the hotel is being picketed or is involved in a “labor dispute.” The problem with the definition of “labor disputes” persists.

In addition, the proposed language presupposes that a group will want to, let alone be able to as a practical matter, cancel its meeting within two weeks of its start in the event of any picketing.

Further, the language contains no explanation of whether the picketing is lawful, or even if it involves picketing concerning a labor dispute, as contrasted with, for example, picketing aimed at preserving the historical character of a hotel property that is slated for renovation.

Clause: CANCELLATION

This Agreement may be canceled by mutual written agreement at any time. In the event of cancellation by [Group] for a reason not set forth in [reference the “Excused Nonperformance” or “Force Majeure” and/or “Cancellation of Commitment” clause(s)], [Group] shall owe liquidated damages to Hotel as set forth below:

• More than one year prior to event: No damages due

• Six months to one year prior to event: 50% of estimated lost profits

• Six months or less prior to event: 75% of estimated lost profits.

Estimated lost profits shall be calculated as follows: ((room nights [- resold rooms nights] × group room rate) × 60%) + (minimum banquet revenues × 25%). Hotel agrees to make all reasonable efforts to resell canceled rooms. Resold rooms shall be credited against any liquidated damages owed by [your Group] as set forth in the estimated profits formula above. Liquidated damages, if any, shall be payable 30 days after the final scheduled day of the Event, provided that Hotel submits to [Group] adequate proof of its efforts to mitigate damages. [Group] shall not owe any liquidated damages if Hotel meets or exceeds its average occupancy level over the preceding two years of [state average occupancy level] for the dates of [Group's] event.

Goldberg: Unlike many proposals from hotels, which present cancellation damages as a percentage of anticipated hotel revenues, the union proposal takes what is a more proper approach to liquidated damages by specifying that the damages are computed on the basis of lost profits. However, the reference to profits being an estimated 60 percent of room revenue substantially understates the average hotel industry profit margin on sleeping rooms, which is between 70 percent and 75 percent. The reference to 25 percent being the estimated lost profit on food and beverage revenues is more in line with industry averages.

The proposal to eliminate all cancellation damages if the hotel meets or exceeds its average occupancy level for the same period as the meeting — what some call the “no harm, no foul” approach — is a good idea, even if many hotels will probably reject it.