Two of the four bills that Council member Teresa Mosqueda is sponsoring to extend additional protections and rights to hotel workers saw lengthy discussions last Friday, as well as significant amendments adopted that address some of the most pointed criticisms of the bills.
The two bills discussed were Council Bill 119555, which sets a minimum requirement for healthcare expenditures for hotel workers; and Council Bill 119557, which provides for a number of safety protections for workers. Neither bill was voted out of committee; Mosqueda said that she wanted to wait for the other two bills in the four-bill legislative package to go through the amendment process in early September, then vote all four out together. The package represents much of what was originally included in Initiative 124, which was approved by voters but thrown out by the state Court of Appeals for violating the “single subject” rule. That case is now before the state Supreme Court and scheduled for a hearing on September 17th. If Mosqueda’s bills pass, however, they will make that case moot: enough time has passed since the passage of I-124 that the Council is now free to amend it, and by breaking it up into four separate bills the Council avoids an possibility of violating the single-subject rule.
The evening before last Friday’s 9am hearing, Mosqueda’s office circulated new drafts of amendments to the bill. That made stakeholders (as well as Council member Bagshaw) unhappy, since they had little time to review some lengthy and significant changes. They made that unhappiness known in the public comment session on Friday. Nevertheless, Mosqueda pushed forward with consideration and adoption of the new amendments, confident that since they were not being voted out of committee that day, there would be time to make additional changes based upon stakeholder feedback.
The amendments to Council bill 119557, the safety measures bill, has been significantly scaled back from the version in I-124 as well as the original version of Mosqueda’s bill. The requirement for hotels to keep a “blacklist” of guests accused of harassment or violence toward employees is now gone, as is in general any requirement for the employer to deny services to those guests beyond their initial stay at the hotel. The ACLU and other stakeholders had criticized those provisions, arguing that they violated guests’ constitutional rights to due process. The amended bill also removes a requirement for hotels to investigate allegations, since hotels may not have appropriate resources to conduct their own investigations and even if they do those investigations could compromise any criminal investigation by law enforcement bodies.
The requirement for hotels to provide panic buttons to employees providing in-room services remains in the bill, with some adjustment to account for the new state law requiring panic buttons. The key difference between the two is that while the state law says that the panic button “may summon” immediate help, Mosqueda’s bill says that it “must summon” immediate help — implying that hotels must have personnel available at all times that employees are working in rooms to monitor alerts from the panic buttons and dispatch someone in response. Since provisioning such a system and hiring and training personnel could take time, the bill gives hotel until the end of 2020 to reach full compliance so long as they are in compliance with the state law up to that time.
The bill also has a list of employer requirements toward the guests, and employer requirements toward the employees who allege harassment or violence by guests. The list of employer requirements for guests include:
- discontinuing in-room services for the remainder of the guest’s stay, including cleaning, towel service, and room service deliveries, unless an investigation (by either the hotel on its own volition, or by law enforcement) determines that the alleged conduct did not occur. Guests may still come to the front desk to pick up towels or room service orders.
- providing a written notice to the accused guest that in-room services have been discontinued. The notice is not required to include factual allegations against the guest.
Employer requirements for the employee include:
- immediately reassigning the employee to a different work area and maintaining that reassignment even if an investigation determines that the alleged conduct did not occur.
- providing the employee with a copy of the notice that was given to the guest.
- providing the employee with several documents, including a notice of their rights, a notice of their right to a “support advocate,” and a notice of the prohibitions against retaliation for making an allegation.
- permitting the employee up to 16 hours of paid time off to consult with a counselor, advisor, advocate, or other support person of their choosing. There was apparently much debate over whether 8 hours would be enough, and in the end the amount was extended to 18 hours because of the likelihood that a same-day appointment might not be available. On the other hand, making it longer than 16 hours might require some kind of verification that the incident actualyl occurred, and one of the goals for the time off is to allow a victim to consult with appropriate persons before lodging a formal complaint or pressing charges (hopefully increasing the likelihood that perpetrators will be charged).
- cooperating with any law enforcement investigation.
- taking reasonable precautions to protect the identities of employees who report guest conduct, employees who are alleged victims, and witnesses.
The bill also charges the Office of Labor Standards (OLS) with providing access to a “support advocate,” a newly-invented service for workers. While state law guarantees access to a crime-victim advocate to help people through investigations and legal proceedings, the “support advocate” would help in situations where the guest’s actions may not rise to the level of a crime. The advocate would help employees know what their rights are under this ordinance, and help them to understand their options for reporting the conduct to management and what management needs to do. It is envisioned that OLS would likely contract this service out to an advocacy organization. The budget implications of this are not understood yet and as such are not addressed in the bill; Mosqueda expects they would be wrapped into this fall’s budget process.
The bill doubles the standard enforcement penalties for violations of the ordinance above what is usually found in this type of labor-standards ordinance, to incentivize compliance and in recognition that there is limited financial recovery for employee victims when an employer doesn’t comply. OLS can direct the fines collected to the victim, or split them to help defray the cost of the support advocate program.
The amendments were adopted by a 3-0-1 vote; Mosqueda, O’Brien and Herbold voted “yes,” and Bagshaw abstained because she wanted more time to read through everything (having just received it the night before).
Council Bill 119555, the bill setting requirements for health expenditures, also had a substitute version offered that contained a collection of amendments, though there was really only one issue of consequence. The goal of the bill is to ensure that hotel workers have health coverage provided by their employers that is equivalent to a “gold” level plan on the state’s health exchange, but for reasons we’ll come back to shortly, it doesn’t simply specify that; rather, it requires that employers spend a minimum amount on health expenditures per employee that is the equivalent of the average cost of a gold-level plan as advertised on the exchange. That is problematic, for several reasons including:
- Large employers negotiate better deals for health coverage plans because they are purchasing them for their entire employee base, and often pay much less than the full advertised rate on the exchange. Because of that feedback, Mosqueda’s amendment reduced the minimum required expenditure to 80% of the advertised rate. However, in public comment several hotel employers said that even that was too high. According to the terms in the original bill, if an employer obtained a gold-level plan for an employee for less than the required minimum expenditure amount, the employer would need to pay the difference directly to the employee in additional compensation.
- A partner or family member might already provide gold-level health coverage to the employee, in which case the hotel employer is still on the hook to meet the minimum healthcare expenditure requirement. The amended bill has a means for an employee to sign a waiver releasing the employer from the responsibility
- An employee may have purchased their own health coverage directly from a provider other than the ones that the employer works with, and may wish to stick with their own. Is the employer required to make additional compensation payments to the employee, even if the employee’s health coverage costs more than the equivalent plan that the employer negotiated?
During last Friday’s hearing, both Bagshaw and Herbold expressed great reservations about enforcing a specific minimum expenditure amount when employers have the ability to negotiate lower-cost plans with an actuarial value that is equivalent to a gold-level plan. Mosqueda agreed that the quality of the healthcare was the goal, not the expenditure itself, and because she really wanted to get the amendments adopted in the meeting she led her colleagues through a messy, painful process of writing a new amendment on the fly that would exempt employers from the minimum-expenditure requirement if they provided their employers with a gold-level plan.
The package of amendments also included a change to the implementation date of the bill to recognize that many employers update health plans annually — and many are doing so this month for next year’s plan. Instead of a fixed 2020 date, it would take effect at the next “open enrollment” period that employer offers, or at the end of 2020 at the latest. The amendments also give employers up to 60 days to provide healthcare expenditures to new employees.
Let’s come back to the reason why this bill has such a convoluted mechanism for requiring that hotels provide healthcare to their workers: simply put, the city can’t. A federal law called ERISA preempts all state and local laws “insofar as they may now or hereafter relate to any employee benefit plan .” As recently as 2016 (and in a long line of cases before that), the Supreme Court has made it clear that the preemption is constitutional (though in the 2016 case Justice Thomas wrote his own concurrence raising doubts about the breadth of the preemption).
After I-124 was approved by the voters, two legal challenges were filed against it. The first is the “single subject” challenge described above and now in front of the Supreme Court. The second was filed by an industry association, ERIC, specifically in response to I-124’s requirement to provide healthcare. That case is on hold until the first one is dealt with, and will become moot if the state Supreme Court tosses I-124 in its entirety. But with Mosqueda’s bill, the issue still remains: the city can’t write laws related to employee benefit plans.
Congress’s rationale for writing ERISA, including the preemption, was that any company that employed people across different jurisdictions had to deal with a hodge-podge of federal, state and local regulations around retirement and other benefit plans that were nearly impossible to navigate — let alone provide any level of equity to their employees across those boundaries. Congress’s solution was to simplify the rules around benefits into one set of federal laws, using its Constitutional power to regulate interstate commerce.
The case law around ERISA’s preemption is a bit strange, because the law itself provides no helpful explanation as to what it means for a law to “relate to an employee benefit plan.” The Supreme Court has called that phrasing “expansive but terse.” In the case law, it has been interpreted very broadly by judges to apply to any state or local law that either “makes reference to” or “is connected with” a benefit plan.
Mosqueda’s bill tries to dance around this by requiring a minimum “healthcare expenditure” as a dollar amount, rather than require that a healthcare plan be offered. However, it defines that amount relative to a gold-level healthcare plan offered on the state exchange (a reference to a plan), and now with the latest amendments, it exempts employers that provide a gold-level plan (both a reference to, and a connection with, a plan). In fact, both the bill itself and the discussion during the Council’s hearings on the bill make clear that thelegislative intent is to ensure that hotel employees get gold-level healthcare plans.
We’ve seen this movie before (Groundhog Day?): the bill is almost certainly illegal because ERISA preempts it. If the Council passes it, it will immediately be challenged in court, most likely by the same party that filed the suit against the equivalent provision in I-124. It will be tied up in court for years as it works its way through multiple levels of appeals, and in the end the city will almost certainly lose and the bill will be tossed out. The city will rack up legal costs in the process, and probably end up paying the legal costs of the challenger as well.
(Just to be perfectly clear: I am not saying it’s a bad idea to require employers to provide healthcare to their employers, particularly those such as hotel workers who do physically strenuous work. It’s a great idea. But federal law prohibits the city from passing such an ordinance.)
I have asked Mosqueda’s office why they believe this bill is not preempted by ERISA;
I have yet to receive a reply (I will update this post if and when they respond). UPDATE: here is the (non-)reply from a spokesperson for Mosqueda: “I believe a response to your question would violate attorney-client privilege. As you likely know, we’ve been working with attorneys on all four pieces of legislation and any advice on ERISA preemption (or not) should be considered privileged.”
As with the first bill, the package of amendments was adopted by a 3-0-1 vote, with Bagshaw again abstaining. The bill remains in committee until the others have had their turn with amendments.
One of the other big controversies in Mosqueda’s four bills is its extension to “ancillary businesses.” As currently written, food, service and retail shops renting out space on a hotel property but not owned or operated by the hotel itself would also be subject to the same rules — including the requirement to provide healthcare coverage. The owners of some of those businesses have raised concerns about the provisions, since they create complications and additional expenses for businesses that may have little relationship with the hotel other than occupying the same building (in fact, some of them can’t even be accessed from within the hotel). It’s an interesting trade-off: on one hand, requiring them to follow the same rules makes them less competitive than their competitors literally across the street, and creates a strong incentive for them to move out of the building. On the other hand, not requiring them to follow the rules creates a strong incentive for hotels to outsource more of their own internal services such as room service, fitness centers, restaurants, and laundry-cleaning. Mosqueda punted on the issue last Friday, and said that her committee will take it up at their next meeting on September 5th — when the other two bills will go through the amendments process, and all four may potentially be voted out of committee.
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