City Council Approves Hotel Licensing Bill

Authors: Anita Laremont, Sean Pethybridge, Timothy Gentles

Intro. No. 991-C (the "Bill") is the fourth and final version of a New York City Council bill requiring the licensing of hotels by the Department of Worker & Consumer Protection. The final version of the Bill, which was approved by the New York City Council on Wednesday, October 23, 2024, attempts to address concerns expressed about the prior bill version, Intro No. 991-B., which was the subject of a City Council hearing on Wednesday, October 10, 2024 ("Hearing"). The Bill provides as follows:

All hotels must secure a license in order to lawfully operate. Each license will have a two years term, and will not be assignable, except where a change or transfer of the controlling interest in the hotel operator has been made in accordance with NYC Administrative Code Section 22-510, which provides protections for displaced hotel service workers. The fee for a license or renewal will be $350.00.

To secure a license, an applicant must identify the hotel operator and provide information to establish that it has "adequate procedures and safeguards to ensure compliance with this statute," including staffing requirements, safety requirements, guest room cleanliness standards, direct employment requirements and panic button provisions set forth in the Bill. The Bill provides that the requirement shall be satisfied by having a collective bargaining agreement that expressly incorporates the requirements of the Bill.

The Bill requires that "core employees" (employees in housekeeping, front desk or front service at a hotel) of hotels with 100 or more rooms must be directly employed by the hotel owner, except that a hotel owner may contract with a single manager to manage all hotel operations involving core employees on behalf of the owner.

The carve out from this requirement for hotels with fewer than 100 rooms ("Small Hotels") is in response to push-back from owners of those facilities. These owners testified at the Hearing that the prior version's admonition against contracting with third parties for core employees, including staffing agencies or other contractors or subcontractors, would upend their business model and impose significant challenges to their operations. The Bill allows Small Hotels to continue to contract with contractors and subcontractors to provide hotel staffing.

Hotels are required to, among other things: maintain continuous coverage of a front desk (which may be accomplished by having an overnight security guard); maintain the presence of at least one security guard on site if the hotel has 400 or more rooms; and maintain cleanliness of guest rooms, sanitary facilities and hotel common areas, including changing linens daily if requested.

Short duration bookings (less than 4 hours) are not permitted for any hotels except airport hotels.

The facilitation of human trafficking is prohibited. Hotel operators are required to provide human trafficking recognition training for all core employees.

Hotels must provide panic buttons to all core employees that enter occupied guest rooms, at no cost to the employee.

Hotels may not retaliate against employees for disclosing or threatening to disclose any violation of this law, providing information, testifying or otherwise cooperating with any investigation, hearing or inquiry into any such activity by the hotel operator, or objecting or refusing to participate in any activity that the employee in good faith believes is dangerous and outside the scope of the employee's job.

The Bill provides for civil penalties for violations, starting at $500, up to $5,000.

The Bill has evolved to address a number of concerns expressed by the hotel industry following its introduction several months ago. Most notably, allowing hotel owners to contract with a hotel manager that controls the day-to-day operation of the hotel (including directly hiring hotel employees), permits the continuation of the current operating structure at many larger hotels. The Bill excludes food and beverage employees, laundry and valet employees, specialty cleaning employees, parking and security employees, and spa, gym and health club employees, among others, from the definition of "core employees."

The final version of the Bill explicitly permits a hotel operator to apply for the license, obviating the need for the owner to do so where there is a hotel operator or manager in place. This should make it easier for hotel properties to secure financing for acquisition or development where they operate with this business model.

Notwithstanding these changes, the Bill continues to pose concerns for hotel owners and operators. It is unclear what will constitute evidence of the existence of "adequate procedures and safeguards to ensure compliance with [the] statute," in the absence of a collective bargaining agreement that incorporates the Bill's requirements, and we await clarification through rules to be promulgated. Further, if a hotel is determined to not be in compliance with the statute, then not only can violations be issued, but denial, suspension or revocation of the license is possible, which would render hotel operation unlawful. Observers will watch to see whether the Bill is utilized for its stated purposes; namely, to prevent human trafficking and ensure safe working conditions for employees.

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