In the hospitality industry, it is fairly common for a hotel to retain a management company to run housekeeping, food and beverage, and other functions. While the management company may supervise and direct the work of hotel employees, those workers remain employees of the hotel. According to a recent decision from the Seventh Circuit Court of Appeals, the management company’s role in directing the work of hotel employees may make it a joint-employer of those workers.

In Frey v. Hotel Coleman, the plaintiff alleged that she was fired after she filed an EEOC charge alleging sexual harassment by the CEO of the management company retained to operate the hotel where she worked. The district court dismissed claims against the management company on the basis that it was not the Title VII employer of the plaintiff. She appealed, claiming that the management company had full responsibility for all aspects of the employment relationship, including hiring and firing, as well as compensation and human resources functions.

The Seventh Circuit agreed, remanding the claim for additional proceedings. An individual manager who is also employed by the same company as the plaintiff cannot be sued under Title VII. However, an outside company hired to manage the hotel can be held liable under Title VII if it meets an economic realities test. This test looks at the control exercised by the management company over the employee’s work. The Seventh Circuit remanded this part of the claim for a determination based on this test.

Hotels or other companies that use outside managers to perform functions involving hotel employees should have in place contracts that provide for indemnification in the event that the management company’s actions violate applicable labor laws. The actual employer should also establish oversight, as well as a reporting mechanism for its employees, to detect and correct any issues with that management company’s supervision of its workers.