Fight looms over health insurance costs for hotel employees

By Andrew F. Hamm

SILICON VALLEY/SAN JOSE BUSINESS JOURNAL

Updated: 8:00 p.m. ET April 24, 2005



South Bay hotel managers are hoping to keep stalled union contract talks from blowing up into a full-blown labor war like the one San Francisco hotels are experiencing.



More than 200 workers from United Here Local 19 marched on the Wyndham Hotel and Hyatt San Jose April 15, banging pots and shouting pro-union slogans to protest the lack of progress in labor talks. The noise tactics have been a hallmark of the San Francisco battles.



While the union is seeking a 4 percent wage increase, the big issue is rising health care costs, both sides agree. The union is trying to keep its members health care program fully funded by the hotels while hotel management is trying to cap its costs.



"They are trying to set up a co-pay system," says union spokesman Enrique Fernandez. "But most of our workers are making $9.50 to $10 an hour, which means they won't be able to afford medical at all if they have to pay."



More than a third of the 3,000 room attendants, valets, bartenders, waitpersons and others that make up Local 19 have been without contracts at the Hilton San Jose and Wyndham in San Jose and the Four Points by Sheraton in Sunnyvale since Dec. 31. The Hyatt San Jose contract expires May 31 and the San Jose Fairmont contract expires Dec. 31. The Crowne Plaza signed a one-year contract with its workers in December.



Under the current system, each hotel pays a lump sum into a trust fund that pays for healthcare for all hotel union workers. Workers are required to pay extra for family members, about $70 a month for a family. Union and hotel representatives jointly manage the trust fund.



The San Jose Convention & Visitors Bureau has so far stayed out of the negotiations but has been following the talks, says its president and CEO, Daniel Fenton.



"If for some reason there isn't any progress, there will be some more organized effort to resolve this," he says.



Both sides are downplaying strike talk although Mr. Fernandez says the union is willing to take that step if necessary.



"We are moving in the right direction but there is concern," he says. "Right now, we are trying to bring awareness to the situation."



A number of scenarios are being discussed, including going to a co-pay system and requiring higher contributions for family members. The union is holding out for the status quo, Mr. Fernandez says.



Unlike San Francisco, where the 14 union hotels negotiate with the union as a single entity, each South Bay hotel negotiates its own contract.



However, what one hotel agrees to is closely watched by the others, says Dick Leasia, head of San Jose-based Thelen Reid & Priest law firm's Labor Employment Practice.



"Health care costs are starting to go through the roof," says Mr. Leasia, with many industries seeing increases in the 12 percent to 15 percent range. "General Motors is being brought to its knees in large part because of healthcare costs."



The nine-month San Francisco hotel labor battle has raged on despite a healthy rebound in occupancy and room rates led by an increase in tourism. San Francisco's hotels are averaging 67 percent occupancy and average daily room rates of $147, according to PKF Consulting, an industry consultant firm. Both numbers are more than 5 percent above 2004 numbers.



Meanwhile, San Jose's 14 major hotels are averaging about 51 percent occupancy and $116 average daily room rate, about the same as 2004 numbers.



"We are making progress ... I'd be more concerned if we weren't progressing," says John Southwell, general manager of Hilton San Jose, who is leading his hotel's labor negotiations. "These are tough times and it's an expensive place to live and we've been down for a few years... which makes this tough."



Both sides acknowledge that healthcare costs are rising, Mr. Southwell says. "There is a certain reality we have to face about costs," he says. "The real answer is to fix the healthcare system."