What started as complaints from hotel workers about labor conditions at the DoubleTree Suites in Santa Monica has led to an investigation into the hotel’s finances by the Santa Monica-Malibu Unified School District Board of Education.
The district owns the land on which the DoubleTree sits and, while they have no proof of financial wrongdoing, the board has requested clarification on how certain lease payment calculations were made.
The board’s scrutiny is the result of questions raised by Unite Here Local 11, a hospitality union. Unite Here led a protest at the DoubleTree earlier this year with 50 hotel employees who claim that they aren’t getting the two 10-minute breaks they’re entitled to during every shift.
A hotel general manager said at the time that they were unaware that this was occurring. It’s up to the workers to take their breaks, the general manager said.
DoubleTree Suites is not a union hotel but Unite Here helped workers file official complaints with state and federal labor agencies. Investigations are ongoing.
Union officials then turned to the district, which owns the land.
The district is owed a monthly base rent that rises with inflation. The Procaccianti Group, which bought the hotel a few years ago, has always paid on time.
The district is also entitled to 5 percent of the hotel’s net cash flow, which has a complex definition. From this provision, the district has never seen a penny. The net cash flow takes into account the hotel’s development and operating cost which, according to the hotel owners, has always exceeded revenues by tens of millions of dollars. Since the contract was signed in 1987, the hotel owners (there have been three) always reported this cash contribution to the district with little explanation as to how it’s been reached. At the request of the board, district officials sent a letter to the hotel owners, asking for more information on the calculation.
Many of the board members were dubious about this reported deficit given Santa Monica’s booming tourism industry ($1.63 billion generated last year).
Dean Pappas, the district’s real estate attorney, explained that the lease could have been “better drafted.” It does not explicitly require the lessee to explain how it reached its final calculation, nor does it give the district the right to audit the lease. Pappas was not responsible for drafting the lease.
Boardmember Ben Allen noted that the lessee should have to cooperate in explaining its calculation, even if the contract doesn’t specifically require it.
The contract is up for an adjustment in 2021.
Hotel workers, Santa Monica High School students, leaders from two school employee unions, clergy members, residents, and the incoming Parent Teacher Association president spoke during the public comment portion of the item, asking the board to take action.
Boardmember Laurie Leiberman recused herself from the discussion because her husband, an attorney, previously represented the hotel owners. Boardmembers Maria Leon-Vazquez, Ralph Mechur, Oscar de la Torre, and Ben Allen were direct in their opinion that the labor violation allegations, if true, are unacceptable for a district lessee. If the state or federal agencies do find that the hotel is violating labor laws, the hotel will have an opportunity to appeal. If they lose an appeal, they have 30 days to remedy the violations.
Mechur suggested that future district contracts should require lessees to pay employees a living wage.
On the issue of net cash flow, board members agreed to wait until their next meeting to consider taking action, allowing the hotel owners time to respond.
This story originally appeared in the Santa Monica Daily Press.