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Kahler hotel employees still waiting for back pay awarded to them in 2016

In 2016, the National Labor Relations Board ruled that employees of Rochester’s Kahler hotels were owed back pay that could total thousands of dollars for each for more than 200 eligible workers. In 2022, they are still waiting for their money.

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The Kahler Hotel in downtown Rochester. Photo taken July 15, 2021.
Andrew Link / Post Bulletin

ROCHESTER — In 2016, the National Labor Relations Board ruled that employees of the Kahler Hospitality hotels were owed back pay due to “unfair labor practices” by the management.

Six years later, the more than 200 employees have not seen any of the money that the ruling promised, due to appeals , delays and management changes.

“They're paying lawyers to help them steal money from people … and drawing it out over a long period of time, hoping that a lot of people just go away and the whole situation will go away,” said Scot Timm, a server at the Kahler Grand Hotel and Marriott hotel for 39 years. “That's just kind of a heartless strategy. It hurts people's lives in a fundamental way.”

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Scot Timm

The situation dates back to when Richfield Management and Unite Here Local 21 were negotiating for a new contract to replace the one that expired on Feb. 28, 2015.

Local 21 was representing 260 members who worked for the four downtown hotels led by health care executive and real estate investor Javon Bea , of Oronoco. After a few unproductive negotiation sessions, Richfield Management and hotels declared the talks were at an “impasse” and unilaterally instituted a new contract that, among other things, dramatically changed the pay for many of the hotel employees.

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In 2016, the National Labor Relations Board found the firm managing Rochester’s Kahler hotel properties guilty of unfair labor practices and engaging in “surface negotiation” with the union. Part of that ruling and other related actions is paying back employees the money that the 2015 contract promised them, but Richfield and Kahler Hospitality unilaterally took away in 2016.

That ruling means eligible Kahler employees are owed back pay for the period from 2015 to when the parties did agree on wages in “new” contract in 2019. That contract lasted until the end of 2021.

The back pay could add up to thousands of dollars for most of Kahler’s longtime employees, particularly people that staff large special events, banquets and meetings at the hotels. The event staff had their wages dramatically cut when hotel management stopped splitting a percentage of the “service fees” charged to clients with the staff. That accounted for the majority of their income. The change reduced their pay to an hourly rate.

Kathy Prouty, who has worked as a banquet server at the Kahler hotels for 45 years, estimates that she could be owed $75,000 in back pay. She remembers the day when her employer illegally made the changes to her income.

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Kathy Prouty

“I went to a friend's house and I sat there and absolutely cried. It really hurt when they took our money away. It was really, really hard,” said Prouty, who is 65 years old. “I'm getting up there in age, and I just would like my full settlement. Let's put this behind us.”

Leah Riley, a Kahler banquet server for 18 years, shares that frustration.

“They cut my income by 75%. The court judge said that he (Javon Bea) was supposed to make us whole again. ... He has spent millions of dollars on lawyers. He chooses to put the money in every other place besides where he should put it,” she said. “You know, the guy is more than capable of settling the settlement and chooses not to. That's what's most frustrating about it. The NLRB ruled in our favor.”

The resolution has been delayed for several reasons. Management’s appeal of the NLRB rulings took years to resolve. In the end, the courts ruled that the decision should stand.

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Leah Riley

The general manager of Kahler hotels has changed multiple times since the situation began in 2016. Daniel Krahn, who has been area general manager for a few months, was asked about why it has taken so long to pay the employees.

Since Krahn has just recently inherited the situation, he consulted with Kahler Hospitality ownership.

“I was notified that we are in discussions with the NLRB and have no further comment at this time,” he responded by email.

Richfield Hospitality, which was in charge in 2016, was later replaced as the management firm running the hotels. Kinseth Hospitality of Iowa took over.

Celebrity labor attorney Arch Stokes, of Atlanta, Georgia, represented the Kahler Hotels throughout the original NLRB complaint. In the rulings, Judge Keltner Locke described Stokes as an attorney that muddied the water by using an avalanche of pie charts as “a figurative smoke bomb.” Stokes is no longer involved in the case.

Meanwhile, Rochester’s Unite Here chapter, Local 21, was dissolved in 2020 and Minneapolis-based Local 17 took over the management of the southeastern Minnesota market.

Those transitions mean that the only people directly involved with the Kahler hotels labor issues in 2016 that are still connected to the dispute are Javon Bea and the employees.

Bea was the face of the $230 million purchase of the four Rochester hotels , anchored by the Kahler Grand Hotel, in 2013. Many believe that to be the largest real estate deal in Rochester’s history.

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While he lives in Oronoco, Bea is also the president and CEO of Mercyhealth, which has hospitals in Wisconsin and Illinois, including the Javon Bea Hospitals in Rockford, Ill.

In 2019, Bea's compensation from Mercyhealth was $9.97 million, according to tax documents. That is more than three times the $2.77 million paid to Mayo Clinic CEO Gianrico Farrugia in 2019.

Kahler workers refer to Bea’s multi-million dollar salary and his commercial Rochester investments, like the Miracle Mile Shopping Center and the Avani Living Apartments, as evidence that could settle the outstanding back pay issue.

Christa Sarrack, the president of Local 17, commented that Bea is very hands-on when it comes to talks with the union.

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“Most employers would never sit at a bargaining table or are as actively involved in the negotiations as Javon. Usually their operator (hotel management firm) negotiates the contract,” she said.

Sarrack made the back pay issue a priority when Local 17 took over the situation in 2020. However, progress has still been slow as employees and the union talk to Kinseth and Bea about paying back the employees. After all of this time, identifying the employees owed money and calculating how much is owed has not been definitively settled.

“Even rough estimates are a little bit hard,” she said, though she believes more than 200 employees who worked for the hotel from 2015 through 2019 are owed some back pay.

Is it unusual for a case like this to take so long to resolve?

“The headliner for me on this is that delay is normal, but this level of delay is not the norm. It's not unheard of, but it's definitely not the norm,” said

Jeff Hirsch, a professor at the University of North Carolina School of Law, who focuses on labor and employment issues.

Hirsch, who is a former NLRB attorney, said usually employers try to resolve this kind of case in a timely manner, because interest accrues on the owed money and legal fees tally higher, increasing the final bill.

“Labor cases can get very, very personal. I have seen many, many employers spend way more money to fight something than it would cost to resolve,” said Hirsch. “Sometimes there are cases that don't involve any money at all and employers will spend tens of thousands of dollars in attorneys fees to fight … just because they really don't like the union or something like that better. Definitely not out of the realm of, you know, when that happens, for sure.”

Atlas Lighting
Jeff Hirsch
Contributed / Steve Exum

In the end, he described the complexity of this case as “a hot mess.”

After 45 years working for the hotels, Prouty still remembers her excitement of walking in with a new hospitality degree and getting a job at the prestigious Kahler Grand Hotel. She says her feelings about the hotels, and the years that she has committed to it and her co-workers, have kept her going.

“I really enjoy my job. I really, really want to see the Kahler succeed. I have a special place in my heart for that place,” she said. “I just want what is owed to me for my work.”

Jeff Kiger tracks business action in Rochester and southeastern Minnesota every day in "Heard on the Street." Send tips to jkiger@postbulletin.com or via Twitter to @whereskiger . You can call him at 507-285-7798.

Jeff Kiger writes a daily column, "Heard Around Rochester," in addition to writing articles about local businesses, Mayo Clinic, IBM, Hormel Foods, Crenlo and others. The opinions of my employer do not necessarily reflect my opinions. He has worked in Rochester for the Post Bulletin since 1999. Send tips to jkiger@postbulletin.com or via Twitter to @whereskiger . You can call him at 507-285-7798.
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