Labor & Employment Law Daily Wrap Up, LABOR—ARBITRATION—7th Cir.: Employers violated CBA by operating hotel to house migrants without using union employees, (Jul 20, 2026)

By Ronald Miller, J.D.

The employers participated in the arbitration without reserving the right to later object to arbitrability and so were bound by the arbitrator’s decision.

An arbitration award that found that three employers violated a collective bargaining agreement when they housed migrants at a hotel without using union members to operate the facility was affirmed on appeal to the Seventh Circuit. The appeals court rejected the argument of two of the employers and an individual defendant that they could not be bound by the arbitrator’s decision because they did not agree to arbitrate. The court pointed out that the employers participated in the arbitration, without reserving the right to later object to arbitrability. Further, they were all present for at least a portion of the arbitration hearings, and they all shared the same counsel (Elmar Hotel Management, LLC v. UNITE HERE Local 1, No. 25-2307 (7th Cir. July 17, 2026)).

In March 2021, Allegiant Equities purchased the Inn of Chicago. At the time, the Inn was not operational, and its union-represented employees were temporarily laid off because of the COVID-19 pandemic. The CBA, which had been signed by the Inn’s prior operator, provided that the agreement would continue with any change in owner or operator. Allegiant then designated Elmar Hotel Management as the operator of the Inn. Elmar signed an agreement with the union, assuming the CBA. Still, the Inn remained out of operation for the next couple of years.

In late 2022 or early 2023, the City of Chicago asked if the Inn could be used to house displaced migrants. A group sales agreement was booked, agreeing to sell blocks of rooms to the city. Under that agreement, functions that would ordinarily go to union employees, such as housekeeping and food and beverage tasks, were assigned to an outside staffing agency. At some point, the functions were assigned to Social Club Management.

Union grievances. The union became aware that the Inn was back in operation without the use of union employees. In March 2023, a union representative visited the Inn and asked for information. The representative was told to leave and that the police had been called. It was later explained that an outside agency was cleaning the rooms, and a church was providing and serving the food. The union filed grievances alleging violations of the CBA. Eventually, the grievances were submitted to arbitration.

Arbitration award. On July 20, 2024, an arbitrator found that the employers violated the CBA when they housed migrants at the Inn without using union members to operate the facility, ordered the employers to operate the Inn under the terms of the CBA, post notices about the violations, and provide compensatory relief.

Relevant to this appeal are three decisions made by the arbitrator. First, he found that the Inn was operating as a “hotel” within the meaning of the CBA when it housed the migrants. Second, the arbitrator found that there was “a single employer.” Third, the arbitrator found that the employers violated the CBA and the NLRA.

Thereafter, the district court confirmed the award and the employers appealed.

Authority of arbitrator. As an initial matter, Allegiant, Social Club and the individual defendant argued that they could not be bound by the arbitrator’s decision because they did not agree to arbitrate. The Seventh Circuit observed that this argument went nowhere. While the general rule is that non-signatories to an arbitration agreement are not bound by the resulting decision, where “a party willingly and without reservation allows an issue to be submitted to arbitration, he cannot await the outcome and then later argue that the arbitrator lacked authority to decide the matter.”

Here, the employers participated in the arbitration without reserving the right to later object to arbitrability. They were all present for at least a portion of the arbitration hearings. And they all shared the same counsel and never asserted that he was appearing solely on behalf of Elmar or that any subset of the employers was objecting to arbitrability. Thus, in the absence of evidence that the employers “questioned the arbitrator’s authority” to resolve the dispute, they cannot now argue that he “had no authority” to bind them.

Single employer. Second, the employers argued that the arbitrator had no authority to find that any of them were the “Employer” as defined by the CBA or that the Inn was operating as a “hotel” when it was housing migrants.

Here, the appeals court determined that the arbitrator’s decision was rooted in the CBA. First, he agreed with the employers that the CBA would apply only if the Inn was still acting as a “hotel” when it was housing migrants. He determined it was.

Next, the arbitrator reviewed the CBA’s “broad definition” of “Employer” and determined that Allegiant, Elmar, and Social Club were all under the personal control of the individual defendant. Thus, the appeals court was satisfied that the arbitrator confined his inquiry to interpreting and applying the CBA. In any event, the parties—including the employers—argued extensively about whether the facts indicated that there was a “single employer” and about whether the Inn was operating as a “hotel,” and the employers never raised any concerns about whether the arbitrator had authority to answer those questions or otherwise objected to the issues being resolved by him.

NLRA violation. Third, the employers argued that the arbitrator had no authority to find that the individual defendant and Social Club violated the NLRA because the unfair labor practice charge that was submitted to the NLRB did not specifically name them as parties. The appeals court found that this argument was just another way of attacking the arbitrator’s finding that they were all “Employers.”

Due process claim. The employers also attacked the arbitration award on due process grounds, arguing first that Allegiant, the individual defendant, and Social Club lacked notice of the grievances and the NLRB charge, so they were not aware of the potential for liability. The grievances were addressed to the individual defendant’s designated point of contact for the union, his financial management consultant. The NLRB charge named Elmar and Allegiant and listed those individuals as representatives. Further, they showed up to the arbitration hearings with shared counsel. Thus, the individual defendant, Allegiant, and Social Club were clearly on notice of the proceedings.

Lastly, the appeals court rejected the employers’ contention that the arbitration award violated public policy because the arbitrator “pierced the corporate veil” to hold Allegiant, the individual defendant, and Social Club liable even though they were not signatories to the CBA. Those arguments failed as an attempt to rehash arguments that they did not accede to the arbitrator’s authority.

Accordingly, the appeals court affirmed the judgment of the district court.

The case is No. 25-2307.

Judge: Maldonado, N.

Attorneys: Remo Polselli, pro se. Wesley G.S. Kennedy (Allison, Slutsky & Kennedy) for UNITE HERE Local 1.

Companies: Elmar Hotel Management, LLC; Allegiant Equities, LLC; Social Club Management, LLC; UNITE HERE Local 1

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