The United States Court of Appeals for the Seventh Circuit recently upheld an arbitration award against Elmar Hotel Management, LLC, and its affiliates for violating a collective bargaining agreement (CBA) with UNITE HERE Local 1. The court's decision, issued on July 17, 2026, confirms that the hotel group must operate under the terms of the CBA and use union workers, impacting the future operations of the Inn of Chicago and similar establishments.
This ruling is significant as it reinforces the importance of collective bargaining agreements in the hospitality industry, particularly as businesses navigate challenges such as labor shortages and economic pressures. The decision underscores the legal obligations that employers have when they take over operations that are already governed by existing union agreements.
Background
The case originated when Elmar Hotel Management, Allegiant Equities, LLC, Social Club Management, LLC, and Remo Polselli (the “Employers”) were found to have violated a CBA by housing displaced migrants at the Inn of Chicago without employing union workers. The CBA had been established with the Inn’s previous operator and was meant to remain in effect despite changes in ownership.
In March 2021, Polselli signed a purchase agreement for the Inn, which was not operational at the time due to the COVID-19 pandemic. After acquiring the Inn, Allegiant designated Elmar as its operator. Hanna Karcho, Polselli’s wife and Elmar’s manager, signed an agreement with the union to assume the CBA. However, the Inn remained closed until late 2022 when it was used to house migrants, leading to the union filing grievances and an unfair labor practice charge against the Employers.
The Ruling
The Seventh Circuit, led by Judge Maldonado, affirmed the arbitration award that required the Employers to operate the Inn in compliance with the CBA. The arbitrator had determined that the Inn was functioning as a hotel when it housed migrants, thus making the CBA applicable. The court noted that the arbitrator found, “nothing in the [Group Sales Agreement] remotely suggest[ed] the operation of the building wasn’t still a hotel.”
Furthermore, the arbitrator ruled that Allegiant, Elmar, and Social Club were effectively a single employer under the control of Polselli. The court stated, “they were all fingers on the same hand,” emphasizing the interconnected nature of the Employers' operations. The arbitrator also found that the Employers failed to use union employees and did not notify the union about transferring work to non-union staff, violating both the CBA and the National Labor Relations Act (NLRA).
Impact
This ruling has significant implications for the hospitality industry, particularly for businesses that may consider operating under existing union agreements. It reinforces the legal requirement for employers to adhere to collective bargaining agreements, even if they change ownership or management. The decision also highlights the importance of union representation in labor relations and the potential consequences for employers who do not comply with established agreements.
Going forward, this case may set a precedent for how courts interpret the obligations of employers under collective bargaining agreements in similar situations. The ruling could encourage unions to be more vigilant in monitoring compliance with CBAs, knowing that they have legal backing to enforce their rights.
What's Next
The Employers may consider appealing the decision, but details about any potential appeal were not available in the court filing. There is no indication of a related case pending at this time.