Hotel world's king of cool pays $1m to staff sacked for being 'too ethnic'

His hotels pack more celebrities than a Hollywood premiÿre. He has redefined urban chic all the way from Los Angeles to Soho. But now Ian Schrager, owner of what is arguably the world's most fashionable hotel chain, has been forced to admit that his brand of trendy exclusivity may also carry the unpleasant whiff of racial discrimination.

His hotels pack more celebrities than a Hollywood premiÿre. He has redefined urban chic all the way from Los Angeles to Soho. But now Ian Schrager, owner of what is arguably the world's most fashionable hotel chain, has been forced to admit that his brand of trendy exclusivity may also carry the unpleasant whiff of racial discrimination.

His palace of cool on Los Angeles' Sunset Boulevard, the Mondrian Hotel, has agreed to pay out more than $1m (£660,000) to settle a suit brought by nine former bell-hops and valets fired, they claim, because they were "too ethnic". The nine - three of them Filipino, two Cambodian, two Latino, one black and one white - were summarily dismissed just a few days before the Mondrian reopened under Mr Schrager's management in 1996.

The money may not make much of a dent in the 54-year-old hotelier's deep pockets, but the case raises embarrassing questions about his definition of urban chic and the place of ethnic minorities in the supposedly liberal, all-embracing culture of celebrity that he espouses.

The bell-hops had several years' working experience at the Mondrian between them and no apparent strikes against their records when they were told to go. According to documents lodged with a Los Angeles court, Mr Schrager himself wrote a handwritten memo complaining that they were "too ethnic". Their replacements were all white.

"There's no demonstrated performance issues, yet all of them were let go," said Kathleen Mulligan, a lawyer with the US Equal Employment Opportunity Commission, which took on the case. "When you go from a 90 per cent minority work group to a 100 per cent white work group that's pretty stark."

The settlement, reached a week ago but only made public yesterday, included a promise by the Mondrian to review its hiring policies and strive for greater diversity. The hotel said it was happy to pay out the money, a total of just over $1m over three years, rather than fight the EEOC at a court hearing scheduled for October.

"We have no desire to invest legal fees, time and effort in fighting when we share the agency's goals," the Mondrian's general manager, David Weidlich, said in a statement. "We feel badly that these former employees were lost in the chaos of the reopening and that their discharge may not have been handled as sensitively as it could have been."

The Mondrian's clientele is overwhelmingly young, thin and blond, many of them aspiring actors and models. When Tina Brown was looking for a location to hold a pre-Oscar party for her buzz-fuelled magazine Talk earlier this year, the Mondrian was a natural choice.

Some of this reputation was already established when Mr Schrager bought the Mondrian in 1995. A converted apartment building with 260 rooms and dizzying views over the Los Angeles skyline, it commanded a central position and held out an obvious appeal to Hollywood's bright young things. What it didn't do in the pre-Schrager era, however, was make money.

Having spent $17.4m on the place and another $15m on a makeover, Mr Schrager put the Mondrian on a much more tightly controlled financial footing and paid an unprecedented degree of attention to its main financial asset, its image. Everything was in the details - including, it seems, the physical appearance of the bell-hops.

In its suit, the EEOC alleged that hiring was based on entirely subjective criteria such as the consideration of whether an applicant was "pretty", "handsome", or "cool". The Mondrian took the highly unusual step of advertising for bell-hops and front-desk receptionists in Variety and other entertainment industry trade papers. The first thing interviewees had to do was agree to have their picture taken.

Challenged on his notorious "too ethnic" memo, Mr Schrager said he merely felt that the bell-hops had too many tattoos. According to the plaintiffs and the EEOC, however, the sentiment was an egregious expression of discrimination. The one white bell-hop who lost his job, Rich Brand, was dismissed because of his close association with the others, the EEOC suit alleged.

Yesterday, the EEOC declared itself pleased with the settlement, particularly since the Mondrian had undertaken to look into equal work opportunities.

Mr Weidlich added: "We have appointed a human resources director whose job it will be to help us comply with our obligation to oversee and report on hiring and firing and fair employment programmes."

The Mondrian made no mention of increasing the ethnic diversity of its staff, however, and several interested parties said they wanted to see tangible proof of a change of heart.

"The real test is going to be obviously if you see a change in the complexion in the people who work in the visible jobs at the Mondrian," Ms Mulligan told the Los Angeles Times. Not the people who clean the rooms, but who's in front and in management."

Despite the success of individual actors and performers such as Will Smith, Jennifer Lopez and Ricky Martin, Hollywood is still an overwhelmingly white community that tends to regard the hiring of a Latino or African American actor as a means of reaching out to minority audiences, not a normal part of everyday life.

Ethnicity in Los Angeles is also inescapably bound up with class. While the Mondrian's overwhelmingly white hotel guests pay between $282 and $565 a night (actually on the cheaper end of the scale), bell-hops like the nine plaintiffs can expect to make little more than the mandatory minimum wage of $5.75 an hour, plus tips. Seeing a Latino or black person in a bell-hop uniform is so normal it has become the natural order of things in Los Angeles; a white person would strike many hotel guests as an instant touch of class. No wonder one observer of the legal suit yesterday described the Mondrian's approach as "rationalised racism".

Mr Schrager himself had no comment on the settlement. He has endured far worse before, and survived, notably a 12-month prison stretch for tax evasion in 1980 that ended his legendary reign at the helm of the New York night club Studio 54. Having opened the Sanderson hotel in London in May, he appears to be going from strength to strength in his business affairs. His hotel empire, which includes seven establishments from the West Coast, to Miami, New York and London, made a cool $120m profit last year and is set to continue expanding for as long as the celebrities, and the buzz they bring with them, keep coming.