Business for Social Responsibility (“The Business of a Better World”) does valuable work with business around social and environmental issues. It’s helped organize efforts to get global companies to take responsibility for the rights of workers in their supply chains, particularly in poor countries.

So what will BSR do about its 2009 conference, the premiere event on the corporate-responsibility circuit, now scheduled for the Hyatt Regency Embarcadero in San Francisco?

You’ve heard about Hyatt’s labor problems by now, haven’t you? Last month, Hyatt laid off 98 housekeepers at three Boston hotels, replacing them with lower-paid workers from an outsourcing firm called Hospitality Staffing Solutions of Georgia, which provides 4,500 workers to hotels in more than 30 cities.

The Hyatt workers were paid $14 to $16 an hour, according to The Times, while the replacements will make $8 an hour. Workers who lost their jobs say they were told to train their replacements for “vacation relief,” then abruptly informed that they were being canned. Hyatt denies that it misled anyone.

According to The Boston Globe, which broke the news:

After hearing the news at meetings last month, employees cried and screamed, said Drupattie Jungra, 55, who had worked at the Cambridge Hyatt for more than 21 years and made $15.69 an hour, plus benefits.

“Where am I going to go look for a job?″ said Jungra, a widow who regularly sends money to her family in Guyana and whose four grown sons live with her.

The story has gone viral in a big way. Deval Patrick, the Massachusetts government, has called for a boycott of Hyatt, labor unions organized protests in Chicago – where 200 people were arrested – and in San Francisco, and the blogosphere and Twitter are, well, all atwitter. See, for example, this blogpost at The Consumerist, which has been viewed more than 12,000 times and attracted dozens of comments,  and this one from Harvard Business Review (hardly a left-wing rag) which ran under the headline “Simple Ways to Damage Your Brand.” Director of content Paul Michelman wrote:

were I personally planning to spend the night in the Boston area sometime soon, I’d do my best to avoid staying at a Hyatt. I don’t like doing business with companies that do things I find distasteful; moreover, I have questions about their commitment to quality. Now, imagine if my feelings are shared by even a small portion of business travelers.

Interesting, isn’t it, that the layoff of 98 people is causing such a stir? Partly it’s because it was handled so poorly by Hyatt. Partly it’s because of the obvious contrast between the housekeepers who earn low wages and the well-to-do business and leisure travelers they serve. (The hotel “bedding wars” of recent years were not good news for workers, as hotels piled on extra pillows and comforters that made the job of making beds more time-consuming.) And partly people have reacted because  their nerves have been made raw by all the corporate downsizing we’ve seen in the last year or so.

Today (Friday), under mounting pressure, Hyatt said that it would offer all the laid off workers jobs at their old rates of pay–although not with Hyatt, but with yet another outsourcing firm, called United Service Companies. Those workers who don’t want the new jobs will be given financial support equal to their old pay rate through next March or until they find jobs, the company said. A company executive was also quoted as saying,

We regret that we did not handle all parts of the transition in a way that reflects our organization’s values.

Unions, the governor, and Boston taxi drivers, who had threatened to boycott Hyatt, said they would review the company’s new proposal. It’s obviously a step in the right direction. But what a shame that it took a full-throated national outcry to get the hotel company to treat its workers better.

Of course, as a business writer, I understand that layoffs are an inevitable part of capitalism. In a dynamic, evolving market system, the fortunes of industries, companies and their workers rise and fall. What matters is how companies treat workers who on their way out.

Here I can speak from experience.  I lost my staff job at FORTUNE at the end of 2008. I didn’t like it but I was treated fairly. One result is that I’m still writing for the magazine and co-chairing FORTUNE’s Brainstorm Green conference on business and the environment (which, if I have anything to say about it, and I do, won’t be held at a Hyatt anytime soon).

I suspect that the events in Boston tell us something about Hyatt. While I don’t treat blog comments as fact, and this is very old news, here’s a comments on the HBR blog:

I worked in public relations at the Hyatt Regency Chicago in the late 1970s and they brought in a younger person, had me train her under the guise that she would be “helping” me and then promptly fired me. Don’t believe the BS about the economy being rough. Hyatt simply treats its employees shabbily and they have been for the past 30 years.

Today, I also heard from Wood Turner, the executive director of Climate Counts, a nonprofit that rates big companies on the climate impact to spur corporate climate responsibility and conscious consumption:

When we scored hotels for the first time last year, they (Hyatt) were the lowest scoring of the six big chains we evaluated. They scored 7 points out of a possible 100 (top score was Marriott with a still-low 40 points). Very piecemeal actions by Hyatt across the board. No evidence of any measurement of impact, goal setting or reductions.

That didn’t surprise me. Typically, although not always, companies that act responsibly on social and workplace issues are good on environmental issues, too, while those that fall short in one area tend to do so in others.

As for BSR, Aron Cramer, the group’s CEO, called me as this story was unfolding to say that BSR had already approached Hyatt and is following developments closely. “We take this very, very seriously,” he said. “My strong hope is that the dispute will be resolved in a way that’s satisfactory for the workers, for the union and Hyatt well before our conference.”

In 2005, BSR moved its conference from  San Francisco to Washington because of a labor dispute at a Marriott where it was originally going to be held. This year, it’s too late to move the conference, Aron said, and BSR does not want to cancel it.

If things aren’t resolved, expect some discussion about layoffs and outsourcing at this year’s event. “The BSR conference is all about promoting debate on responsible business practices,” Aron said. Or irresponsible ones, in the case of Hyatt.