New York City Says Goodbye to At-Will Employment for the Fast Food Industry
On January 5, 2021, New York City Mayor Bill de Blasio signed legislation that effectively ends at-will employment for fast food employees in New York City. The new law takes effect on July 4, 2021, and would make New York City the nation’s first jurisdiction to create job protections for a particular industry. However, at least some portions of the new law may be ripe to challenge on federal preemption and other grounds. The new law was passed via two separate bills—one on wrongful discharge and one on layoffs.
Just Cause, Progressive Discipline, and Seniority Requirements
In a sweeping and dramatic change, the new law prohibits fast food employers from discharging employees or substantially reducing employees’ hours without “just cause” outside of a probation period. The law defines “just cause” as “the fast food employee’s failure to satisfactorily perform job duties or misconduct that is demonstrably and materially harmful to the fast food employer’s legitimate business interests.” A covered reduction in hours is any reduction “totaling at least 15 percent of the employee’s regular schedule or 15 percent of any weekly work schedule.” If an employee is working within a probation period (“not to exceed 30 days from the first date of work”), the employee is not subject to the just cause standard.
In addition, the law imposes progressive discipline requirements on fast food employers, subject to limited exceptions for egregious performance or misconduct. Importantly, a termination will “not be considered based on just cause unless … the fast food employer has utilized progressive discipline.” The term “progressive discipline” is defined as a “disciplinary system that provides for a graduated range of reasonable responses to a fast food employee’s failure to satisfactorily perform such fast food employee’s job duties, with the disciplinary measures ranging from mild to severe, depending on the frequency and degree of the failure.” Fast food employers must establish and distribute a compliant progressive discipline policy to satisfy the just cause standard.
In addition to discharge for “just cause,” fast food employers may lay off employees based on a “bona fide economic reason,” which is defined as “the full or partial closing of operations or technological or organizational changes to the business in response to the reduction in volume of production, sales, or profit.” Fast food employers must maintain business records sufficient to show that the closure or reorganization is “in response to a reduction in volume of production, sales, or profit.” Employee discharges based on a bona fide economic reason must “be done in reverse order of seniority … so that employees with the greatest seniority [are] retained the longest and reinstated or restored hours first” (i.e., last in, first out). Fast food employers are likewise required to “make reasonable efforts to offer reinstatement … to any fast food employee discharged based on a bona fide economic reason within the previous twelve months, if any, before the fast food employer may offer or distribute shifts to other employees or hire any new fast food employees.”
Penalties and Burden of Proof
Within five days of discharging an employee, fast food employers must “provide a written explanation to the fast food employee of the precise reasons for their discharge.” Fast food employers bear the burden of proving that the discharge or reduction in hours was based on just cause or other permitted reasons. If a fast food employer cannot successfully prove that it discharged an employee or reduced an employee’s hours for a permissible reason, the employee may be entitled to reinstatement, restoration of hours, or rescission of discipline. Where a fast food employer violates the law, fast food employees may obtain back pay, and employers may incur a statutory penalty of $500 for each violation. Where a fast food employer unlawfully discharges an employee, the employee is also entitled to recover attorneys’ fees and costs.
Employee Arbitration Rights
Effective as of January 1, 2022, the new law explicitly allows employees alleging violation of the fast food industry law to bring an arbitration proceeding on behalf of themselves and any applicable class of individuals. The law maintains specific requirements for the selection of an arbitrator, and the parties are required to abide by the employment rules of the American Arbitration Association (AAA). Employees who elect to file an arbitration demand waive their right to sue in court or file an administrative charge.
Amendments to the New York City Fair Work Week Law
The new law expands the predictive scheduling and premium pay requirements under the New York City Fair Work Week Law. Fast food employees who lose a scheduled shift because of discharge for any reason are now entitled to schedule change premiums for each lost shift.
Under existing law, New York City fast food employers must provide a “good-faith estimate” of the hours, days, and times an employee is expected to work no later than the first day of employment. The law amends the scheduling practice to require “predictable, regular set of recurring weekly” schedules. Further, prior to an employee’s first shift, fast food employers must provide a written copy of employees’ regular schedule, inclusive of the number of hours expected to work per week, and working days, times, and locations.
Potential Legal Challenges
The new law may face legal challenges given its aggressive approach towards a targeted industry. For instance, the law’s abolishment of at-will employment may be subject for challenge under National Labor Relations Act (NLRA) preemption principles, which generally prohibits state and local laws that seek to govern conduct protected by the NLRA. It is notable that the National Labor Relations Board has issued guidance on employee at-will status. Similarly, where an employer utilizes an arbitration agreement that does not include the New York City law’s arbitration remedies—for instance, a class action waiver, or specifying an arbitration provider other than AAA—the law may be preempted by the Federal Arbitration Act (FAA). Here, it is notable that the Supreme Court of the United States held that the FAA requires enforcement of arbitration agreements on their terms. Finally, the law’s specific targeting of the fast food industry may be subject to U.S. Constitutional equal protection challenge, insofar as the law may lack a rational basis for creating more onerous requirements for fast food employers compared to other employers.
Fast food employers operating in New York City may want to monitor the new law for any legal challenges and administrative guidance in advance of the July 4, 2021, effective date. Subject to successful legal challenges, New York City fast food employers may consider reviewing their current practices for compliance and training under the new law. Lastly, employers that are not directly covered by the new law nonetheless may want to monitor whether the law provides a template for similar measures in other jurisdictions or targeting other industries.