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November, 2021

NYC’s Condemnation of Employment At-Will Chases a Bogeyman to Correct for Bad Management

By Tracey I. Levy

Crain’s New York Business reported in its November 22, 2021 issue that six of the seven New York City Council speaker candidates support modifying or ending the concept of employment at-will, in favor of a “just cause” standard.   If the just cause requirement that New York City put into effect this past year for fast food franchises is to be the model for all employers going forward, New York City employers have much to worry about.  Such a plan would essentially take a hatchet to solve a problem that is fundamentally one of bad management, with little regard to the myriad repercussions for employers.

The concerns that the City Council speaker candidates reportedly cited as grounds for scaling back or eliminating employment at-will were threefold: the unfairness of being terminated without just cause, the perception that employment at-will “primarily” impacts communities of color, and the difficulties that a sudden job loss present for employees with families.  In regard to the third concern, Councilman Francisco Moya was quoted as saying that “’[i]n certain jobs, workers can be fired for taking the day off or for bringing their kid to the doctor.’”  The council speaker candidates seem to lack a full appreciation of the protections already afforded to employees under current federal, state and local laws that collectively impose myriad incursions on the concept of employment at-will.

Communities of Color and Certain Employee Actions Are Already Legally Protected

First and foremost, to the concern of the impact on communities of color, our current employment law protections expressly prohibit any employer from taking adverse action against an employee based on more than 20 protected characteristics, including race, color, national origin or ethnicity.  Woe to the employer that terminates an employee of color without any legitimate business reason.  An employer that falls back on the shield of employment at-will in that situation leaves itself with little more than a pie plate by way of defense to a discrimination claim, as the absence of any legitimate business reason gives rise to an inference of discrimination that can be impossible to disprove.

It often is noted that many European countries have just cause requirements for termination of employment.  That is true, but European countries also operate under a rather different legal system than what was developed in the United States, with a far greater emphasis on codes and adherence to procedural protections and a considerably lesser role for protection of individual rights through court action.  Some may think that system is better.  Certainly, it is different.  But both are designed to protect against certain employer overreaching, and it would be a mistake to port over a small slice of a foreign country’s legal system without looking at the entirety of its legal structure and how that contrasts with current systems already in place here.

Councilman Moya’s comments about workers being fired for taking the day off or bringing their child to the doctor also appear to be based on a misunderstanding of current legal protections.  New York State and New York City law both provide employees with paid sick and safe leave time, and employees can use those days for a broad range of reasons, including if they personally feel unwell, or need to care for a sick child or take their child to a well-visit with the child’s doctor.  An employer that fires an employee in contravention of those state and city laws faces the full weight of the enforcement provisions, including civil penalties, orders of reinstatement, and payment of back wages and benefits.

Unfairness or Surprise Does Not Equate to Lack of a Legitimate Reason

As to the concerns of unfairness and sudden job loss, in my experience most employee terminations are not for lack of cause, but they may well be perceived as sudden or unexpected by an employee due to ineffective communications and sub-optimal performance management practices.  Giving pointed performance feedback is hard.  I have been coaching managers and HR professionals through it for decades now, and it never gets easier.  As a manager myself, one of the least favorite aspects of my job is when I need to tell an employee that the employee’s work, attitude, behavior (or all three) is not meeting my expectations.  Countless times I have worked with organizations that have “packaged someone out,” offering some amount of severance to an underperforming employee to hopefully part ways quietly because the organization can no longer tolerate making do with the employee’s subpar delivery, but the organization also recognizes that it did not effectively communicate its dissatisfactions to the employee over the preceding weeks, months, or years.

It’s not just that managers dislike having difficult conversations.  Often organizations need to balance competing demands, such as maximizing productivity, delivering on a key product or deadline, or accepting the realities of a tight job market or hiring freeze.  In each of these situations, a manager may elect to keep the employees the manager has, no matter how marginal the performance, because the time and expense of managing the employee out may be too great.  Just in this past year, I can think of repeated instances in which an organization explained to me that an employee had been told of the employee’s errors on multiple occasions, but the manager did not expressly inform the employee that such errors were viewed as performance concerns because the employee had a pivotal role in one or more key projects and the organization did not want to deliver pointed, critical feedback that might leave the employee feeling demotivated.  The organization made the choice to continue with the employee they had, until they finally reached their wits’ end or the project was at a less critical stage, such that they concluded it was now wiser to make a staffing change.  Those organizations each had just, and ample, cause for the termination decisions they made, but to the impacted employees, the decisions may have felt unfair and sudden.  Chasing the bogeyman of employment at-will therefore will not solve the problem, nor is it clear why the City Council needs to be legislating in this area.

The costs of recruiting, hiring and training new employees further disincentivize organizations from terminating employees willy-nilly, without cause.  Nearly every client and business owner I speak with, in a broad range of industries, are finding it difficult to hire qualified, motivated employees at present.  They certainly are not firing their current people if it is remotely possible for them to avoid doing so.  Social media and websites like Glassdoor further serve as a check on employers engaging in baseless termination decisions.  Disgruntled employees make their views known on those websites, and bad reviews can hamper an organization’s recruiting efforts.

I am not so naïve as to believe there are no employers out there that engage in bad employment practices.  However, returning to my initial hatchet analogy, the remedy being proposed by so many of the candidates for council speaker overlooks a range of legal and practical checks on employer behavior that collectively offer substantial protections to many employees.  The problem with a just cause requirement is not so much in the need for employers to have reason to terminate an employee; currently, in most situations, those reasons already exist.  Rather, the problem, as discussed in my prior blog article on the fast food franchise law, is that the definition of “just cause” under such a law and the processes that accompany the enforcement of such a requirement hamstring employers in myriad other ways.  Any legislative response must consider those implications.  Notably, Montana, which was the first and has long been the only state to require “good cause” for termination, substantially scaled back its employee protections earlier this year, following its experience of years of litigation over the specifics of employer termination decisions.

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12

February, 2021

NYC Upends Employment at Will – Revolutionary Change in the Fundamentals of US Employment Law

By Tracey I. Levy

Employment “at will” — the ability to fire an individual for any reason or no reason at all and the individual’s right to quit at any time — has been the bedrock principle of the employment relationship in the United States throughout its history.  Collective bargaining agreements modify that relationship, contractually, in the union context.  Individual employment agreements may similarly include contractual limitations on the employment at will doctrine.  Employment laws modify employment at will by precluding employers from terminating an individual for a discriminatory, retaliatory, or similarly unlawful reason.

But now New York City has gone one step further and abolished the concept of employment at will in its entirety in the discretely targeted area of the fast food industry (defined as fast food chains with 30 or more operating establishments nationally).  While the law thereby will have limited application in its current form, the radical shift that the New York City law presents cannot be understated.  We are unaware of any other state, city or locality that has superseded the principle of employment at will for an entire industry, thereby requiring private employers to demonstrate “just cause” before taking any significant, adverse employment action against an individual employee.*

New York City’s new law expands on prior restrictions requiring “predictive scheduling” for hourly fast food workers to now provide that, absent “just cause” or a “bona fide economic reason,” once such employees successfully complete a 30-day probationary period they cannot be “discharged”, which means not only that they cannot be fired, but that they cannot be suspended indefinitely, laid off, or subjected to more than a 15% reduction in their scheduled work hours.  While “discharged” is thus defined quite broadly, the new law defines “just cause” quite narrowly, as an 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.”  The law then builds on that definition to provide that, absent “egregious” behavior, the just cause standard cannot be satisfied unless the employer already has in place a written progressive discipline policy that was provided to the employee, and the employer followed its progressive discipline process.  Disciplinary actions taken more than a year prior to the discharge effectively expire, as the law says they cannot be considered part of the progressive discipline process.  Finally, employers need to be careful with their documentation, as they must provide the impacted employee with a written explanation of the precise reason for discharge within five days, and they effectively waive the right to later defend their action based on any reason that is not included in that written explanation.

To assert that termination was due to a “bona fide economic reason,” the employer must show through its business records that, in response to reduced production volume, sales or profit, it needs to fully or partially close its operations or make technological or organizational changes.  When invoking this standard as a reason for discharge, employees must be let go in reverse order of seniority, so that the longest tenured employees are the last to go and the first to be rehired.  For a twelve-month period following such a discharge, the employer has to make “reasonable efforts” to reinstate former employees before it can offer shifts to other employees or hire anyone new.

Employees are entitled to reinstatement if they are found to have been discharged without just cause, plus the employer must bear the cost of the employee’s reasonable attorneys’ fees and may be liable for back pay and punitive damages.  As a further penalty, the employer will be liable for schedule change premiums, as provided under the existing predictive scheduling law, for each shift the employee loses as a result of having been discharged without just cause.  Alternatively, the law makes arbitration available as an option to employees, beginning in January 2022, and provides that a losing employer must reimburse the city for the cost of the arbitration.

The broad definition of “discharge”; narrow definition of “just cause”; precise policy, notice and documentation requirements; and heavy financial costs imposed on a losing employer collectively provide fast food employees with unprecedented job protection, likely greater than that provided anywhere else in the country.  Even well-intentioned employers that are indisputably contending with employees presenting persistent attendance issues, repeated underperformance, or offensive behavior may find themselves tripped up by the procedural requirements of the law, particularly the five-day window to thoroughly document the precise reason for discharge.  Similarly, by defining a work schedule reduction of more than 15% as a “discharge”, the new law brings the full weight of the documentation and enforcement provisions down on employers endeavoring to adjust work schedules to meet business needs.

Finally, the law’s recognition of seniority as the sole basis for determining employee selections in the event of a downsizing or restructuring deprives employers of necessary flexibility in making selection decisions.  The longest tenure does not consistently equate with the best performance and skillset, yet the law fails to recognize the relevance or legitimacy of those factors in reviving a struggling business.

While the applicability of this law is limited to a discrete industry, its import is manifold greater.  Government-mandated paid sick leave was unheard of in the private sector when it was adopted by San Francisco in early 2007, and in the subsequent 14 years such laws have proliferated to 13 states, the District of Columbia, and discrete localities in at least five other states.  The precedent has been set, and absent responsive action by the business community, it may not be long before employment at will fades away as past history.

*Editor’s Note 11/28/21: At the time this article was posted, we overlooked the Montana Wrongful Discharge from Employment Act, which after a probationary period, prohibited termination of an employee except for good cause.  Montana substantially amended its law as of April 1, 2021 to dial back employee protections.  The revised law considerably extends (to as long as 18 months) the probationary period during which employees can be terminated without cause, grants broader employer discretion in determining “good cause,” and provides employers with the “broadest discretion” when terminating managerial or supervisory employees.  It also imposes certain procedural limitations that further reduce the scope and viability of the law’s protections for employees.

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