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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  We are unaware of any other state, city or locality that has superseded the principle of employment at will for an entire industry, thereby requiring private employers to demonstrate “just cause” before taking any significant,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.

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