At-Will No More: NYC Council Passes Just-Cause Termination and Progressive Discipline Requirements for Fast-Food Employers

Seyfarth Shaw LLP

The NYC Council has passed two bills that will end traditional at-will employment for fast-food employers in New York City.  The bills were sent to Mayor Bill de Blasio for signature on December 17, 2020 and will take effect 180 days following his expected signature.

Just Cause and Progressive Discipline Requirements

The main bill, Int. No. 1415-A, would prohibit fast-food employers from terminating or substantially reducing the hours of an employee without just cause, specifically the employee’s demonstrated misconduct or poor performance.  The misconduct or poor performance must be “demonstrably and materially harmful to the fast food employer’s legitimate business interests.”  A “reduction in hours” means “a reduction in a fast food employee’s hours of work totaling at least 15 percent of the employee’s regular schedule or 15 percent of any weekly work schedule.”

In addition, any attempt to terminate or reduce the hours of an employee requires a progressive discipline 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.”  An employer cannot rely on discipline that was issued more than one year before the current contemplated action.  The progressive discipline policy must be in writing.

Finally, the employer is required to provide the employee a written explanation “of the precise reasons” for the termination or hours reduction within five days of the adverse action.  The bill provides that a fact-finder may not consider any reasons proffered by the employer that were not included in the written explanation.

The bill excludes probationary employees -- those in the first 30 days of employment -- from the just-cause and progressive discipline requirements. 

The relief available under the law is broad.  A violation will result in (1) “reinstatement or restoration of hours of the fast food employee, unless waived by the fast food employee”; and (2) payment of the employee’s reasonable attorneys’ fees and costs.  Additionally, a court may award: (1) a $500 penalty for each violation; (2) an order directing compliance with this law; (3) rescission of any discipline issued; (4) back pay for any loss of pay or benefits resulting from the wrongful discharge; (5) punitive damages; and (6) “any other equitable relief as may be appropriate.”

Predictive Scheduling

Bill 1415-A also expands NYC’s existing predictive scheduling laws for fast-food employers.  It requires them to “have scheduling practices that provide each fast food employee with a regular schedule that is a predictable, regular set of recurring weekly shifts the employee will work each week” and must provide a “written copy of [the employee’s] regular schedule” before the employee’s first shift and any time the employee’s schedule is changed on an indefinite basis.  Previously, fast-food employers were only required to provide employees with a good-faith estimate of hours in writing. 

Moreover, the employer cannot reduce the employee’s schedule by 15% unless either: (1) the employee consents to or requests the reduction in writing; or (2) the reduction was not substantial under the just cause provisions of the law.

Bona Fide Economic Reason and Reverse Seniority

The second bill, Int. No. 1396-A, provides that a fast-food employer is permitted to terminate or substantially reduce an employee’s hours not merely for “just cause,” but also for a “bona fide economic reason,” which is defined to mean “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.”  To justify the adverse action based on an economic reason, the employer’s decision must be “supported by a fast food employer’s business records showing that the closing, or technological or reorganizational changes are in response to a reduction in volume of production, sales, or profit.”  If the termination is based on this bona fide economic reason, the discharge must be carried out “in reverse order of seniority” in the relevant establishment.

In addition, where an employer has discharged or reduced employee hours based on a bona fide economic reason, it may not hire any new employees or assign additional shifts to current employees unless and until it “make[s] reasonable efforts to offer reinstatement or restoration of hours” to any employee discharged for economic reasons within the previous twelve months.

Finally, this bill permits an employee, on or after January 1, 2022, to file an arbitration demand in lieu of a lawsuit to address an alleged wrongful discharge or reduction in hours.  It provides specific requirements for the selection of an arbitrator and requires the parties to abide by the employment rules of the American Arbitration Association as well as rules to be adopted by the City’s Department of Consumer Affairs.  Once an employee elects to file an arbitration demand, she will have waived her right to sue or file an administrative charge.

Broader Implications for Employers?

There is no doubt that these bills will have profound effects on the fast-food industry in New York City.  A question remains whether this legislative package portends an effort by the City Council to undo at-will employment for other industries (or all industries) in NYC.  In the spring of 2020, some Council members proposed legislation that would have imposed “just cause” termination requirements for all employers of essential workers (see here and here), though that package was not enacted.

We will continue to monitor developments and provide updates as appropriate.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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