Beginning July 5, 2021, at-will employment will no longer be legal in most New York City fast-food businesses, meaning that workers cannot be terminated without cause or notice.
Currently, with the exception of Montana, all states in the U.S. are “at-will” employment states, allowing employers to dismiss employees for any (legal) reason and without warning. Some states allow certain exceptions, but not New York.
The majority of the American workforce is employed at-will, including most white-collar professionals. Job security protections are generally found among unionized workers, public sector employees, and C-suite executives.
Now, however, two new labor laws, passed last December and signed into law in January, are set to take effect in New York City on July 5, 2021. These laws will protect over 70,000 fast-food workers in the five boroughs from being fired without “just cause” or for a “bona fide economic reason.”
The new laws are limited to fast food chains with 30 or more locations nationwide.
They require employers to demonstrate misconduct, unsatisfactorily performance, or other valid reason for firing an employee.
Moreover, barring extreme behavior, employers must provide workers with proper warning and proportionate disciplinary action before they can be fired. The laws explicitly require employers to provide employees with a written policy on progressive discipline, and that the employer not rely on any discipline that is more than a year old to justify a discharge.
As a “bona fide economic reason,” employers cannot simply make a business decision to “right-size” their workforce at any given time. There first must be a demonstrable reduction of production, sales, or profit.
Within five days of discharging an employee, the employer must provide a written explanation of the “precise reasons” for the discharge. Employers can only justify a discharge based on reasons included in this written explanation.
Fired employees can contest a termination through arbitration, by filing a complaint with the NYC Department of Consumer and Worker Protection, or by suing in state court. Employers may be faced with fines, punitive damages, and other penalties. It is the employer’s burden to prove “just cause” or a “bona fide economic reason” for termination.
A key point, oddly glanced over in the press, is that layoffs must be done by order of seniority, meaning that newest employees must be let go first, and that laid-off employees must be offered their jobs back before new people are hired.
The result is that employers that downsize, regardless of circumstance, must first lay off their newest and likely lowest-paid workers (thus cutting less costs and potentially resulting in a greater number of layoffs), and that they cannot consider individual employees’ skill, efficiency, or compatibility.
The New York State Restaurant Association sued New York City in May, aiming to block the new laws, primarily arguing that they discriminate against employers. However, the first pretrial conference is scheduled for September, after the laws have already taken effect, and similar lawsuits, like the one against New York State’s raised minimum wage, have been defeated in court.
The bill is the latest in a string of new labor laws in New York, including the first $15/hour minimum wage in the U.S. in January 2020 and elimination of subminimum wage in July 2020.
Although the new laws are limited to fast-food chains, they can be seen as a bellwether with implications for other industries and municipalities.
Several senators, prominently Bernie Sanders, have sought to establish a federal just-cause standard, though such a bill is highly unlikely to pass the Senate. More likely, President Biden can require just-cause of all government contractors via executive order, affecting 4.1 million employees.
