In a move that will likely cause local fast food restaurants to strongly consider automating many jobs currently performed by human beings, New York City has enacted a pair of laws effectively eliminating the at-will employment doctrine as it applies to fast food employers in the city.
Effective July 4, 2021, fast food employers are required to show either "just cause" (Int. 1415-A) or a "bona fide economic reason" (Int. 1396) when terminating employees, and are further subject to other restrictions on scheduling and hiring practices.
"Bona fide economic reason" means "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."
The term "discharge" is defined broadly and includes "any cessation of employment, including layoff, termination, constructive discharge, reduction in hours and indefinite suspension."
The term "fast food establishment" is a business:
- That has as its primary purpose serving food or drink items;
- Where patrons order or select items and pay before eating, and such items may be consumed on the premises, taken out or delivered to the customer's location;
- That offers limited service;
- That is part of a chain; and
- That is one of 30 or more establishments nationally (including franchisors and franchisees if they own or operate 30 or more establishments in the aggregate).
The term "just cause" is defined broadly. To terminate a fast food employee and not violate the new law, the employer must show "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 "probation period" means "a defined period of time, not to exceed 30 days from the first date of work of a fast food employee."
"Progressive discipline" means "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 disciplinary measures ranging from mild to severe depending on the frequency and degree of the failure."
A "reduction of 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."
Restrictions on Discharging Employees for Poor Performance
Under Int. 1415-A, a fast food employer shall not discharge an employee who has completed the probation period except for just cause. Moreover, within five days of discharge, the employer must provide a written explanation to the employee of the precise reason for discharge.
The fast food employer bears the burden of proving just cause in any proceeding brought under Int. 1415-A. In order to determine whether just cause exists, the fact-finder is prohibited from considering any reasons not included in the written explanation and must further consider whether the:
- 1. Employee knew or should have known of the employer's policy, rule or practice that is the basis for progressive discipline or discharge;
- 2. Employer provided relevant and adequate training to the employee;
- 3. Employer's policy, rule or practice, including the utilization of progressive discipline, was reasonable and applied consistently;
- 4. Employer undertook a fair and objective investigation into the job performance or misconduct; and
- 5. Employee violated the policy, rule or practice, or committed the misconduct that is the basis for the progressive discipline or discharge.
Unless the employee's conduct was egregious, a termination shall not be considered based on just cause unless the fast food employer:
- Has utilized progressive discipline within one year before the termination; and
- Had a written policy on progressive discipline in effect that was provided to the employee.
Discharging a Fast Food Employee for a Bona Fide Economic Reason
Under Int. 1396-A, a fast food employer may discharge an employee for a "bona fide economic reason," as defined above. However, the employer bears the burden of proving a bona fide economic reason through its business records in order to justify such a discharge.
The law further dictates which employees can be discharged for a bona fide economic reason. Specifically, such discharges of fast food employees must be done in reverse order of seniority so that those with the greatest seniority shall be retained the longest, be reinstated or have their restored hours first. Accordingly, the new law prohibits a fast food employer from considering an employee's performance in determining who will be discharged for a bona fide economic reason.
Hiring New Fast Food Employees After Layoffs
Before a fast food employer may hire new employees or offer new shifts, the employer must make reasonable efforts to offer reinstatement or restoration of hours, as applicable, to any fast food employee discharged based on a bona fide economic reason with the previous 12 months.
New York City shall provide rules defining what constitutes sufficient advance notice and a reasonable effort to offer reinstatement or restoration of hours, including with respect to discharged employees who have declined prior offers of reinstatement or restoration of hours.
Impacts on Predictive Scheduling for Fast Food Employees
Int. 1415-A expanded the predictive scheduling requirements for fast food employers, which previously required such businesses to provide employees with a good faith estimate of the hours, dates, times, and locations of those hours no later than when a new employee received her or his first work schedule.
Now, fast food employers must "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 the employee with a written copy of her or his regular schedule including the day, location, and number of hours an employee can expect to work per week for the duration of the employee's employment. This must also be done if a long-term or indefinite change is made to the employee's regular schedule.
Furthermore, Int. 1415-A prohibits a fast food employer from reducing the total hours of an employee's regular schedule by more than 15 percent from the highest total hours of such employee's regular schedule at any time in the previous 12 months without the prior written consent of the employee.
Resolving Legal Disputes
Effective January 1, 2022, fast food employees alleging a violation of the new law may file for arbitration on behalf of themselves or a class. If the fast food employee initiates an arbitration proceeding, that shall be the exclusive remedy for the wrongful discharge dispute and the employee shall have no right to bring or continue a private right of action unless the arbitration is withdrawn or dismissed without prejudice.
The parties must jointly select an arbitrator from a panel that will be determined by the Department of Consumer and Worker Protection. The arbitration rules have yet to be developed.
If the arbitrator finds that the fast food employer violated the provisions of Int. 1396, it shall require the employer to:
- Pay the reasonable attorneys' fees and costs of the employee;
- Reinstate or restore the hours of the employee, unless the employee waives reinstatement;
- Pay New York City for the costs or the arbitration proceeding; and
- Compensate the employee with other appropriate relief, including back pay, rescission of discipline, and other compensatory or injunctive relief.
In any arbitration proceeding under Int. 1415-A, a prevailing fast food employee shall be entitled to:
- Reinstatement or restoration of her or his hours, unless waived by the employee; plus
- Change premiums for any lost shifts; plus
- Attorneys' fees and costs.
Furthermore, an employee may be eligible to receive $500 for each violation, rescission of discipline, and back pay for any loss resulting from the wrongful discharge. The statute of limitations for such a proceeding is two years from the date of the alleged violation.
Industry Legal Challenges
In response to these two new laws, the Restaurant Law Center and the New York State Restaurant Association have filed a lawsuit in the U.S. District Court for the Southern District of New York against the City of New York and Lorelei Salas in her official capacity as the Commissioner of the New York City Department of Consumer and Worker Protection.
The organizations seek a declaratory judgment that the two laws violate a number of other laws—including federal labor law and the constitution—and ask the court to issue an injunction prohibiting the City from implementing and enforcing Int. 1415-A and Int. 1396's provisions.
Takeaways for NYC Fast Food Establishments
For now, these challenges have not impacted the impending effective date of July 4, 2021. Fast food employers should prepare now to comply with these new requirements. Specifically, covered employers must create progressive discipline policies, install probationary periods for new employees, revise their standards of conduct, and review their scheduling practices to ensure compliance with the predictive scheduling laws.
Furthermore, fast food employers should train their managers with respect to new limitations on disciplining and discharging employees and preparing the necessary paperwork regarding such adverse employment actions. DWT will continue to monitor any updates on this topic and issue additional advisories as appropriate.