On December 17, the New York City Council passed two bills that will fundamentally alter the terms and conditions of employment for fast food employers in the city. Mayor Bill de Blasio is expected to sign both bills.

In a nutshell, the two bills prohibit fast food employers from terminating employees unless they have just cause or bona fide economic reasons for doing so. The bills also require fast food employers to adopt and apply written progressive discipline policies and to provide employees with regular, predictable work schedules with regular, predictable weekly shifts for each work week. The bills give fast food employees the option of pursuing claims for violation of these rules through arbitration, even if they do not have arbitration agreements with their employers.

These provisions will take effect 180 days after the bills are signed by the Mayor.

Discharge for just cause and progressive discipline

Under the first bill, fast food employers cannot terminate, constructively discharge, reduce regularly scheduled work hours by 15 percent or more, or indefinitely suspend employees who have completed their probationary periods, without just cause.

“Just cause” is defined as “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.” The bill requires arbitrators, judges, and juries to consider five factors in deciding whether a fast food employer had just cause for an adverse employment action:

  • The employee knew or should have known of the employer’s policy, rule, or practice that is the basis for progressive discipline or discharge.
  • The employer provided relevant and adequate training to the employee.
  • The employer’s policy, rule, or practice, including the use of progressive discipline, was reasonable and applied consistently.
  • The employer undertook a fair and objective investigation into the job performance or misconduct.
  • The employee violated the policy, rule, or practice, or committed the misconduct that is the basis for progressive discipline or discharge.

In addition, and importantly, the bill states that “a termination shall not be considered based on just cause unless (1) the fast food employer has utilized progressive discipline; provided, however, that the fast food employer may not rely on discipline issued more than one year before the purported just cause termination, and (2) the fast food employer had a written policy on progressive discipline in effect at the fast food establishment and that was provided to the fast food employee.” In other words, a fast food chain cannot terminate an employee unless it first applies its written progressive discipline policy. This progressive discipline requirement does not apply to terminations for “egregious” performance or misconduct issues.

The bill further states that within five days of discharge the fast food employee must receive a written explanation with the precise reasons for the discharge. Arbitrators, judges, and juries cannot consider any reasons offered by the fast food employer for the discharge unless they are included in the written explanation provided to the fast food employee.

As if things were not difficult enough for fast food employers already, they also have the burden of proving just cause by a “preponderance of evidence.”

The penalties for violating the just cause and progressive discipline provisions of the bill include reinstatement and restoration of hours (unless waived by the employee), attorneys’ fees and costs, $500 for each violation, an order directing compliance with the law, rescission of any discipline issued, back pay for any loss of pay or benefits, punitive damages, and any other equitable relief as may be appropriate.  This means a fast food chain faces potential six-figure exposure for a short-term employee earning $15 an hour.

Predictive scheduling

The first bill also strengthens New York City’s predictive scheduling law for the fast food industry. Instead of simply providing employees a good-faith estimate of their work schedule, fast food chains must now “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.”

Fast food chains are also required to provide employees with written copies of their regular schedules before their first work shifts and whenever there is a long-term or indefinite change to their regular schedules.

The bill prohibits fast food chains from reducing “the total hours in a fast food employee’s regular schedule by more than 15% from the highest total hours, contained in such employee’s regular schedule at any time within the previous 12 months, unless the employee has previously consented to or requested such reduction in writing, or the reduction was consistent with the restrictions on discharges.”

Discharge for bona fide economic reasons

Under the second bill, fast food employers can discharge employees not only for “just cause” but also for a “bona fide economic reason.” The bill defines “bona fide economic reason” as “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.”

There are three restrictions on discharging employees for bona fide economic reasons:

  • First, the discharges must be “supported by a fast food employer’s business records showing that the closing, or technological or reorganizational charges are in response to a reduction in volume of production, sales, or profit.”
  • Second, the discharges must be “done in reverse order of seniority in the fast food establishment where the discharge is to occur, so that employees with the greatest seniority [are] retained the longest and reinstated and or restored hours first.”
  • Third, fast food chains must make reasonable efforts to offer reinstatement or restoration of hours to any employees discharged based on a bona fide economic reason within the previous 12 months, and before offering shifts to other employees or hiring any new employees.

Arbitration

Finally, the second bill permits fast food employees to bring claims for unlawful discharge, or other violation, to arbitration even without an arbitration agreement.  There is a two-year statute of limitations, and employees can file arbitration demands starting January 1, 2022. If an arbitrator finds in the employee’s favor, the arbitrator shall

(i) require the fast food employer to pay the reasonable attorneys’ fees and costs of the fast food employee, (ii) require the fast food employer to reinstate or restore the hours of the fast food employee, unless the employee waives reinstatement, (iii) require the fast food employer to pay the city for the costs of the arbitration proceeding, and (iv) award all other appropriate equitable relief, which may include back pay, rescission of discipline, in addition to other relief, and such other compensatory damages or injunctive relief as may be appropriate.

The arbitration proceeding will be governed by the American Arbitration Association’s employment rules and to-be-determined arbitration rules by New York City’s Department of Consumer Affairs.

The arbitration provision is an election of remedies. In other words, if employees demand arbitration, they waive their rights to pursue their claims in court.

Conclusion

We expect these twin bills to cause heartburn for any fast food chain operating in any of the five boroughs of New York City. The requirements are numerous and onerous. Fast food chains will have to carefully examine their scheduling, progressive discipline, and termination practices to ensure compliance with the laundry list of rules imposed by the New York City Council.

It remains to be seen whether the Council extends these rules to other categories of workers, such as those in the retail industry. If they do, we may be witnessing the beginning of the end of at-will employment in New York City.

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