Will New York City scrap employment at will?
In December 2020, the New York City Council passed the Wrongful Discharge Law, which prohibited fast food employers from terminating employees “except for just cause or for a bona fide economic reason.” A bill has now been introduced that would expand those protections beyond the fast food industry and add other protections to all employees in the City.
The Wrongful Discharge Law
The Wrongful Discharge Law, which took effect July 4, 2021, was a win for fast food employees who suffered job losses during the COVID-19 pandemic. The following is a summary of the provisions relating to employee discharges.
The law in its current form applies only to hourly employees and fast food establishments in the City that are part of an entity with 30 or more establishments in the United States. Under the law, covered employees may be discharged only for (1) a bona fide economic reason, or (2) for “just cause.”
The law 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.” Discharges must be supported by business records and conducted in order of reverse seniority, and the employer must make reasonable efforts to rehire discharged employees before hiring new ones.
“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.” Additionally, a termination can be justified on just cause grounds only if it is pursuant to an existing progressive discipline policy that was previously provided to the employee.
The law also requires employers to provide a written explanation of the reason for any termination within five days and provides employees the right to pursue claims in arbitration, where the employer bears the burden of proving just cause or a bona fide economic reason for the termination.
In February 2022, a federal court in New York upheld the law after a challenge from a restaurant trade group. That decision is on appeal to the U.S. Court of Appeals for the Second Circuit.
End of employment at will in NYC?
The original Wrongful Discharge Law (within its limited scope), as well as the proposed amendments described below, run counter to the common-law legal principle that, absent a contract of employment for a definite term, employment is at will and may be terminated by the employer or the employee at any time and for any reason that is not unlawful. (Montana, unlike the other 49 states, has legislation that requires just cause for termination in most cases.)
On December 7, NYC Councilmember Tiffany Cabán and her colleagues introduced a bill (Int. 0837-2022, linked above) to expand the Wrongful Discharge Law, arguably to all employees in the City. The bill removes the fast-food-specific language from the law, which could make the termination of any employee illegal unless a bona fide economic reason or just cause is present.
The scope of the bill is unclear in some respects. The Wrongful Discharge Law amended the pre-existing Fair Workweek Law. Among other things, the Wrongful Discharge Law added a definition of “fast food employee,” which explicitly “does not include any employee who is salaried.” The proposed amendments in the latest bill remove the words “fast food” from the law, changing its application from just a “fast food employee” to an “employee” generally. The definition of “employee” under the Fair Workweek Law incorporates the definitions under New York’s Labor Law and the federal Fair Labor Standards Act. Neither of those definitions excludes salaried employees.
As a result, in its current form, the bill seems to expand the Wrongful Discharge Law to all private sector employees, whether hourly or salaried.
The bill also seeks to significantly curtail employer use of electronic monitoring in making disciplinary or discharge decisions. Use of electronic monitoring for these purposes would be unlawful unless the employer could establish “(i) there is no other practical means of tracking or assessing employee performance; (ii) the employer is using the least invasive form of electronic monitoring available; and (iii) the employer previously provided notice to the employee of that monitoring[.]” To establish the practical necessity of electronic monitoring, the employer would be required to file an impartial evaluation from an independent auditor with the New York City Department of Consumer and Worker Protection.
Notwithstanding those limited exceptions, the bill would impose an absolute ban on using data for discipline or discharge if the data is “gathered using biometric technologies, video or audio recordings within the private home of an employee, apps or software installed on personal devices or geofencing technologies.”
Finally, the bill introduces a process similar to that in the California Private Attorney General Act, which has caused frustration to employers in that state. Under the NYC bill, allegedly aggrieved employees would be able to bring actions on behalf of multiple employees, and 65 percent of any recovery would be paid to the City.
Next steps
The bill was immediately referred to the Council’s Committee on Consumer and Worker Protection, and thus neither the timeline nor prospect of passage is clear. Nevertheless, organizations with employees in New York City should, with the assistance of counsel, consider seriously how such a law would affect their operations and what steps they can take to influence the proposed legislation.
