Reminder: NYC Law Ending At-Will Employment for Fast-Food Industry Takes Effect July 4

New York City’s new law severely limiting at-will employment in the fast-food industry is scheduled to go into effect on July 4, 2021.  Although a lawsuit seeking to enjoin the law is pending, covered employers should be working to ensure compliance with all of the law’s various provisions.

As previously discussed here, New York City’s law undermining at-will employment in the fast-food industry will go into effect on July 4, 2021.  Covered fast-food employers should implement policies and trainings to ensure compliance with this novel law.

Below is a summary of the key features of the law:

• Just Cause Termination and Progressive Discipline Policy. Other than for bona fide economic reasons (discussed below), employers will be able to terminate or substantially reduce the hours of fast-food workers only for demonstrated misconduct or poor performance, which must be “demonstrably and materially harmful to the fast food employer’s legitimate business interests.”  Employers will have to prepare a written progressive discipline policy and provide impacted employees with a written explanation with the “precise reasons” for the employee’s termination or hours reduction. 
• Bona Fide Economic Reason. In addition to poor performance and misconduct, employers can terminate employees, or reduce their hours, based on a bona fide economic reason.  However, such a decision must be “supported by a fast food employer’s business records.”  Moreover, a termination or hours reduction based on economic reasons must be carried out in reverse seniority order, and subsequent hires or additional hours must first be offered to those who were terminated or had their hours reduced.
• Probationary Employee Exemption. Employees in the first 30 days of employment are exempt from the just-cause and progressive discipline requirements.
• Predictive Scheduling. Fast-food employers will have to create predictive scheduling practices and systems to “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.”  Employers must provide a “written copy of [the employee’s] regular schedule” both (a) before the employee’s first shift and (b) any time the employee’s schedule is changed on an indefinite basis.  (Prior to these amendments, 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: (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.
• Arbitration. On or after January 1, 2022, fast-food employees will be entitled to file an arbitration demand in lieu of a lawsuit to address an alleged wrongful discharge or reduction in hours on behalf of themselves and any applicable class of individuals.  The law 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 and Worker Protection. 

On May 28, 2021, the Restaurant Law Center and New York State Restaurant Association filed a federal lawsuit seeking declaratory and injunctive relief to prevent the law from taking effect based on constitutional and preemption grounds.  This lawsuit is still pending, and until further notice, we recommend that all covered employers finalize their respective plans, policies, and trainings to ensure they are compliant with the new law.

Seyfarth will continue to monitor developments in this space and provide updates when available.