The New York City Council has passed two bills that limit employers’ ability to discharge employees in the quick-service restaurant industry. In an expansion of the Fair Workweek Law, the new legislation permits employers to terminate employees only for “just cause” or for a “bona fide economic reason.” These stricter requirements effectively eliminate the at-will status of quick-service restaurant employees and create a discipline structure similar to that bargained for by unionized workforces. The protections are set to take effect on July 4, 2021.
Until now, most quick-service restaurant workers have been classified as at-will employees. The law permits employers to discharge at-will employees at any time for any reason. Under the new laws, however, quick-service restaurant employers will only be permitted to discharge employees for just cause or for a bona fide economic reason. “Just cause” is defined using two categories of wrongdoing: (1) the employee’s failure to “satisfactorily perform” his or her job duties; or (2) the commission of misconduct that “is demonstrably and materially harmful” to the employer’s legitimate business interests. Any offense that falls short of either definition will not be sufficient to discharge the offending employee. A “bona fide economic reason” is further defined as a “full or partial” closing of the business or some other business-related changes that are responsive to a “reduction in volume of production, sales, or profit.” Where a bona fide economic reason exists, employers must discharge employees in reverse order of seniority.
When challenged, the employer bears the burden of proving that one of the two permissible conditions for discharge exists. Justifiable just cause first requires quick-service restaurant employers to utilize a progressive discipline structure that includes a system of gradual responses to an employee’s performance issues and misconduct. Only where an employee commits an act of egregious misconduct may the employer bypass the progressive steps of discipline. The progressive discipline program must be documented in writing.
Once the employer demonstrates the existence of a progressive discipline system, the court will consider the following factors:
- Whether the employee knew or should have known about the policy or rule that was violated, providing the basis for the discipline.
- Whether the employer provided necessary and adequate training to the employee.
- Whether the employer applied the policy or rule, including the progressive discipline, reasonably and consistently.
- Whether the employer investigated the poor performance or misconduct fairly and objectively.
- Whether the employee actually violated the policy or rule that provided the basis for the discipline.
Courts will weigh all five factors in determining whether just cause existed at the time of discharge. In contrast to the detailed analysis of just cause, employers need only present business records as of closing or reduction of production, sales or profit to demonstrate a bona fide economic reason.
The new laws also impose an additional administrative requirement on employers. Within five days of discharging a quick-service restaurant employee, the employer must provide a written explanation with the precise reasons for discharge. If the discharge is subsequently challenged, the court will consider only the reasons proffered in this statement. At that stage, the employer may not introduce additional reasons for discharge.
New York City quick-service restaurant employers should begin drafting and implementing policies to comply with the new laws as soon as practicable. Employees discharged in the absence of just cause will be entitled to reinstatement as well as back pay of lost wages and benefits. In addition, the employer may be liable for a $500 fine for each violation. Because of the prevalence of similar provisions in collective bargaining agreements, it may be prudent for employers to become familiar with the operation of discipline for unionized workforces. If you have any questions about how New York City’s new just cause laws may affect your business, please reach out to any member of Faegre Drinker’s New York labor and employment group.