A new New York City law effective July 4, 2021, will fundamentally alter the employment relationship between “fast food” employees and their employers, by severely limiting a “fast food” employer’s legal right to fire or discipline its hourly employees. 

The new law applies to all businesses primarily serving food or drinks, where patrons order or select items and pay before eating, offering limited service, and that are part of a chain of 30 or more establishments nationally (including both franchised and company-owned locations). The new law prohibits such businesses from terminating or reducing the hours of hourly employees whose job duties include customer service, cooking, food or drink preparation, delivery, security, stocking supplies or equipment, cleaning or routine maintenance, without the employer having either “just cause” or a “bona fide economic reason” for the termination or reduction. 

The law represents a dramatic and unprecedented departure from the traditional “at-will” employment relationship, under which an employer can fire an employee at any time, without notice, cause, or severance.

Generally speaking, under the traditional “at-will” employment relationship, employees have legal protection only where: a) the employee can show the employer took the action based on a discriminatory or retaliatory reason which is prohibited by the anti-discrimination laws, such as gender, age, race, or national origin discrimination, or the whistleblower laws; b) the employee is a member of a union which has a collective bargaining agreement which provides job protection, or the employee was terminated for engaging in protected union organizing activity, or c) the employee is a high-level executive with a written employment contract that limits the employer’s right to fire the executive without compensation.

By giving fast-food employees statutory job protection, the law effectively “unionizes” all fast-food employees in New York City, by giving them legal protection which is roughly equivalent to the protections found in many union collective bargaining agreements. In this way, the law accomplishes what union organizers have been trying to accomplish for the past two decades - for years, union organizers have nationally waged largely unsuccessful efforts to unionize the employees of several national foodservice chains, including McDonald's and Starbucks.

Just Cause
The law limits the definition of “just cause” by mandating that, when making the decision to discharge or reduce hours, such employers must utilize a progressive discipline system, which provides for a “graduated range of reasonable responses to a fast-food employee’s failure to satisfactorily perform his or her job duties, with disciplinary measures ranging from mild to severe, depending the frequency and degree of the failure.” The law prohibits an employer from considering the poor performance that is more than one year old. The law requires the employer to give the employee a written explanation of the reasons for the discharge, within five days of the discharge.

Bona Fide Economic Reason
If the employer claims the termination was for a “bona fide economic reason,” the employer may be required to produce business records to support the reason, “showing that the closing or technological or reorganizational changes are in response to a reduction in the volume of production, sales, or profit.” In deciding which employees to lay off for economic reasons, the employer must terminate employees in reverse order of seniority.

Penalties and Procedures for Disputes
The law provides severe penalties for violations. Employees can obtain reinstatement, lost wages, and other compensatory damages, as well as attorney’s fees, which provides an incentive for plaintiff’s attorneys to take such cases on a contingency fee basis.

By adopting the broad statutory definition of an “employer” which normally applies to federal wage and hour cases, the law effectively allows such employees to sue individual managers or owners personally, as well as the business, in certain circumstances where the manager or owner is directly involved in supervising the employee’s work, hiring and firing employees, and setting employee schedules and pay, or had operational control over workplace conditions.

The new law gives fast food employees the option to either bring a lawsuit in court or to file a claim in an arbitration proceeding, under an arbitration system to be established by the City by January 1, 2022, which will be similar to the arbitration systems found in many union agreements. 

Specifically, the arbitration proceeding will be conducted according to the labor arbitration rules of the American Arbitration Association, except that the parties must select a single arbitrator from a panel of possible arbitrators selected by the City which will include both pro-employee and pro-employer representatives. If the parties cannot agree on an arbitrator, the City will select an arbitrator from the panel. Employees can bring an arbitration proceeding on a class basis and can obtain an award for attorney’s fees if the employee prevails. 

Take-Away
Foodservice businesses in New York City must carefully analyze whether their business falls within the definition of a “fast food” establishment and, if so, such businesses must adopt and follow specific procedures for a “progressive discipline” system for any disciplinary action and a seniority system for any layoffs for business reasons.