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(Coming to California?) Restaurant groups challenge NYC layoff law

Peter Romeo | Published on 6/3/2021


The action challenges the legality of New York's Just Cause legislation, which prevents certain restaurant employers from dismissing or cutting the hours of an employee at will.

A first-of-its-kind law that limits fast-food chains’ ability to fire employees in New York City is being challenged in federal court by advocacy groups that blast the measure as a way for unions to promote restaurant workers’ interests without being voted into that role.

The plaintiffs are also seeking to overturn a related measure that prevents local units of a quick-service chain from laying off workers or cutting any employee’s hours by at least 15% unless the employer can show a “bona fide economic reason.”

“In other words, layoffs are barred until the employer suffers actual economic harm, and may not be used to avoid that harm or to increase volume production, sales, or profit,” reads the complaint. It contends that the measures would negate at-will employment, a standard in place within New York City and its host state for more than a century.

In most instances, employees could only be dismissed or disciplined by having their hours cut by at least 15% if the employer can demonstrate “just cause,” and only after the employer provides “progressive discipline” to alleviate performance issues. The actions are subject to review via an administrative hearing or by an arbiter.

An exception is made for “egregious behavior” on the part of an employee.

The two groups bringing the action—the Restaurant Law Center, an affiliate of the National Restaurant Association, and the New York State Restaurant Association—asked the U.S. District Court for the Southern District of New York to block the measures before they take effect July 5.

They note that the legislation unfairly targets just a small splinter of New York’s business community. The measures apply solely to New York City branches of limited-service restaurant chains that extend to at least 30 locations nationwide. 

When the legislation was passed by the New York City Council in December, industry advocates and some chains voiced fears that the law would be copied in other jurisdictions. Several controversial measures that originated in the city have spread nationwide, including no-smoking laws and menu labeling.

The plaintiffs contend that the laws being challenged incorporate language that was directly provided by the Service Employees International Union (SEIU), a labor group that has been striving for years to organize restaurant chains. The union also supports Fight for $15 and a Union and a second group pushing to change restaurant workers’ compensation, One Fair Wage.

The complaint alleges that the so-called Just Cause legislation was a way for unions to push their causes legislatively instead of following the organizing and voting guidelines set in federal labor law.

SEIU “has instead chosen to end-run around federal labor standards by focusing on a different constituency: the New York City Legislature,” the lawsuit states. “Through the City Legislature, the SEIU seeks to evade the NLRA [National Labor Relations Act], overturn the state’s longstanding doctrine of at-will employment, and, instead, impose onerous procedural rules that go to the heart of collective bargaining agreements in unionized workforces.”

The complaint adds, “the SEIU played a large part in drafting the laws.”

The SEIU and City Council members who supported the Just Cause measures have yet to respond publicly to the lawsuit, which was filed against the city on Friday.