NYC’s Protections for Fast-Food Workers Get Second Circuit Test

Restaurant industry groups fighting New York City’s law limiting fast-food companies’ otherwise vast authority to fire workers will get a chance to convince a federal appeals court to strike it down.

A lawyer for the Restaurant Law Center—an affiliate of the National Restaurant Association—and the New York State Restaurant Association is set to appear at oral argument Thursday at the US Court of Appeals for the Second Circuit to challenge the city’s 2021 measure requiring just cause to terminate fast-food workers.

The survival of the fast-food workers law could boost more exceptions to the at-will employment doctrine for other types of workers and in other areas of the country. That company-friendly model is currently the default for workplaces in every state except Montana.

The New York City Council is considering a proposal to extend its just-cause protections across all industries, while pending legislation in Illinois would bar terminations without reasonable cause.

The case’s potential impact has drawn several amicus briefs on both sides of the issue, including one from the US Chamber of Commerce and several other business groups backing the restaurant group. A host of worker advocacy organizations, a group of labor law professors, and a coalition of 14 states with Democratic attorneys general plus the District of Columbia have thrown their support behind the law in separate amicus briefs.

The use of the at-will employment doctrine makes the US an outlier among industrialized democracies, legal observers said. The doctrine permits companies to fire workers for any reason, provided the termination doesn’t run afoul of a specific workplace protection, such as laws against discrimination on the basis of gender, race, or age.

Having a past bankruptcy, using previously agreed-upon vacation days, and being left-handed were among the reasons employers gave for firing workers, according to a recent survey conducted by the National Employment Law Project and YouGov.

“People are still surprised that they can be fired for any reason or no reason,” even though at-will employment is the default across the country, said Paul Sonn, the state policy program director at NELP, which supports the New York City law.

At-Will Exceptions

One way of looking at federal and state anti-discrimination laws is that they carve out exceptions to the ubiquitous at-will employment doctrine as much as they affirmatively create safeguards against bias, legal observers said.

Other exceptions include just-cause protections that are typical in union contracts, civil service laws, and employment arrangements for highly compensated executives. The Uniformed Services Employment and Reemployment Rights Act also gives limited just-cause safeguards to service members returning to work from deployment.

More recently, localities have enacted job-specific exceptions, with the New York City measure and Philadelphia’s 2019 law providing just-cause protections for parking attendants.

US territories such as Puerto Rico instituted a broad just-cause termination requirement in 1976, and the Virgin Islands did the same a decade later.

Those longstanding laws provide evidence that ending at-will employment can work without being a heavy burden on businesses, said Kate Andrias, a law professor at Columbia University who joined an amicus brief supporting the New York law.

But business groups say just-cause laws intrude on the employer-employee relationship, distort companies’ hiring and firing decisions, and impose significant costs on businesses.

Regulating Terminations

New York City’s just-cause law applies to fast-food chains with at least 30 locations nationally. It prohibits firing workers or reducing hours by 15% or more absent just cause—defined as unsatisfactory job performance or misconduct—or a “bona fide economic reason.”

The measure also calls on covered employers to establish a system of progressive discipline and requires them to give fired workers a written explanation for their termination. City regulators enforce the law, plus workers can bring wrongful discharge claims in arbitration or court.

US District Judge Denise Cote, a Clinton appointee, in 2022 rejected the restaurant industry groups’ challenge to the law, which was based primarily on the argument that the protections invade the collective bargaining process. That means the law is preempted by the National Labor Relations Act under the US Supreme Court’s 1976 decision in Machinists v. Wisconsin Employment Relations Commission, they said.

But Cote ruled that “the regulation of the process for termination of employment—even through a detailed law—is not the regulation of the collective bargaining process and is not preempted by the NLRA.”

‘Unprecedented Intrusion’

Judges Rosemary Pooler, a Clinton appointee; Barrington Parker, a George W. Bush appointee; and Alison Nathan, a Biden appointee, will hear the arguments Thursday.

The just-cause law’s requirements impose typical union-contract terms on employers that don’t have such agreements, and so can’t escape Machinists preemption, the restaurant groups said in their appellate brief.

“The resulting legislation is an unprecedented intrusion into the core of the employer-employee relationship designed to tip the scales in a manner no local or state government has ever done,” they said.

But the Third Circuit declined to apply Machinists preemption to the Virgin Islands’ just-cause law, and the First Circuit likewise upheld an ordinance requiring companies that buy hospitality businesses to have good cause to fire their predecessors’ workers during the first three months after the acquisition, New York City said in its brief.

Moreover, the Second Circuit has noted the Supreme Court has never applied Machinists preemption to a law that didn’t regulate the mechanics of labor dispute resolution, the city said.

The New York City Law Department and the restaurant industry groups’ lawyer, William Peterson of Morgan, Lewis & Bockius LLP, didn’t respond to requests for comment.

The case is Rest. Law Ctr. v. City of New York, 2d Cir., No. 22-00491, oral argument scheduled 5/18/23.