Daniel Montagna

Proposed New York City legislation would redefine employee/employer relationships for many New York City-based employers.

If passed, Int. No. 837 will prohibit covered employers from terminating employees without either “just cause” or a “bona-fide economic reason.”

The bill would expand current city law, which prohibits same in the fast-food industry, to include all employees across all industries with the exception of those working in a probationary period, a short-term position, construction, for the government, and those covered by collective bargaining terms compliant with the bill.

Employers are urged to review and update handbooks, disciplinary policies, current employee contracts, and insurance policies if/when Int. No. 837 is enacted.

On December 7, 2022, the New York City Council introduced legislation that would effectively end the at-will employment arrangement for many employees in the City. The bill, Int. No. 837, is aimed at expanding current law, which presently restricts employers from terminating Fast-Food Workers without either “just cause” or a “bona-fide economic reason.” N.Y.C. Admin. Code § 20-1271 et . Under the new language, this prohibition would extend to all employees with the exception of those working in a probation period, short-term position, construction, for the government, and those covered by collective bargaining terms compliant with the bill. The legislation also restricts employers’ ability to rely on data collected through electronic monitoring when disciplining employees, unless the employer can show (1) that there is no other practical method of tracking or assessing performance, (2) it is using the least invasive electronic monitoring, and (3) the employee was previously provided notice of the monitoring. Electronic monitoring is defined broadly as “the collection of information concerning employee activities, communications, actions, biometrics or behaviors by electronic means.”

Under the bill, termination for “just cause” requires an employer to post and use a progressive discipline policy, provide 14 days’ notice of discharge under that policy, and, within 5 days of the notice of discharge, provide written reasons for the decision. Terminations for a “bona fide economic reason” must be supported by business records showing the legitimacy of a qualifying economic reason and must be done in reverse order of seniority. Importantly, these requirements are inapplicable in the case of an employee’s “egregious misconduct” or “egregious failure to perform,” though the bill does not provide a definition of those terms.

Ending the at-will approach to employment relationships for so many workers would be momentous legislation; it should also be a call to employers to implement best practices even before the vote on Int. No. 837 is taken. For example:

  1. Adopting rational and clear rules of conduct and performance in an employee handbook will be essential to the 5-day justification letter but is also needed now to set day-to-day expectations for employees and their supervisors.
  2. Likewise, having an evenly enforced progressive discipline policy with documentation of disciplinary actions should be the norm for all employers. (Many cases under current anti-discrimination and anti-retaliation laws turn on whether a purported justification for an employment decision was actually a pretext, hiding unlawful animus. Thus, these measures are already crucial to rebutting claims of biased and other unfair treatment in the workplace.)

As for new concerns raised by the bill, the 14-day notice period effectively creates a limbo for employees who would otherwise likely be terminated immediately under current law. Assuming the employee is unhappy with the discharge, this creates the potential for suboptimal interactions between the to-be-terminated employee and co-workers. For employees who interact with clients, the situation could be even more perilous for the employer. While such concerns should be addressed on a case-by-case basis, a solid employee off-boarding system, with immediate access limitation when called-for, should ensure that the company’s reputation, both internal and external, does not suffer while the soon-to-be-former employee collects a two-week severance.

Two additional concerns raised by the bill are its effects on a company’s existing contracts, including any employee contracts, and its Employment Practice Liability Insurance (EPLI). A New York City-based company should review employment agreements with employees that contain at-will terms and seek legal advice on modifying same. It should also review its existing EPLI to confirm adequate coverage for the new classes of claims created by Int. No. 837 (and make necessary changes if not).

Ultimately, the pending bill highlights the necessity for employers to review their handbooks, discipline policies, employee contracts, and insurance policies so that if and when Int. 837 is passed, the company is readily able to adapt to the post at-will employment regime.