With more than half of New York restaurants hanging on a thread and depending on federal dollars to stay afloat, New York City Mayor Bill de Blasio on January 5 signed new legislation that effectively ends at-will employment for fast-food restaurants in New York City. The move, which goes into effect on July 4, 2021, prevents employers from discharging employees or reducing their hours past a certain threshold unless the employer has "just cause," which is described as unsatisfactorily performing their duty, among other things.  

The effort makes New York City the first jurisdiction in the country to pass job protections for employees within a particular industry, according to Ogletree Deakins, a labor and employment law firm.

While an obvious win for employees, for small fast-food franchises the change could make an already difficult business environment even more so. Business owners say they need the flexibility of at-will employment--particularly in light of the coronavirus pandemic. Many employers have needed to layoff, furlough, or reduce employee hours in this uncertain climate in particular.

It's "absolutely terrifying for small business" and "simply wrong," Jessica Walker, CEO of the Manhattan Chamber of Commerce told a reporter at Restaurant Business last February, after the proposal was first announced.

Here's how the new laws will affect these businesses.

What is at-will employment?

In theory, at-will employment means that both employee and employer are under no obligation to continue the working relationship, and both can end it at any moment. An at-will employee can walk out the door right now, with absolutely no prior notice, and there's nothing legally the employer can do. The employer can refuse to rehire and give a bad reference, but that's the end of it.

Employers in at-will relationships can also end an employment relationship without notice, but they can't do it for illegal reasons. In theory, you could walk and say to an employee, "I always fire someone on the third Monday in January, and this year it's you. Pack your stuff and get out." If you picked this employee because of race, gender, religion, or other protected category, that becomes an illegal termination.

How this New York City Law affects fast-food employment at will.

After a maximum of a 30-day probationary period, fast-food restaurants can terminate employees only for "just cause," defined as  "the fast-food employee's failure to satisfactorily perform job duties or misconduct that is demonstrably and materially harmful to the fast food employer's legitimate business interests."

Reductions in hours are also covered, so you can't just not schedule a problem employee anymore.

Unless the employee's bad behavior is "egregious," managers have to go through a progressive discipline process before terminating an employee.

Layoffs for economic reasons are still allowed, but they have to be last-in-first-out. In other words, if you have a long-term employee who is a poor performer but hasn't reached the level of "just cause" yet and you have newer employees who are star performers, you still have to pick the newer employees for termination if layoffs are in order.

Impact on your business.

Right now, there's no direct impact on your business if you do anything other than fast food in New York City, but it's a step in the door. While progressive discipline is the gold standard of handling employee problems, having to justify every termination may result in people slowing their hiring or increased use of temps.

Laws that start in one place often spread out across the nation. For instance, in 2016, Massachusetts made it illegal to ask a job candidate about a prior salary, and now that law has spread to more than half the states.

This is something you'll want to keep your eye on. While it offers protection to the employees, it also restricts employers--especially when the government controls who can be terminated in a layoff situation. The best plan for layoffs is to keep your top performers and let the others go. This may well hamper your ability to survive economic downturns--something almost every restaurant owner in the world faced in the past year.

Right now, it's just one portion of one industry in one state, but it may be coming your way.