The End of At-Will Employment in New York?

New York State and New York City are currently considering bills that would effectively end at-will employment.

On March 6, 2023, a trio of New York State Senators introduced Senate Bill S05459, which, if passed, will effectively terminate at-will employment within the State of New York. In December 2022, the New York City Council also introduced a similar proposed ordinance, Int. 0837-2022, which has since garnered additional support while the proposal has been in committee.

New York State’s Proposed Legislation

If enacted, Senate Bill S05459, otherwise known as the Safeguarding Employees and Accountability for Termination (“SEAT”) Act, would take effect 90 days after being signed into law and effectively eliminate the notion of at-will employment within New York State.

The SEAT Act would create a cause of action in a new Article 20-D of the New York Labor Law that would allow employees to sue for “wrongful discharge.” Importantly, a “discharge” is defined broadly under the current version of the bill as a “resignation, elimination of the job, failure to recall or rehire and any other cutback in the number of employees for a legitimate business reason.”

Definitions According to the Current Bill

Under the current form of the bill, a discharge is considered wrongful if:

1. it is not made for “good cause” and the employee has completed a “probationary period” of employment; or
2. the employer materially violated an express provision of its written personnel policy prior to the discharge and the violation deprived the employee of a “fair and reasonable opportunity” to remain employed.

The SEAT Act in its current form defines “good cause” as “any reasonable job-related grounds” to support the employee’s discharge based on various reasons, such as failure to satisfactorily perform the employee’s job duties, the employee’s material or repeated violation of the employer’s policies, and the employee’s disruption of the employer’s operations (except where such disruption is protected by law). Further, discharges occurring during a “probationary period” (as defined by the bill) are not subject to the “good cause” requirement.

Employers Beware of Wrongful Discharge Claims

As we stated, the SEAT Act would provide for a private right of action for employees to sue their employers for wrongful discharge, but the bill notably includes an exhaustion of internal remedies requirement if an employer maintains certain “written internal procedures” allowing an employee to appeal a discharge. The statute of limitations under the current form of the bill is six years from the date of the discharge. Possible remedies for wrongful discharge under the current bill include lost wages and fringe benefits, with interest, for a time period not to exceed four years from the date of discharge. Notably, the SEAT Act would impose a duty to mitigate damages on the employee.

New York City’s Proposed Legislation

Similar to the SEAT Act, if passed, Int. 0837-2022 will effectively eliminate the concept of at-will employment in New York City. Namely, a private employer would be precluded from discharging a covered employee who has completed the employer’s probationary period, unless “just cause” or a “bona fide economic reason” exists to support the “discharge.”

Definitions According to the Current Proposed Ordinance

The proposed ordinance currently defines “discharge” broadly as meaning “any cessation of employment, including layoff, termination, constructive discharge, reduction in hours [totaling at least 15% of the employee’s regular schedule or 15% of any weekly work schedule] and indefinite suspension.”

In its current form, Int. 0837-2022 defines “just cause” as the employee’s failure to satisfactorily perform their job duties or the employee’s misconduct that is “demonstrably and materially harmful” to the employer’s business interests. Unless an employee egregiously fails to perform their duties or engages in egregious misconduct, terminating an employee without adhering to the employer’s written policy on progressive discipline would be unlawful under the proposed ordinance.

The proposed ordinance defines “a bona fide economic reason” as the “full or partial closing of operations or technological or organizational changes to the business in response to a reduction in volume or production or sales of 15% or more over a period of two quarters” at either the discharged employee’s work location or across all establishments owned by the employer in New York City.

What’s Required under the Proposed Ordinance?

Significantly, the proposed ordinance would require an employer to provide at least 14 days’ notice of any discharge, regardless of whether that discharge is based on just cause or a bona fide economic reason as described above. Within five days of issuing that notice, the employer would be required to provide a written explanation to the employee of the exact reason for their discharge, as well as copies of any information used in making that decision.

The proposed ordinance also would largely prohibit the use of electronic monitoring in disciplining or discharging employees.

At present, only New York City fast food workers are protected from being terminated for reasons unrelated to just case or bona fide economic reason.

Boiling it Down

If passed, the New York State and New York City bills would be groundbreaking in effectively eliminating the concept of at-will employment, thereby severely restricting an employer’s ability to discharge its employees. Currently, Montana is the only state that is not an at-will employment state.

We will be closely monitoring the progress of the bill and proposed ordinance and will report any updates.