May 25, 2023
New York State’s Proposed At-Will Prohibition: The “Big Apple” Does Not Fall Far From the Tree
Seyfarth Synopsis: Like the New York City Council, the New York State legislature is considering a bill to effectively abolish at-will employment. If passed, the State bill would prohibit employers from discharging employees absent good cause if the termination occurs after a mandatory probationary period.
As we discussed previously, the New York City Council is considering a bill that would prohibit employers from discharging employees absent just cause or a bona fide economic reason. The bill would require employers to administer progressive discipline programs and provide reasoned notices of termination to employees except in circumstances involving egregious misconduct.
While the City bill has gained national attention, its future remains unclear. As of writing, that bill remains pending with no additional action taken since December 7, 2022 except for the inclusion of additional co-sponsors.
New York State’s Bill
Not to be outdone, three New York State Senators introduced a bill that would effectively abolish at-will employment throughout the Empire State. The bill, coined the "Safeguarding Employees and Accountability for Termination Act" (“SEAT Act”), would make employee discharge unlawful if:
(1) the discharge was not for good cause and the employee had completed the employer's probationary period; or
(2) the employer materially violated an express provision of its own written personnel policy prior to the discharge, and the violation deprived the employee of a fair and reasonable opportunity to remain in a position of employment with the employer.
The bill defines “good cause” to justify termination as:
(1) the employee failed to satisfactorily perform job duties;
(2) the employee disrupted the employer’s operations (except when engaging in concerted activity);
(3) the employee engaged in material or repeated violations of an express provision of the employer’s written policies; or
(4) other legitimate business reasons exist as determined by the employer while exercising its reasonable business judgment.
The bill would establish a mandatory “probationary period” whereby an employer could terminate an employee without good cause. The default period would be one month, but an employer could establish a longer period not to exceed six months.
The bill provides for a six-year statute of limitations and entitles an employee to lost wages and fringe benefits for up to four years for any violation. If an employer maintains written internal procedures under which an employee may appeal a discharge within the organizational structure of the employer, the employee must first exhaust those procedures before filing an action. The employee's failure to initiate or exhaust available internal procedures would be a defense to any lawsuit subject to certain exceptions. Any recovery would be offset by the employee’s interim earnings derived from any subsequent employment or work.
The SEAT Act would also enable the employee and employer to agree to arbitrate in lieu of a lawsuit by mutually selecting an arbitrator who would conduct proceedings pursuant to Article 75 of the New York Civil Practice Law and Rules.
Like the New York City bill, the Senate bill remains under consideration. On March 6, 2023, it was referred to the Labor Committee and no further action has been taken to date.
How Does the SEAT Act Compare to New York City’s Bill?
While the City and State bills are broadly similar, they are different in several important respects.
For example, the probationary period under the SEAT Act defaults to 30 days, but it can be extended to as long as six months. Under New York City’s bill, the probationary period is limited to a maximum of 30 days.
The bills also differ in their treatment of layoffs or terminations based on economic conditions. Under the City bill, if employers cannot substantiate the need for termination based on the just cause factors, they must have a bona fide economic reason. For a discharge to be based on a bona fide economic reason, the employer must experience a full or partial closing of operations or technological or organizational changes to the business in response to a reduction in volume of production or sales. By contrast, the SEAT Act permits good cause termination where the decision is motivated by legitimate business reasons determined by the employer while exercising reasonable business judgment.
New York City’s bill also includes unique provisions not included in the SEAT Act. It would limit employers’ ability to rely on data collected through electronic monitoring when discharging or disciplining employees, unless the employer can show that (1) there is no other practical method of tracking or assessing employee performance, (2) it is using the least invasive available form of electronic monitoring, and (3) it previously provided the employee with the required notice of the monitoring. Even when these conditions are met, the employer may not rely solely on the data from electronic monitoring in making such employment decisions, except in cases of egregious misconduct or involving threats to others’ health or safety.
Additionally, City employers would need to file in advance with the Department of Consumer and Workforce Protection “an impartial evaluation from an independent auditor that said electronic monitoring is effective in undertaking its designed task.”
But the New York City bill is not altogether stricter than the SEAT Act. The SEAT Act would permit actions for wrongful discharge to be filed within six years after termination, whereas the City bill requires a civil action within two years.
Damages under either bill could be steep. Violations under the SEAT Act would entitle employees to lost wages and benefits for a period not to exceed four years from the date of the discharge, together with interest on the lost wages and fringe benefits.. The New York City bill would entitle employees to reinstatement, payment of back pay for any loss of pay or benefits resulting from discipline, other compensatory damages and any other relief required to make the employee whole and reasonable attorney’s fees, among other things.
It is far from certain that either of these bills will progress in their respective legislative bodies, let alone pass and become law. That said, employers should be prepared in case these bills are a sign of what is to come in future legislative sessions. Seyfarth will continue to monitor developments in this space and provide updates when available.