NYC’s Mandatory Collective Bargaining Agreements in Fast-Food Shops?

Posted in: Employment Law

The New York City Council recently passed two bills mandating detailed and extensive labor protections for fast-food workers in New York City. The Council passed Int. 3966-A and 1415-A on December 17, 2020. Their protections apply only to workers employed by firms operating more than 30 fast-food establishments in the United States.

Although not officially called collective bargaining statutes, there is no mistaking that these laws mandate core provisions found in many if not most collective bargaining agreements:

  • Employees beyond their probationary period (which is limited to 30 days) may be discharged only for just cause or a “bona fide economic reason”;
  • Just cause requires “progressive discipline,” a graduated series of penalties for minor offenses, unless the employee’s offense is “egregious” (never defined in the law);
  • The employer must provide the employee, within five days, a written explanation of the “precise reason” for termination and may never alter or amplify its explanation;
  • If the termination is challenged, the employer must establish that its rules were known to the employee, that the employee was adequately trained, that its disciplinary policy was reasonable and consistently applied and that the employer undertook a fair and objective investigation into any misconduct; and
  • Layoffs or schedule changes are permissible only for “bona fide economic reasons” and must be done in reverse order of seniority.

These provisions may be enforced through a private action brought in court by the employee who also may choose to challenge the action in a mandatory arbitration proceeding, a troublesome provision because “[a]rbitration is strictly a matter of consent.” Granite Rock Co. v. Teamsters, 561 U.S. 287, 299 (2010). The new non-consensual ordinances nonetheless contain detailed provisions establishing an arbitration board (including specifying the procedural rules that apply in hearings), allow employees to be represented by “any person or organization representing persons” seeking such a challenge, and specifically allow class actions in arbitration, contrary to recent decisions under the Federal Arbitration Act (FAA). See Lamps Plus v. Varela, 139 S. Ct. 1407 (2019) (“a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so”) (quoting from Stolt-Nielsen v. Animal Feeds Int’l Corp., 559 U.S. 662, 684 (2010) (emphasis in original). Penalties for improper employer conduct include back pay, reinstatement, attorney’s fees, fines, and emotional distress damages. Coupled with the City’s $15.00 minimum wage, paid sick leave, and detailed scheduling requirements applicable to fast food and retail establishments, it is difficult to see what more could be obtained through an actual collective bargaining agreement between an employer and a labor union, except perhaps in those few shops where employees have enough leverage to demand wages above the minimum.

This well-intentioned measure, designed to benefit lower-wage workers, marks the first time a municipal government has legislated the detailed provisions of a mandatory collective bargaining agreement applicable to private sector employers and employees. There are substantial questions whether these ordinances are within the City’s authority, even assuming that the City’s home rule authority extends to labor relations issues governed by federal law.

Labor relations in the United States is governed by federal law—the National Labor Relations Act—with a federal agency, the National Labor Relations Board (NLRB), overseeing the relationships between employers, employees, and labor unions (unless the NLRB determines it has no jurisdiction over fast-food shops, which it has not done). The basic premise of federal labor law is that employers and unions are free to devise their own agreements free from government control. The law does not allow government to impose labor contracts on anyone; Congress established that federal “labor policy is not presently erected on a foundation of government control of the results of negotiations.” Machinists v. WERC, 427 U.S. 132, 143 (1976). The Supreme Court explained in detail in Golden State Transit Corp. v. City of Los Angeles, 475 U.S. 608, 616-17 (1986):

The NLRA requires an employer and a union to bargain in good faith, but it does not require them to reach agreement. § 8(d), as amended, 29 U.S.C. § 158(d) (duty to bargain in good faith “does not compel either party to agree to a proposal or require the making of a concession”); NLRB v. Jones & Laughlin Steel Corp., 301 U. S. 1, (1937) (“The theory of the Act is that free opportunity for negotiation . . . may bring about the adjustments and agreements which the Act in itself does not attempt to compel”).

The Supreme Court has repeatedly made clear that these principles apply not only to federal compulsion but to state and municipal efforts to govern labor relations. Employers and unions are free to come to their own agreements, resolving the unique issues in each workplace, without government dictating the rules.

The genius of this system is that it allows the parties flexibility to deal with the myriad problems that arise in structuring workplaces, devising and revising new and innovative solutions to unanticipated situations in ways not available through the cumbersome legislative process. While the City Council chose to legislate the rules only for large fast-food businesses, if the City has the authority to create a set of mandatory workplace rules for some businesses it has the power to define rules for all, including private restaurants and other businesses struggling in the pandemic. Should the City Council be the place to determine workplace rules for all ailing NYC businesses? The rules for fast-food workers do not seem appropriate for more highly skilled workers at hospitals, financial institutions, or high-end restaurants. Should City Hall decide that the length of a probationary period for nurses or respiratory technicians is 30, 60, or 120 days? How about how long it takes to become a qualified chef at one of New York’s great restaurants? Or what a bank needs to establish in order to justify the termination of an employee accused of financial impropriety? And if this is the law in New York City, isn’t the same legislation—with perhaps different rules—going to govern businesses in Los Angeles, Chicago, Boston, and Philadelphia?

The Congress that granted private parties the right to order their own affairs and precluded the NLRB from forcing any concessions or agreements upon employers or unions certainly never contemplated a city (or all cities) constructing mandatory collective bargaining codes for private employers. Essentially nothing would be left of the NLRA. The City’s new laws are not consistent with core principles of federal labor law.

Proponents of the new laws argued that state and local governments may establish workplace rules of general applicability—applying to all employers and employees—dealing with minimum wage, overtime pay and discrimination in employment, for example. Those mandatory statutes, applicable to all businesses within the state or city, form the background against which negotiations occur. “Minimum state labor standards affect union and nonunion employees equally, and neither encourage nor discourage the collective bargaining processes that are the subject of the NLRA. Nor do they have any but the most indirect effect on the right of self-organization established in the Act.” Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 744 (1985).

Unlike true minimum-terms laws, the City’s new laws, applicable only to certain fast-food businesses, necessarily discourage the collective bargaining process by making it superfluous. The City’s ordinances are not a “minimum state labor standard” that allows private parties latitude to order their own affairs as they choose. The new laws establish specific detailed standards for fast-food workplaces within the City, not only precluding “improper” discharges and layoffs but specifying the length of probationary periods for new workers, mandating that seniority applies in all layoffs or reductions in hours, and determining exactly what employers must prove in a challenge to any termination or layoff.

The City’s efforts on behalf of low-wage fast-food workers are surely well-intended, but the City Council has not chosen an acceptable means for this purpose. The City Council is not the place where binding agreements governing private workplaces in the City should be enacted. Fast-food workers who want greater job security have the right to organize unions and bargain collectively, and unions seeking to represent them can use the provisions of federal law to obtain representation rights and negotiate binding agreements on the employees’ behalf. As others have argued, it may be more difficult to organize a union in a fast-food business, but if so, this is a matter for the NLRB or Congress to decide. The answer to this perceived problem is not for the New York City Council to take it upon itself to create mandatory collective bargaining agreements for the City’s fast-food industry, in derogation of long-established principles of federal labor law.

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