NYC fast-food wrongful discharge law is upheld

In 2017, the New York City Council enacted a law that protects employees at large fast-food chains in New York City from arbitrary terminations and reductions in hours. This law was significant because, generally speaking, most employees who are not unionized have no protections against arbitrary terminations or wage reductions because they are at-will employees and courts usually defer to managerial prerogatives. A significant law like this will always undergo a court challenge, however. The Restaurant Law Center and New York State Restaurant Association brought this case, alleging that the NYC law violates the Constitution and federal wage and hour laws. The Court of Appeals (Nathan and Parker) rejects these arguments and the law stands.

The case is Restaurant Law Center v. City of New York, issued on January 5. Under the law, fast food chains cannot fire hourly wage employees without notice or reason in the absence of egregious misconduct. These employees also have the option whether to arbitrate their claims or bring their cases to court. That distinction can make all the difference in whether you won or lose the case, as juries will be more sympathetic to wrongful discharge cases than arbitrators who are paid by the companies to resolve the case. 

The lawsuit does not allege that the City law is a good idea or a bad idea. The focus is more legalistic, involving areas of the law that would bore non-lawyers to death. These areas of the law might even bore lawyers to death. But the case is important because lots of people work for these fast food chains and, prior to this law's enactment, they had minimal protections against arbitrary personnel decisions. 

We have two challenges here: first, the industry argues that the City law is preempted by federal law. If that is the case, then the City law fails. But the National Labor Relations Act does not take precedence here because the NLRA only regulates the process of labor negotiations, not the substance of labor negotiations. The Second Circuit says that regulating the substance of labor negotiations, by prohibiting arbitrary terminations and salary reductions, does not fall within the NLRA. In fact, all employees in NYC who work for large fast food places are covered under the City law, not just unionized employees. 

The second challenge to the City law falls under the Dormant Commerce Clause. The Constitution says that Congress shall regulate interstate commerce. Over the years, the Supreme Court has also determined that the Commerce Clause also makes it illegal for states to practice protectionism by favoring in-state commerce over out-of-state commerce. That's the Dormant Commerce Clause. The industry argues that the City law violates the Dormant Commerce Clause because, in practice, the City law favors New York City franchises over out-of-state franchises. The Court of Appeals disagrees, finding as follows:

Any burdens imposed by the Law are highly localized. The Law does not impose direct costs on out-of-state franchisors or any other out-of-state entity—only individual restaurants operating in New York City.  Put otherwise, at the restaurant level, every restaurant to which the Law applies is an in-state business; and at the chain level, the Law applies equally regardless of where a franchise is headquartered. So, for example, the Law imposes the same burdens on a local franchisee of a New York-based interstate chain like Shake Shack or Nathan’s Famous as it does on a local franchisee of an interstate chain headquartered outside New York.