Wrongful Termination and “For Cause” Termination in New York

New York is an “at-will” employment state. This means that, absent an employment agreement for a fixed duration, an employment relationship can be terminated by the employer at any time and for any or no reason, provided that the reason is not the result of discrimination or retaliation. An employer and employee may enter into an agreement that modifies the at-will relationship by, for example, allowing the termination of the employment only “for cause.”

Wrongful Termination

New York courts do not recognize a legal claim for “wrongful termination” of an at-will employee if the termination was simply unfair or misguided. An at-will employee must claim either that (i) the employer breached an express or implied contract of employment, or that (ii) the termination was the result of unlawful discrimination, retaliation, interference with a protected right (such as statutory medical leave), or another unlawful reason. This is surprising to many employees who could easily prove that their at-will termination was extremely unfair. However, unfairness by itself without a discriminatory or retaliatory reason, or other unlawful reason, does not constitute a “wrongful termination.” At the same time, however, the “at will” doctrine does not absolve employers from treating their employees fairly. Employees may seek legal help even if the “at will” termination was unfair but completely legal. The best practice for employers in terminating an “at will” employee is to document any performance issues – such as poor performance, repeated absenteeism, tardiness, or violation of company policies – consistently and well before the termination decision.

“For Cause” Termination

“For cause” provisions are generally in employment contracts which provide some benefit, such as severance pay, if the termination is not “for cause.” In other words, if the employer terminates the contract early for its own convenience instead of “for cause,” it would need to confer some benefit on the terminated employee. This could be a payout until the end of the contract, continued medical benefits, or severance pay. What constitutes a termination “for cause” is decided by the parties who enter into the employment agreement. Employers generally like to make these clauses broad to give them leeway to terminate an employee “for cause” in a variety of situations including repeated poor performance or underperformance. Employees generally like to make these clauses narrow to include only serious offenses such as:

1. Embezzlement, theft, or dishonesty;
2. Breach of employment contract;
3. Conviction of a crime;
4. Violation of sexual harassment or other company policies;
5. Code of conduct violation; or
6. Acts of moral turpitude which cast a negative light on the employer.

Since what constitutes “for cause” in any particular situation is a fact-sensitive inquiry, there is a risk that a dispute between the employee and the employer will arise if an employee is terminated “for cause” and thus denied their contracted-for benefits. Employers need to be very careful to document the reasons for the “for cause” termination. Many employees, especially highly compensated ones, may seek legal help if they feel their termination was not “for cause” but simply a way for their employer to avoid paying severance.

Developments in New York City

New York City recently passed legislation that upends the presumption of at-will employment for certain fast-food employees. The law prevents fast-food workers from being discharged except for just cause or a legitimate economic reason. The law defines just cause as “failure to satisfactorily perform job duties or misconduct that is demonstrably and materially harmful to the fast-food employer’s legitimate business interests” and includes factors to determine if the just cause requirement was satisfied.[1]

Furthermore, the law requires that before discharging an employee for just cause, the employer use progressive discipline based on such employer’s written policy provided to the employee. Employers must also provide terminated employees with a written explanation of the “precise reason for their discharge” within five days of such discharge.[2] Violations of this legislation can result in the city forcing the employer to reinstate a wrongfully discharged employee, monetary penalties, backpay, and “any other appropriate equitable relief.”[3]

It is vitally important that employers know the relationship they have with each of their employees. It is also crucial for employers to be guided by a legal team that specializes in employment law. At KI Legal, we have the knowledge and expertise to ensure that any business, regardless of its size and type, is within the bounds of the vast body of federal, state, and local law that governs employer-employee relationships. Operating outside those bounds, even if unintentional, can have disastrous effects on the operation of one’s business.

For help navigating labor and employment considerations, or to discuss your particular employment issue, contact KI Legal’s knowledgeable labor & employment attorneys by calling (212) 404-8644 or emailing info@kilegal.com.