Mayor Bill de Blasio recently signed a bill amending the New York City Displaced Building Service Workers Protection Act (“the Displaced Workers Act” or “the Act”), first enacted by the City Council in 2002. As originally adopted, the Act required one building service contractor taking over another contractor’s work to retain the prior contractor’s building service workers for a 90-day transition period, during which they could not be discharged without cause, and after which they had to be offered continued employment if their performance during the transition period was satisfactory.1 These requirements remain, but the new amendments significantly expand the Act’s coverage.

Amendments Summary

The amendments to the Act do the following:

  • The “building service” coverage now explicitly extends to security officers and fire safety directors, in addition to the categories that were already protected by the Act: watchmen, guards, doormen, building cleaners, porters, handymen, janitors, gardeners, groundskeepers, stationary firemen, elevator operators and starters, window cleaners, and superintendents.
  • To cover more workers, the salary cap for determining whether a worker is a “building service employee” has been increased from $25.00 per hour to $35.00 per hour and is now subject to adjustments for inflation.
  • The definition of “covered employer” has been expanded from owners, property managers and contractors to include commercial lessees or tenants that rent more than 35,000 square feet of space.
  • The exemption for buildings in which the city leases more than 50% of the space has been eliminated.
  • In addition to injunctive relief allowed under the original Act, the amended law now provides for remedies including reinstatement and back pay commencing from the date a worker is not properly retained during a transition period or discharged.

Enforceability and Preemption

The City’s Displaced Workers Act has been the subject of litigation under the National Labor Relations Act (NLRA). Under the NLRA , when a majority of the workforce hired by a new employer comes from the predecessor’s unionized workforce, that new employer becomes a “successor,” which triggers an obligation to bargain with the predecessor’s existing union.

In November 2012, the federal court for the Eastern District of New York held that an employer’s status as a “successor” could not be determined before the 90-day period called for by the Displaced Workers Act expired. Paulsen v. GVS Properties, LLC, 1:12-cv-04845 (E.D.N.Y. Nov. 13, 2012). In Paulsen, GVS purchased certain New York properties and, pursuant to the Displaced Workers Act, retained seven of the eight employees of the predecessor, all of whom were represented by a union. About three week later (and before the 90-day transition period had expired), the union demanded that GVS recognize and bargain with it. The company declined, because it was still in the midst of the 90-day transition period.

After the 90-day period expired, however, GVS continued to refuse the union’s bargaining demand because the four employees from the previous employer it hired did not constitute a majority of its workforce. The union filed an unfair labor practice charge, alleging that GVS was a successor under the NLRA and obligated to recognize and bargain with the union. In support of the charge, Region 29 of the NLRB filed an action seeking an injunction to require GVS to recognize and bargain with the union as a successor. The court held that GVS was not a successor, because its retention of the predecessor’s employees during the 90-day period was involuntary, and denied the NLRB’s request for a preliminary injunction.

In 2015, however, the NLRB considered a case with essentially the same facts. In that case, it found that an employer became a “successor” immediately, with a concomitant obligation to recognize and bargain with an incumbent union, when it was required to hire the employees of the predecessor employer for a “trial period as required by law,” even though doing so was involuntary. GVS Props., LLC, 362 NLRB No. 194 (Aug. 27, 2015).

The dissent in that case expressed concern that the majority’s opinion “could prove the death knell for local worker retention statutes.” The concern arises from the possibility that courts will find such statutes preempted by the NLRA, because by forcing purchasers to become successors, those statutes impermissibly intrude on successorship determinations that Congress intended to leave free from local regulation. The majority’s reaction: “We do not share that concern.” Whether the concern is well-founded remains to be seen.

In the meantime, New York City property owners, property managers and contractors, tenants that rent more than 35,000 square feet of space should familiarize themselves with the amended Displaced Workers Act, and consult with counsel if placed in a successorship position.