What Employers Should Know About New York City’s New Hotel Severance Pay Law

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What Employers Should Know About New York City’s New Hotel Severance Pay Law

Hotels in New York City with 100 or more rooms are required to pay each laid-off employee severance pay of $500 per week for up to thirty weeks if the hotel has had a mass layoff for a period of 30 days involving 75% or more of their workers that were employed as of March 1, or the hotel was shut down on March 1, 2020, or later and has not recalled 25% or more of its employees that were employed on March 1, 2020, or reopened as of November 1, 2020, for the public.

Unfortunately, the city has not yet given any guidelines on how this law should be interpreted or enforced. However, there are certain events that obligate a hotel to pay the severance pay, such as a mass layoff or shutdown that:

  • Closed the hotel down on or after March 1, 2020
  • In which 25% or more of workers employed as of March 1, 2020 were not recalled as of October 11, 2021
  • Hotel has not reopened by November 1, 2021.

If one of these events does occur, the hotel is required to pay $500 per week for a maximum of thirty weeks to covered hotel service employees who:

  • Do work that contributes to operating the hotel
  • Have been working for the hotel for a year or more by March 1, 2020
  • Were laid off sometime after March 1, 2020, as a result of a mass layoff or closure

There are certain hotel employees that are specifically excluded from this new severance pay law, including confidential, managerial, or supervisory employees, as well as any employee who has participated in the management of the hotel.

Those employees that are covered by the severance pay no longer need to be paid this severance pay once the hotel reopens and has recalled 25% or more of the workers that were employed as of March 1, 2020.  

It is not as clear who is included in hotel service employees as it is who is not. Therefore, it may be necessary to include all employees when determining whether or not you have recalled at least 25% of employees.

There are a few requirements in this law that are not clear, such as when supervisory, confidential, or managerial employees are excluded. It is also not clear whether or not the employees of any concessionaires or vendors will need to be paid severance pay. Also, it never explains what should be done if an employee quits or chooses not to come back to work when recalled.

Hotels must pay eligible employees their severance pay within fives days of the end of each week for which they are qualified. There is a considerable penalty for not following this law. There is a private right of action, and the employee can receive double damages as well as attorney’s fees and costs.

If a hotel is closed or has been converted or is being converted into another type of facility, it is exempt from this law if the hotel provides covered hotel service employees with 20 days of severance pay for each year they worked for the hotel, and the severance pay is a direct result of the conversion. The severance pay must be given at the same rate the hotel service employee receives for paid days off.

The Hotel Association of New York City has filed a lawsuit challenging this law’s validity, but this does not inherently stop the law from taking effect. This means that unless the court chooses to take any action against it, such as an injunction, the law will still become effective and require severance pay beginning November 1, 2021.