Executive Summary: On February 6, 2018, a New York federal judge rejected a challenge to a New York City law requiring fast-food businesses to, upon request of their employees, forward voluntary deductions from employee paychecks to nonprofits. The 2017 Deductions Law requires these businesses to create and maintain a payroll deduction system by which employees can donate a portion of their wages to certain nonprofits registered with the New York City Department of Consumer Affairs.
Restaurant industry groups mounted a challenge to the law in late 2017, arguing it violated the First Amendment and was preempted by federal labor law. In a 70-page opinion, Judge Paul G. Gardephe dismissed the challenge, granting summary judgment to the City.
In rejecting the groups' free speech component of their First Amendment challenge, in which the groups argued that the Deductions Law impermissibly compels speech, Judge Gardephe wrote that the fast-food employers merely serve as an intermediary for their employees' speech, holding that the employers "have no discretion as to the recipient of their employees' donations[.]" In short, the payroll deductions do not constitute compelled speech, and likewise, do not interfere with employers' ability to communicate their own messages to organizations of their choice.
The court also dismissed the groups' free association component of their First Amendment challenge. The groups argued that the law impermissibly forced employers to associate with nonprofits. The court's response was that the requirement of setting up a payroll deduction system does not implicate constitutionally protected speech. While fast-food businesses may not agree with certain nonprofit recipients' messages, the law did not interfere with messages those employers wish to separately promote.
Turning to the preemption argument, the court addressed both the National Labor Relations Act (NLRA) and the Labor Management Relations Act (LMRA). The groups argued, among other things, that the law impermissibly delegated to the Department of Consumer Affairs the responsibility of determining what is a labor organization in violation of the NLRA. The court held that the law explicitly incorporates the federal definition of "labor organization" and the NLRB's interpretation of that term. The court rejected the groups' preemption argument under the LMRA for the same reason.
Employers' Bottom Line: Unless the decision is overturned by the Second Circuit, fast-food businesses in New York City must structure their payroll systems to allow employees to donate to approved nonprofits. Employee requests to donate must be honored so long as the nonprofits are on the Department of Consumer Affairs' approved list. Since donations involve wage deductions, the employer must ensure that the pay statements issued to employees comply with Labor Law § 195 and that deductions of this nature are reflected on the affected employees' pay statements. Employers must train their management-level employees to refrain from making representations or taking actions that may be construed as inhibiting employees from exercising their rights to organize or engage in protected concerted activity, or discriminating against employees who request these deductions.
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