In a decision of great import to the New York City hospitality industry, a federal court has held that a New York City statute mandating payment of severance benefits to certain covered hotel service employees was not preempted by ERISA. RHC Operating, LLC v. City of New York, 1:21-cv-09322-JPO (S.D.N.Y. Mar. 30, 2022).
Like other major centers of tourism, the hotel industry in New York City was decimated by the COVID-19 pandemic, resulting in many closed hotels and thousands of laid-off workers. To date, some 60% of New York City hotel workers remain unemployed.
In response to the pandemic, the federal government’s Coronavirus Aid, Relief and Economic Security Act (CARES Act ), provided funding for enhanced and extended unemployment benefits until September 2021.
Shortly after the federally subsidized unemployment benefits ended, New York City’s Severance Law (codified as Int. No. 2397-2021) was enacted on October 9, 2021. Under the law, hotels with at least 100 rooms must pay weekly severance of $500 per employee per week to laid-off employees for up to 30 weeks if the hotel either (1) experienced a mass layoff of 75% or more of their workforce employed as of March 1, 2020, during any 30 day period or (2) closed to the public on or after March 1, 2020, and have not yet (a) as of October 11, 2021, recalled 25% or more of its employees employed as of March 1, 2020, and (b) reopened to the public by November 1, 2021.
The obligation to pay severance ceases at the...
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