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May112022

Navigating the New York City Severance Law in Difficult Times

Jack Pulvirenti, CPA

5.11.22 | Industry Insights

The Hotel Association of New York City’s recent efforts to strike down the hotel severance law were denied by a federal judge.1 The severance legislation, signed into law last October by former Mayor Bill de Blasio, came at a time when the New York City hotel industry was reeling from the sweep of COVID-19. Since that time, circumstances have only improved marginally. It is important to understand the nature and requirements of this law.

Key Provisions of the Severance Law

The pandemic-prompted legislation requires hotels that had at least 100 rooms on March 1, 2020, to pay their covered hotel service employees severance of $500 per week for up to 30 weeks (up to a total of $15,000) if the hotel was closed to the public on or after March 1, 2020, and did not reopen as of November 1, 2021. In addition, the hotel would be subject to the severance obligation if it experienced a mass layoff of at least 75% of its employees on or after March 1, 2020, and did not recall 25% or more by October 11, 2021.

Covered hotel service employees are defined as those who were:

  • Employed for at least one year by the hotel on March 1, 2020
  • Employed to provide work in connection with the operation of the hotel
  • Laid off after March 1, 2020, due to a closure or a mass layoff

Expressly excluded from this definition are managerial, supervisory, and confidential employees as well as anyone who exercises control over the management of the hotel.

Any severance pay provided under this law is in addition to any severance or other pay already paid or owed to the employee.

To put some teeth into the law, there is a right of action component for employees to enforce their right to severance pay. The employees may be able to seek double damages and demand payment for attorneys’ costs and associated fees.

The hotel’s obligation to provide this severance ends when an employee is recalled to work for the hotel or when the hotel reopens and recalls at least 25% of its employees.

The law will expire and be deemed repealed as of June 1, 2022.

Exemptions for Closed or Converted Hotels

The COVID-19 crisis forced many NYC hotels to shut down or seek some way to reconfigure themselves. If the hotel has closed permanently or has or is in the process of converting to an alternative use, it is exempted from the severance pay provision. The exemption holds provided that the hotel offered employees severance of 20 days’ pay per year of service, and the severance is tied specifically to the conversion.

If you have questions about navigating the Severance Law, contact Jack Pulvirenti at 212.331.7514 | jpulvirenti@berdonllp.com or your Berdon advisor.

Berdon LLP New York Accountants

1https://www.natlawreview.com/article/district-court-upholds-new-york-city-hotel-severance-law#:~:text=In%20a%20decision%20of%20great,was%20not%20preempted%20by%20ERISA.

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