Restaurant Industry Groups Lose Bid to Overturn New York’s Payroll Deductions Law

Restaurant owners in New York City have recently been grappling with New York’s payroll deductions law, which requires fast food employers to implement a procedure for employees to donate a portion of their wages to non-profits.

Two prominent restaurant industry groups—the National Restaurant Association (a foodservice trade association) and the Restaurant Law Center (its legal arm)—brought a lawsuit to challenge the law, entitled Restaurant Law Center v. City of New York, et al., 17-cv-09128, arguing that the Deductions Law was unconstitutional because it forced owners to:  (i) engage in “speech” by making donations on employees’ behalf;  (ii) “host” or “accommodate” the messages of their employees; and (iii) “associate” with non-profits.

On February 6, 2019, Judge Paul Gardephe of the U.S. District Court for the Southern District of New Yorkissued a 70-page decision (the “Decision”) rejecting the National Restaurant Association’s constitutional challenges.  Judge Gardephe’s thorough Decision provides valuable guidance for restaurants regarding the boundaries of the Deductions Law.

The Deductions Law

The “Deductions Law,” which is codified at N.Y. Admin. Code § 20-1301, and which became effective on November 26, 2017, “requires certain fast food establishments in New York City to create and maintain a payroll deduction system by which employees can donate a portion of their wages to certain non-profit organizationsregistered with the New York City Department of Consumer Affairs.”  Labor organizations are not eligible to receive donations pursuant to the Deductions Law.

Penalties for Violations

Where an employer violates the Deductions Law, the employer may be liable for deductions and remittances plus interest, and civil penalties of up to $1000 per violation.  N.Y.C. Admin. Code § 20-1307(b)(2)(b).  In addition, where an employer has retaliated against an employee seeking to exercise rights under the Deductions Law, the employee may be entitled to reinstatement and back pay.  Id. § 1307(b)(2)(a)-(c).

The National Restaurant Association’s Arguments and the Court’s Analysis

In deciding the case, Judge Gardephe analyzed three main arguments regarding whether the Deductions Law violated employers’ First Amendment rights.

First, the Court addressed whether the Deductions Law forced the employers to engage in “speech” by making donations on employees’ behalf.  Judge Gardephe found that the National Restaurant Association’s argument was too broad because “[u]nder the First Amendment, an entity’s mere transmission of others’ speech does not necessarily constitute speech of that entity.”  (Decision p. 19).  The Court noted that, “[u]nder the Deductions Law, although fast food employers serve as an intermediary for their employees’ speech by administering a payroll deduction scheme, they have no discretion as to the recipient of their employees’ donations – they merely follow their employees’ instructions.  Given these circumstances, the employers’ mere act of sending a check to an employee’s designated non-profit recipient is not speech.” (Decision p. 21).  

Second, Judge Gardephe analyzed the plaintiffs’ argument that the Deductions Law forces fast food employers to “host” or “accommodate” the messages of their employees.  He rejected this argument because the Deductions Law does not prevent fast food employers from donating to any causes they support, or voicing disagreement with organizations supported by their employees.  Instead, the Deductions Law only requires employers to “perform the ‘ministerial act’ of administering payroll deductions.”  (Decision p. 25).  Therefore, the Court held, the Deductions Law does not affect food employers’ ability to communicate their own message.  (Decision p. 23).

Third, Judge Gardephe considered the National Restaurant Association’s argument that the Deductions Law compelled fast food employers to “associate” with non-profits, because donations would appear in the financial records of the employers, the banks used to transmit donations, and in certain publicly-filed disclosures.  Judge Gardephe found that there was no evidence suggesting that the financial disclosures would lead others to believe that the restaurants were associating themselves with the non-profits designated by their employees, or that employers would be perceived as expressing a message of support for these non-profits.  (Decision p. 27).

Based upon his analysis, Judge Gardephe rejected the National Restaurant Association’s constitutional challenges to the Deductions Law.


New York’s Deductions Law (and laws like it in other jurisdictions) outs the onus on restaurant owners and managers to facilitate their employees’ non-profit donations.  Although many restaurant owners have questioned the wisdom and validity of the law, Judge Gardephe’s Decision confirms that the law is constitutional. Therefore, restaurant owners and managers should work with experienced counsel to make sure that they properly implement the Deductions Law.