Supreme Court, New York County

Decided on May 26, 2026

Index No. 655526/2024

Arlene P. Bluth, J.

[*1]

The following e-filed documents, listed by NYSCEF document number (Motion 001) 20, 21, 22, 23, 24, 25, 33, 45, 49, 57, 62, 80 were read on this motion to/for DISMISS.

The following e-filed documents, listed by NYSCEF document number (Motion 002) 28, 29, 30, 31, 32, 34, 44, 46, 50, 59, 60, 63, 81 were read on this motion to/for DISMISS.

The following e-filed documents, listed by NYSCEF document number (Motion 003) 35, 36, 37, 38, 47, 51, 64, 82 were read on this motion to/for DISMISS.

The following e-filed documents, listed by NYSCEF document number (Motion 004) 52, 53, 54, 55, 56, 58, 61, 83 were read on this motion to/for LEAVE TO FILE.

Motion Sequence Numbers 001 through 004 are consolidated for disposition. Defendants' motions to dismiss (filed under MS001, 002 and 003) are denied. Non-party City of New York's motion (MS004) to intervene is granted without opposition.

Background

This putative class action concerns hotel service workers who contend that defendants violated §22-510 of the New York City Administrative Code, commonly referred to as the Displaced Hotel Service Workers Act ("the Act"). They claim that defendants failed to comply [*2]with the Act's requirements that they be offered temporary employment at the Embassy Suites in Times Square following a change in the cleaning contractor. Plaintiffs observe that the Act required that they be retained at their former wage rate or higher for at least 90 days after the aforementioned change and instead they were simply terminated from their employment. Plaintiffs contend that defendant Superior Cleaning Services LLC ("Superior") employed them at the hotel before the hotel changed the housekeeping services contractor to New York Super Clean Service Inc. ("Super Clean").

Plaintiffs bring two causes of action. The first cause of action is for failure to provide information as required under the Act. The second cause of action is asserted against NY 37th ES LLC ("37th"), Two Rivers Operating Tenant LLC ("Two Rivers"), and Super Clean for failure to offer continued employment as required under the Act.

The Act

The Displaced Hotel Service Workers Act, codified at § 22-510 of the New York City Administrative Code, provides temporary job security to certain hotel workers after certain changes, including a change in their employer. The key provision at issue in this case states that:

"A successor hotel employer shall, during the hotel service employee retention period, offer each eligible hotel service employee employment for no less than 90 days under the terms and conditions established by the successor hotel employer, or as required by law, except that the wage rate offered and paid for such period shall be the same as or higher than the wage rate last paid to such employee by the former hotel employer, or as required by law. Such offers shall be made in writing and shall remain open for at least 10 business days from the date of such offer" (Administrative Code of City of NY § 22-510[b][2]).

Employees can still be fired during this 90-day period, but such termination must be for cause (id. § [b][3]). After the 90-day period, layoffs are permitted as long as the employer retains employees by seniority and experience within each job classification, if one applies (id. [b][4). Critically, and as will be discussed below, this law does not apply to "any successor hotel employer who, on or before the change of control or change in controlling interest or identity, agrees to assume, or to be bound by, the collective bargaining agreement of the former hotel employer, provided that such collective bargaining agreement provides terms and conditions for the discharge or laying off of employees" (id. § [d][1]). In other words, the practical effect of this law is that workers belonging to a union with a collective bargaining agreement ("CBA") that contains provisions about layoffs are not bound by this statute.

Federal Preemption

All defendants contend that the Act is preempted by federal law and, specifically, the National Labor Relations Act ("NLRA").

"The Supremacy Clause, in article VI of the Constitution, may entail pre-emption of state law either by express provision, by implication, or by a conflict between federal and state law. It is never assumed lightly that Congress has derogated state regulation, but instead courts have addressed claims of pre-emption with the starting presumption that Congress does not intend to supplant state law" (Balbuena v IDR Realty LLC, 6 NY3d 338, 356, 812 NYS2d 416 [2006] [internal quotations and citations omitted]).

"Several distinct preemption doctrines have evolved under the Supremacy Clause. Express preemption applies where Congress explicitly declares that a federal law is intended to [*3]supersede state law" (id.). Implied preemption is comprised of field preemption (where federal law completely occupies a particular topic area) and conflict preemption where there is a clear conflict with federal law (id.).

Defendants contend that the instant preemption is conflict preemption and, specifically, that it falls under a doctrine called the Machinists preemption (named after a U.S. Supreme Court case) "which applies to conduct the NLRA left unregulated" (Helmsley-Spear, Inc. v Fishman, 11 NY3d 470, 477, 872 NYS2d 383 [2008] [internal quotations and citations omitted]). They claim that because the Act violates the equal treatment principle—in that workers subject to CBAs are not bound by these rules—it is preempted under applicable precedent.

Defendants rely heavily on a United States Supreme Court case, Livadas v. Bradshaw (512 US 107 [1994]) for the proposition that this statute is preempted by the NLRA. This Court finds that case to be wholly inapposite. Livadas dealt with the California Commissioner of Labor's interpretation of a state statute as barring him from enforcing a law requiring prompt payment of wages upon an employee's discharge where the employee was covered by a CBA with an arbitration clause. The Court held that "A state rule predicating benefits on refraining from conduct protected by federal labor law poses special dangers of interference with congressional purpose" (id. at 116).

To be sure, employees covered here by a CBA that has layoff provisions are not bound by the Act. But that does not compel the Court to grant the motions. The Court views the Act at issue here to be minimum benefits provided to all workers and that it does not compel the conclusion that preemption applies. As the Third Circuit concluded while analyzing other relevant Supreme Court precedent "Metropolitan Life and Fort Halifax clearly stand for the proposition that, in enacting the NLRA, Congress did not intend to prevent states from establishing minimum substantive requirements for contract terms" (St. Thomas--St. John Hotel & Tourism Assn., Inc. v Govt. of U.S. Virgin Is., 218 F3d 232, 243 [3d Cir 2000] [upholding a statute prescribing permissible bases for discharge of employees]). In this case, the Third Circuit also rejected the notion of impermissible and unequal treatment between union and non-union employees by noting that the statute protected all employees and "gives employees the option of relinquishing the territorial statutory protections through the terms of a collective-bargaining agreement" (id. at 245).

That is how this Court views the Act in dispute here. It protects all employees and permits those subject to a CBA to obtain more benefits; employees are not forced to choose between a CBA and the protections of state law like the plaintiff in Livadas. Other types of minimum labor standards have been upheld (see Concerned Home Care Providers, Inc. v. Cuomo, 783 F.3d 77, 85 [2d Cir. 2015] [finding that a law fixing minimum compensation rates for home healthcare aides was not preempted by the NLRA]; Rest. Law Ctr. v City of New York, 585 F Supp 3d 366, 377 [SD NY 2022], affd, 90 F4th 101 [2d Cir 2024] [holding that a wrongful discharge law that provided protections for fast food workers was not preempted by the NLRA]).

And, critically, the Court observes that the First Circuit found that a very similar type of statute was not preempted by federal law under the Machinists doctrine (Rhode Is. Hosp. Assn. v City of Providence ex rel. Lombardi, 667 F3d 17, 26 [1st Cir 2011]). In that case, cited by the City in its proposed brief attached to its motion to intervene, the First Circuit upheld a statute that required an employer at a "hospitality business" to retain employees for three months subject to certain limited conditions, such as firing an employe for "good cause" (id. at 23-24). [*4]This Court sees no reason to depart form the preemption analysis contained therein, in which the First Circuit stressed the restrictions in the relevant ordinance were "limited" (id. at 35).

The Contracts Clause

"Not all laws affecting pre-existing contracts violate the Clause. To determine when such a law crosses the constitutional line, this Court has long applied a two-step test. The threshold issue is whether the state law has operated as a substantial impairment of a contractual relationship. In answering that question, the Court has considered the extent to which the law undermines the contractual bargain, interferes with a party's reasonable expectations, and prevents the party from safeguarding or reinstating his rights. If such factors show a substantial impairment, the inquiry turns to the means and ends of the legislation. In particular, the Court has asked whether the state law is drawn in an appropriate and reasonable way to advance a significant and legitimate public purpose" (Sveen v Melin, 584 US 811, 819 [2018] [internal quotations and citations omitted]).

Defendants argue that the Act significantly alters their pre-existing contracts with the subject employees. Plaintiffs and the City argue that defendants have not even identified a contract, as the employees are at will. The City further argues that any Contracts Clause defense is entirely inapplicable to contracts formed after the effective date of the Displaced Workers Act in September 2020 and point to Moore v. Metro. Life Ins. Co., (33 NY2d 304, 311 [1973]) which held that the prospective application of a statute to contracts that are "written, renewed, modified, or altered" after the effective date does not violate the Contracts Clause.

Defendants contend that the requirements of the Act do not simply continue or renew the terms of existing contracts. They argue that the Act abrogates the at will termination by either party on a one-sided basis, that it thwarts the parties' intent, and that no important public interest justifies the impairment.

Defendants simply did not point to an agreement that was substantially impaired by the Act. They are entitled to discharge employees for cause during the first ninety days and, following the retention period, they can lay off employees, trim their workforce and even restructure the compensation packages for retained employees.

And even if this constituted a substantial impairment, the City has a legitimate interest in barring immediate mass layoffs. Workers get 90 days to either prove themselves at their job (assuming the new management is going to keep employees) or to find another job. And those most junior workers likely know that if there is downsizing, then they will have to find new jobs. That is a limited involvement that does not come close to violating the Contracts Clause.

Physical Taking

Defendants argue that the Act constitutes a physical taking in that it allows the workers to invade the hotel's property and infringes on the hotel's right to exclude.

"The right to exclude is universally held to be a fundamental element of the property right" and a violation of this right can implicate the Takings Clause of the U.S. Constitution (Cedar Point Nursery v Hassid, 594 US 139, 139 [2021]).

However, "... where the government merely regulates the use of property, compensation is required only if considerations such as the purpose of the regulation or the extent to which it deprives the owner of the economic use of the property suggest that the regulation has unfairly singled out the property owner to bear a burden that should be borne by the public as a whole" (Yee v City of Escondido, 503 US 519, 522 [1992]).

In a similar Takings Clause challenge to a local landlord-tenant law, the Supreme Court ruled that an ordinance did not amount to a physical taking where it deprived the landlords of their ability to choose their incoming tenants (id. at 530-531). There, the Supreme Court ruled that where trailer park owners voluntarily opened their property to occupation by others, a regulation — even one that deprived the landowners of the choice of a permanent tenant by limiting the bases upon which a park owner could terminate a mobile home owner's tenancy — did not constitute a per se taking based on the inability to exclude particular individuals (id.). The City notes that the Act at issue here presents an even weaker case for a Takings Clause challenge. The Act does not require that the employees be kept on a permanent basis. Instead, it requires continued employment for ninety days and authorizes layoffs if a reduction in staff is warranted or the employee is not satisfactory.

The Court finds that the Act is not a taking under the Takings Clause. Requiring a hotel to allow employees who already work there to remain on the job for ninety days is not a "physical invasion" as defendants claim.

State Law Preemption

"Preemption applies both in cases of express conflict between local and State law and in cases where the State has evidenced its intent to occupy the field" (Albany Area Bldrs. Assn. v Guilderland, 74 NY2d 372, 377 [1989]).

"It is a familiar principle that the lawmaking authority of a municipal corporation, which is a political subdivision of the State, can be exercised only to the extent it has been delegated by the State. While the Legislature has retained authority in matters of State concern, it has empowered municipalities to legislate in a wide range of matters relating to local concern. So long as local legislation is not inconsistent with the State Constitution or any general law, localities may adopt local laws both with respect to their property, affairs or government and with respect to other enumerated subjects, except to the extent that the legislature shall restrict the adoption of such a local law (Albany Area Bldrs. Assn. v Guilderland, 74 NY2d 372, 376 [1989] [internal quotations and citations omitted]).

Defendants argue that the Act is preempted as it infringes on fields fully occupied by the State's Labor Code — specifically in the areas of minimum-wage and collective bargaining.

The Act itself does not set a minimum wage. Instead, it requires employees to be compensated at their previous wage for a 90-day retention period and then "[i]f such employee's performance during such retention period is satisfactory, the successor hotel employer shall offer such employee continued employment under the terms and conditions established by the successor hotel employer" (Administrative Code of City of NY § 22-510[b][6]). The successor hotel employer is therefore only temporarily bound to pay a certain wage to the employees. The Act therefore, on its face, does not seek to regulate or supplant the State's minimum wage laws.

Similarly, the Act does not seek to regulate collective bargaining. As discussed above, the Act constitutes a minimum labor standard that neither encourages nor discourages collective bargaining and does not interfere with the collective bargaining process.

Plaintiffs Have Stated a Claim as to All Defendants

Defendants contend that the precise allegations in this instant complaint do not evince a violation of the Act. They claim that the owner and operator of the hotel, 37th and Two Rivers, has remained constant. Defendants argue that a change in the hotel cleaning contractor is not a [*5]basis for relief under the Act. This Court disagrees.

Under the Act, the definition of "change in controlling interest," the trigger for the provisions of the statute, includes a "hotel employer" (Administrative Code of City of NY § 22-510[a]). A "hotel employer" is defined as "any person who owns, controls or operates a hotel, and includes any person or contractor who, in a managerial, supervisory or confidential capacity, employs one or more hotel service employees" (id.).

The broad definition discussed above clearly implicates the factual scenario alleged by plaintiffs and the Court denies this branch of defendants' motion. A hotel employer can include any contractor who employs hotel service employees. That includes the two cleaning contractors and there is no dispute that the contractor changed. There is no basis to limit the application of the Act to only hotel ownership changes.

Class Action Allegations

Defendants allege that plaintiffs' class action allegations should be stricken and are legally deficient on their face. Plaintiffs allege there are about thirty members of the putative class, and defendants argue that this fails to demonstrate numerosity to the extent that joinder of all members is impracticable. Defendants also contend that plaintiffs fail to show commonality of the claims. Defendants contend that plaintiff was deficient in only alleging that the common claims arise from defendants' alleged breach of the Act, namely the failure to provide notice with a list of the names, addresses, dates of hire, and employment classifications of each of the formerly employed service workers.

The Court denies this branch of the motion as it is both premature and without merit. At this stage of the case, prior to any motion for class certification, there is no basis to preemptively strike plaintiff's class allegations. In other words, the allegations are not so facially defective that this Court must bar a class action at this early stage of the case.

Intervention

Although defendants uploaded documents constituting "opposition" to the City's motion to intervene, that opposition was based on the merits of the case and not on the precise issue of intervention. Defendants did not object at oral argument and their papers explicitly state that the intervention part of the City's motion is acceptable (NYSCEF Doc. No. 58 at 5). And while the Court permits intervention to the extent requested by the City—to offer arguments as to the constitutionality of the statute—the Court does not permit intervention as a party as (at least on this record) the City is not a proper plaintiff or defendant here. The City may monitor this case and request at any time, if it wishes, to offer briefing on future motions.

Accordingly, it is hereby

ORDERED defendants' motions (MS001, 002, 003) to dismiss are denied and defendants shall answer the complaint pursuant to the CPLR.

ORDERED the City's motion (MS004) to intervene in order to defend the constitutionality of the applicable law is granted.

The Court schedules a conference to take place on this matter on August 10, 2026 at 10 a.m.

One week before the conference, on August 3, 2026, the parties must upload a joint discovery stipulation to NYSCEF. If the parties are unable to agree on a joint stipulation, they shall write individual letters highlighting the areas of agreement and disagreement and upload the letters to NYSCEF on or before August 3, 2026. If a reasonable stipulation is submitted, the Court will so [*6]order it and adjourn the conference. If the letters show that the parties have a discovery dispute, the Court will either issue an order that resolves the dispute or call the parties in for the conference. If no stipulation or letters are uploaded on or before August 3, 2026, the parties are expected to appear for the conference in person, and failure by any party to appear may result in the Court striking that party's pleadings.

DATE 5/26/2026