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).

Background

When it’s time for tax-exempt organizations such as colleges/universities, museums, and hospital systems to part ways with their senior executives, these institutions are most often considering how to best transition these executives off into the sunset rather than a morass of special tax rules (I will mention Internal Revenue Code citations just once for reference)

It always has been difficult to give a consistent answer as to whether informal severance arrangements have created an ERISA-covered severance plan. In Mance v. Quest Diagnostics Inc., 2017 WL 684711 (DC NJ 2017), the U.S. District Court held that Quest’s decision to provide some departing employees with severance benefits under a voluntary