A recent decision by an appeals court in New York involving an Illinois-based moving company could have a widespread impact on companies that have out-of-state contracts with franchisees or affiliates. The decision essentially stated that out-of-state companies cannot impose their workplace policies on their affiliates in New York if those policies are counter to state law.

The decision comes after a lawsuit stemming from a contract between two companies, one a nationwide moving company headquartered in Oakbrook Terrace in suburban Chicago and the other its New York-based affiliate.

The action centered on Astro, a New York moving company which at one point employed two people who had previously been convicted of sexual offenses against children.

Astro entered a contract to act as an affiliate of Allied Van Lines.  That contract included a provision requiring Astro to abide by Allied hiring bylaws. As part of Allied workplace regulations, anyone with a prior sexual offense fails a screening and cannot work with the company. The two employees failed the screening and were fired by Astro.

The fired workers then filed suit, claiming Astro and Allied had violated their rights under New York human rights laws, which forbid job terminations based on criminal history background checks. Astro and Allied argued those laws should not apply in this case, however, as the background check provision was legal in Illinois, where Allied was based.

Richard Finkel, an attorney with Bond, Schoeneck & King in New York, explained the  case eventually involved the state appeals court needing to decipher how and when to New York human rights laws.

Following a trial, the case was appealed to the U.S. Second Circuit Court of Appeals, which sits in New York.

That court, however, deferred the question to the New York Court of Appeals, which issued a decision stating that out-of-state companies had to adhere to New York human rights law if they or an affiliate employ workers in New York.

“It is not about doing business in New York; it is about imposing your policies on a New York business,” Finkel said. “So, if you contract with a New York company and let the New York company run with it and operate that business as they see fit, then you shouldn’t have a problem. But if you impose requirements or your out-of-state policies on a New York company, and those policies are lawful where you are but not lawful for New York, then you had better think twice about it.”

Finkel said the decision was one about which out-of-state companies should be aware if they plan to work with or through New York entities - and particularly if they expect those New York employers to abide by their policies

"If you are going to have a policy like that, you have to make sure it meets New York standards,” Finkel said.

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