Procedures to be followed in the event a public entity takes-over of a private enterprise

Procedures to be followed in the event a public entity takes-over of a private enterprise
Auguste v NYC Health and Hospitals Corp., 271 AD2d 215 [Appeals on Constitutional grounds dismissed, 95 NY2d 930, motion for leave to appeal denied, 96 NY2d 704]

Section 45 of the Civil Service Law sets out the rights of the employees of a private sector employer in the event the State or a municipality takes over the private entity. However, sometime special legislation addressing a specific takeover situation is adopted. Section 7390 of the Unconsolidated Law is an example of such special legislation.

Section 7390 was enacted in the early 1970s in response to the New York City Health and Hospital Corporation’s [HHC] decision to take over many of the functions then being performed by a number of voluntary hospitals. This change was expected to have an impact on several thousand workers. In particular, Section 7390(2) gave civil service status to the employees affected by HHC’s reorganization changes under certain conditions.

The Appellate Division in deciding the Auguste case ruled the provisions of Section 7390(2) applied in a takeover situation that occurred some 30 years after the statute was enacted.

Gislaine Auguste, a Senior Medical Laboratory Technologist at Lincoln Hospital, was an employee of New York Medical College [NYMC]. NYMC provided Lincoln with pathology services under an affiliate agreement with HHC. When HHC decided not to renew its affiliation agreement with NYMC in 1997, Auguste found herself without a job.

Arguing that her position at Lincoln was transferred rather than abolished, Auguste sued. Her theory: she had a statutory right under Section 7390(2) to continued employment based on her seniority and her status with NYMC and other affiliate employers. The Appellate Division agreed and directed HHC to reinstate her with back salary.*

Auguste’s basic argument: The 13 new positions were civil service positions with duties similar to those of her former position with NYMC and she had civil service status without having to qualify by examination pursuant to Section 7390(2).

Auguste, who had 32 years of service to her credit at the time she was terminated, apparently was employed by an HHC affiliate when Section 7390 was enacted. Although she was not affected by the administrative changes HHC actually made during the 1970s, this employment presumably gave her a vested right to the benefits granted employees of HHC affiliates by Section 7390 so long as she continued in uninterrupted service with HHC affiliates.

The Appellate Division specifically rejected HHC’s contention that Section 7390 was intended to apply only to the staffing changes resulting from its 1970s reorganization plan.

Citing Butler v New York City Health and Hospitals Corp., 82 AD2d 136, the Appellate Division held Section 7390:

1. Gave civil service status to former employees of a voluntary hospital whose functions were transferred to an HHC affiliate; and

2. Specifically provides that employees of voluntary hospitals providing services that are assumed by HHC shall be transferred to HHC.

The bottom line: the court said that Section 7390, although enacted to address situations arising in the 1970s, was not limited to that specific period but operates to continue affected employees in their employment in similar or corresponding positions as HHC employees, including individuals affected by the non-renewal of the HHC-NYMC affiliation agreement in 1997.

Accordingly, Auguste continued to be protected by Section 7390 when her employment by an HHC affiliate was discontinued through no fault of her own some 30 years later.

* Eleven former Lincoln/NYMC pathology department employees, together with two new employees, were appointed to new HHC positions of Associate Laboratory Microbiologist.
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