Introduction
Upcoming changes
Comment
New York employers should brace for the significant expansion of the whistle-blower protections set out in section 740 of the New York Labor Law (S.4394A/A.5144A), which was signed into law in October 2021 by Governor Kathy Hochul.
These sweeping changes should prompt businesses to review and/or revise their whistle-blower policies and train supervisors on what to do when an employee makes a complaint that improper activity has occurred or is taking place, before the law takes effect on 26 January 2022.
Until now, New York's whistle-blower employment protections in section 740 were limited to actual violations of a law, rule or regulation that resulted in a specific, substantial danger to public health or safety or constituted healthcare fraud. As of 26 January 2022, section 740 will expand greatly in both its scope and application. The new law will now be substantially similar to the broad protections afforded to employees under New Jersey's Conscientious Employee Protection Act (CEPA), which is generally considered one of the nation's most expansive whistle-blower protection laws.
Once these amendments to section 740 are effective, New York whistleblower protection will encompass not only employees who report violations of a law, rule or regulation, but also employees who report, object to, refuse to participate in, disclose or participate in an investigation into an employer's activity, policy or practice that the individual reasonably believes is a violation of a law, rule or regulation. Specifically, the amendments expand section 740 to state that an employer cannot retaliate against an employee for:
- disclosing or threatening to disclose to a supervisor or public body an activity, policy or practice of the employer that the employee reasonably believes is in violation of a law, rule or regulation, or that the employee reasonably believes poses a substantial and specific danger to public health or safety (an "improper activity");
- providing information to, testifying before or participating in an investigation of a public body regarding any improper activity by the employer; and
- objecting to or refusing to participate in any improper activity.
Where an employee's claim necessitates disclosure to a public body, section 740 requires that the employee first make a good faith effort to notify the employer. However, there are five enumerated exceptions to this notice requirement:
- there is an imminent and serious danger to the public health or safety;
- the employee reasonably believes that reporting the improper activity to the supervisor would result in a destruction of evidence or other concealment of the activity;
- the improper activity could reasonably be expected to lead to endangering the welfare of a minor;
- the employee reasonably believes that reporting to the supervisor would result in physical harm to the employee or another; or
- the employee reasonably believes that the supervisor is already aware of the improper activity and will not correct it.
In addition to expanding the scope of what constitutes whistle-blowing activity, the legislation expands section 740 to include:
- an expanded definition of "employee" to include not only employees, but also former employees and natural persons employed as independent contractors;
- a broader definition of "law, rule or regulation" to include not only federal, state or local statutes or ordinances and the rules or regulations promulgated therefrom, but also executive orders and their resultant regulations and "any judicial or administrative decision, ruling or order";
- a far-reaching definition of "retaliatory action" that encompasses:
- adverse employment actions or threats of adverse employment actions (such as demotion, suspension or termination of employment);
- actions or threats to negatively effect a former employee's current or future employment; or
- threatening to report the immigration or suspected citizenship of an employee or employee's family to authorities;
- a lengthened statute of limitations from one to two years;
- additional available relief in the form of a civil penalty and punitive damages;
- the right to a jury trial; and
- an additional posting requirement that obliges every employer to post a notice of the rights and obligations under section 740 in a conspicuous location.
The available relief under the amended section 740 remains largely the same as before, whereby a successful whistle-blower may be granted:
- an injunction to stop an employer's continued violation;
- reinstatement as an employee or front pay in lieu of reinstatement;
- reinstatement of fringe benefits and seniority;
- compensation for lost wages and benefits; and
- payment of costs, disbursements and attorney's fees.
However, the revisions to section 740 add the potential for a civil penalty of up to $10,000 and punitive damages for a wilful, malicious or wanton violation. Nevertheless, if an employee brings a claim without basis in law or fact (ie, the claim is frivolous), the court may grant the employer its reasonable attorneys' fees, costs and disbursements.
Because of the amendments to section 740, New York employers should prepare to see an increase in whistle-blower actions, with new and unique claims asserted by employees. In New Jersey, CEPA cases comprise a significant number of case filings each year; New Yorkers should expect the same. It is likely that some of the case law that has developed in New Jersey on issues that have arisen under the statute, such as what constitutes a "reasonable belief" and whether alleged whistle-blowing conduct implicates a law, rule or regulation or mere disagreement with an internal operating procedure, may prove instructive.
For further information on this topic please contact Heather R Boshak or Allison L Hollows at Fox Rothschild LLP by telephone (+1 215 299 2164) or email ([email protected] or [email protected]). The Fox Rothschild LLP website can be accessed at www.foxrothschild.com.