Introduction
Are independent contractors protected as "employees"?
Are former workers protected?
What action is protected?
Does the employee need to submit a written complaint?
Scope of prohibited retaliatory action
Statute of limitations
Right to jury trial
Penalties for violations of statute
Requirement to educate employees
Comment


Introduction

On 26 January 2022, section 740 of the New York Labor Law was expanded to provide extensive whistle-blower protections to employees who report employer conduct that they reasonably believe violates a law, rule or regulation.(1) These amendments closer align such protections to neighbouring state New Jersey's Conscientious Employee Protection Act (CEPA).

Which state's law affords better protections for whistle-blowers? This article answers that question through a comparison between section 740 and the CEPA.

Are independent contractors protected as "employees"?

Section 740(1)(a) states that the term "employees" explicitly includes individuals who are hired as independent contractors. The CEPA, meanwhile, defines "employees" as "any individual who performs services for and under the control and direction of an employer for wages or other remuneration".(2) Case law that has interpreted the CEPA has clarified that "it includes more than the narrow band of traditional employees";(3) however, it continues to exclude independent contractors. Instead, New Jersey courts employ a multifactor test in deciding whether a worker is considered an "employee" or an "independent contractor" under the CEPA and look to:

(1) employer control; (2) the worker's economic dependence on the work relationship; and (3) the degree to which there has been a functional integration of the employer's business with that of the person doing the work at issue.

As section 740 expressly includes independent contractors in the definition of "employees", it provides broader protection than the CEPA.

Are former workers protected?

Section 740 expands whistle-blower protection to post-employment actions. As it expressly includes "former employees" within the purview of protected employees, and employers are prohibited from "threaten[ing], penalize[ing], or in any other manner discriminat[ing] against any . . . former employee exercising his or her rights under this section",(4) the potential for liability under section 740 does not end with the cessation of the employment relationship. By contrast, the CEPA does not apply to post-employment conduct.(5) Thus, a former employee could not bring a CEPA retaliation claim for their former employer's opposition to their unemployment claim. Such a claim could, however, proceed in New York under section 740.

What action is protected?

Both section 740 and the CEPA prohibit retaliation against employees who disclose to a supervisor or public body, object or refuse to participate in an activity, policy or practice that they reasonably believe is a violation of law, rule or regulation. Section 740(1)(c) defines "law, rule or regulation" to include:

(i) any duly enacted federal, state or local statute or ordinance or executive order; (ii) any rule or regulation promulgated pursuant to such statute or ordinance or executive order; or (iii) any judicial or administrative decision, ruling or order.

In addition, under section 740, an employee who discloses or objects to a policy or practice that they believe poses a substantial and specific danger to the public health and safety is protected. The CEPA, meanwhile, prohibits retaliation against an employee who objects to, discloses or refuses to participate in activity that the employee reasonably believes "is in violation of a law, or a rule or regulation promulgated pursuant to law", is fraudulent or criminal, or "is incompatible with a clear mandate of public policy concerning the public health, safety or welfare or protection of the environment".(6) In determining whether something is a "clear mandate of public policy" under the CEPA, courts in New Jersey look to:

federal and state constitutions, statutes, administrative rules and decisions, judicial decisions, and professional codes of ethics to inform [a] determination whether specific corrupt, illegal, fraudulent or harmful activity violates a clear mandate of public policy, but those sources are not necessarily exclusive.(7)

In this regard, both states' laws protect employees who "reasonably believe" an activity is in violation of a "law, rule or regulation".

Does the employee need to submit a written complaint?

Regarding the method of making a complaint, section 740 at no point imposes a requirement that the employee's whistle-blowing be in writing. Section 740(3) limits protection for an employee who makes a disclosure to a public body unless they first:

made a good faith effort to notify his/her employer by bringing the activity, policy or practice to the attention of a supervisor of the employer and has afforded such employer a reasonable opportunity to correct such activity, policy or practice.

Exceptions may apply in some situations. There is, however, no requirement that this disclosure be in writing. The CEPA, by contrast, requires that where an employee's whistle-blowing action is a disclosure to a public body, the employee must, unless certain exceptions apply, first bring the:

activity, policy or practice in violation of a law, or a rule or regulation promulgated pursuant to law to the attention of a supervisor of the employee by written notice and [afford] the employer a reasonable opportunity to correct the activity, policy or practice.(8)

Thus, the CEPA requires that disclosures to a public body be preceded by a written complaint, while section 740 merely requires notification to a supervisor, which need not be in writing.

Scope of prohibited retaliatory action

Section 740(1)(e) includes a detailed and extremely broad definition of "retaliatory action", which specifically enumerates the actions that an employer is prohibited from taking in retaliation:

discharge, threaten, penalize, or in any other manner discriminate against any employees or former employees exercising his or her rights under this section including (i) adverse employment actions or threats to take such adverse employment actions against an employee in the terms of conditions of employment including but not limited to discharge, suspension, or demotion; (ii) actions or threats to take such actions that would adversely impact a former employee's current or future employment; or (iii) threatening to contact or contacting US immigration authorities or otherwise reporting or threatening to report an employee's [or family or household member's] suspected citizenship or immigration status.

Under the CEPA, "retaliatory action" is defined more narrowly as including "the discharge, suspension or demotion of an employee, or other adverse employment action taken against an employee in the terms and conditions of employment".(9) As previously discussed, the CEPA protection does not extend to post-employment actions; thus, retaliatory actions against a former employee are not prohibited. Unlike section 740, the CEPA also does not address the reporting of suspected citizenship or immigration status.

Statute of limitations

Section 740 has a longer statute of limitations than the CEPA. It allows claims to be brought within two years after the alleged retaliatory action.(10) A CEPA claim, meanwhile, must be brought within one year of the purported adverse employment action.(11)

Right to jury trial

Section 740 and the CEPA both provide for a right to trial by jury.

Penalties for violations of statute

Section 740 caps civil penalties at $10,000, while the CEPA provides for penalties of up to $20,000 for subsequent violations. Of course, both section 740 and the CEPA provide the court with many options in terms of ordering relief, including:

  • injunction;
  • reinstatement;
  • compensation for lost wages, benefits and other remuneration; and
  • the payment of:
    • reasonable costs:
    • ‚Äčdisbursements;
    • attorney's fees; and
    • punitive damages.

Requirement to educate employees

Both section 740 and the CEPA impose on employers the responsibility for posting a notice informing employees of their rights. Section 740(8) requires every employer to:

inform employees of their protections, rights and obligations under this section, by posting a notice thereof. Such notice shall be posted conspicuously in easily accessible and well-lighted places customarily frequented by employees and applicants for employment.

The CEPA, however, goes a step further and requires employers to:

conspicuously display, and annually distribute to all employees, written or electronic notices of its employees' protections, obligations, rights and procedures under this act, and use other appropriate means to keep its employees so informed. Each notice posted or distributed pursuant to this section shall be in English, Spanish and at the employer's discretion, any other language spoken by the majority of the employer's employees. The notice shall include the name of the person or persons the employer has designated to receive written notifications pursuant to section 4 of this act.(13)

Comment

Section 740 offers more employee protections than the CEPA by providing for a broader group of workers and explicitly including protections for former employees and independent contractors under the statute. Unlike the CEPA, section 740 also specifically permits post-employment adverse actions to form the basis of a whistle-blower retaliation claim. Compared to the CEPA, section 740 provides for a slightly broader list of retaliatory actions. Finally, by including a two-year statute of limitations, section 740 provides New York employees with twice the amount of time as their New Jersey neighbours to raise their whistle-blower retaliation claims.

For further information on this topic please contact Brian S Cousin 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.

Endnotes

(1) Further information is available in the New York Law Journal article Game-Changing Expansion of New York Whistleblower Protection: Will Your Company Be Ready When This Whistle Blows? (February 4, 2022).

(2) New Jersey Statues Annotated (NJSA) 34:19-2(b).

(3) D'Annunzio v Prudential Insurance Company of America, 192 New Jersey 110, 120 (2007).

(4) Section 740(1)(e).

(5) Zubrycky v ASA Apple, Inc, 381 New Jersey Super. 162, 168 n.2 (App. Div. 2005).

(6) NJSA 34:19-3(c).

(7) Mehlman v Mobil Oil Corporation, 153 New Jersey 163, 188 (1998).

(8) NJSA 34:19-4.

(9) NJSA 34:19-2(e).

(10) Section 740(4)(a).

(11) NJSA 34:19-5.

(12) Section 740(4)(b) and NJSA 34:19-5.

(13) NJSA 34:19-7.