The legislation (S.4394A/A.5144A) amends NY Labor Law Section 740 (Section 740), which prohibits retaliation by employers against whistleblowers. Effective 90 days after the Governor’s signature, the amendments will alter the regulatory landscape radically for New York employers by expanding both who is protected by the law and what constitutes protected activity.
Whistleblowers need only to have a “reasonable belief” of a legal violation, and the alleged violation no longer must pose a danger to public health
Section 740 formerly prohibited retaliation against employees who disclose an “activity, policy or practice that is in violation of law, rule or regulation” and only when such violation “creates and presents a substantial and specific danger to the public health or safety” or concerns health care fraud (emphasis added). The amendments dramatically expand the scope of protected activity to include disclosures about what “the employee reasonably believes is in violation of law, rule or regulation or that the employee reasonably believes poses a substantial and specific danger to the public health or safety” (emphasis added).
There are two major changes here. First, whistleblowers no longer must report conduct that “is in violation” or law to be protected; rather, they need only disclose what they “reasonably believe” to be in violation of law. Second, the alleged violation no longer must “pose[ ] a substantial and specific danger to the public health or safety” to be protected.
Expanded definitions
The amendments to Section 740 expand several definitions to include individuals and activities not previously covered. For instance:
- Individuals eligible for whistleblower protection now include not only employees, but also “former employees” and “natural persons employed as independent contractors.”
- The definition of “law, rule or regulation” – the violation of which a covered individual must report for whistleblower protection – is expanded to include “executive orders” as well as “any judicial or administrative decision, ruling or order.”
- Adverse actions that could constitute “retaliation” under Section 740 now expressly include actions that would “adversely impact a former employee's current or future employment.”
Other important changes
Other noteworthy changes to Section 740 include:
- Section 740 originally did not protect employees who reported alleged wrongdoing to a public body and not to their employer. As amended, there are exceptions to this rule that allow individuals in some cases to bypass their employer and report to a public body instead, while still receiving whistleblower protection. Notable exemptions include: (1) the employee reasonably believes that reporting to a supervisor would result in destruction of evidence or concealment, and (2) the employee reasonably believes that a supervisor is already aware of the violative activity and will not correct it.
- The amendments enlarge the statute of limitations from one year to two.
- Section 740 now carries a notice posting requirement. Employers are now required to inform employees of their protections, rights, and obligations under Section 740 by posting a notice. Employers are required to post these notices “conspicuously in easily accessible and well-lighted places customarily frequented by employees and applicants for employment.”
- The amendment adds new explicit remedies, including front pay, a civil penalty of US$10,000, and punitive damages.
Section 740 now explicitly gives whistleblower plaintiffs the right to a jury trial.
This is a significant legislative change, and we will be watching closely how it is utilized in and interpreted by New York courts. For now, employers should prepare for new and previously unavailable whistleblower retaliation claims once the amendments go into effect in January 2022.
Authored by Michael DeLarco, Dave Baron, and Heather McAdams.
