Effective January 26, 2022, revisions to Section 740 of the New York Labor Law will substantially enhance protections for employee whistleblowing in a number of critical ways.
Until now, courts have construed the New York whistleblower protection law narrowly. Protected activities giving rise to retaliation claims had to be related to either (1) a violation of law presenting a substantial and specific danger to public health or safety; or (2) healthcare fraud.
An employee who reported illegal activities not related to public health or safety (or healthcare fraud) may have been protected by a specific prohibition of retaliation—such as those found in the New York Human Rights Law—but the employee was not covered by a more general protection. New York courts have also held that the existing statute requires proof of an actual violation of law to sustain a cause of action.
The law will expand in several significant respects.
First, statutorily covered protected activities will expand to include employee disclosures related to any activity, policy, or practice of an employer that the employee reasonably believes is in violation of a federal, state, or local law, rule, or regulation—even if the employee is acting outside the scope of their job duties.
This is a momentous change. Previously, employees were protected only upon a showing of an actual violation of law, or a substantial or specific danger, related to public health or safety. Now, an employee’s reasonable belief of a much broader set of violations will suffice.
In addition, the amended law:
With the passage of this new law, New York becomes one of the most pro-employee whistleblower jurisdictions in the country. We note that after New Jersey passed the Conscientious Employee Protection Act—which provides similar whistleblower protections to those New York has just enacted—New Jersey saw a noticeable increase in whistleblower cases. New York employers should prepare for a similar trend starting next year.
As noted above, the law expands the definition of employee to cover independent contractors. This follows a legislative trend of providing independent contractors with protections historically reserved for employees.
The new law also closely aligns whistleblower protections for employees and independent contractors of private for-profit entities with protections some New York courts have held are already afforded to employees of not-for-profit corporations under Section 715-b of the New York Not-for-Profit Corporation Law. Section 715-b requires nonprofits with 20 or more employees and an annual revenue greater than $1 million to adopt an explicit whistleblower policy protecting broadly against intimidation, harassment, discrimination, and other forms of retaliation and adverse employment consequences. In Ferris v. Lustgarten Foundation, the Appellate Division, Second Department recently became the first New York appellate court to find that a private right of action exists for an employee to sue a not-for-profit corporation—and a related for-profit corporation under a single employer or joint employer theory—under Section 715-b. The new law will extend similar protections to employees of all not-for-profit and for-profit enterprises.
In addition to complying with the notice posting requirement, employers should take steps that will best position them to avoid or successfully defend claims under the new statute. These steps include the following:
Our lawyers have a command of the challenges the expanded law will pose for New York employers, and regularly assist clients in preparing for and complying with new legislation impacting their policies, practices, and bottom line—and in litigating claims when they arise.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Ashley J. Hale
Melissa C. Rodriguez
Douglas T. Schwarz
Samuel S. Shaulson
Kenneth J. Turnbull