I Hear That Whistle Blowing: New York’s Expanded Whistleblower Law Raises Volume On Employers

New York State lawmakers have done it again – amending an often-forgotten whistleblower statute of limited application into a sweeping new source of employee rights that should make employers listen up and take notice.  Almost two years ago it was Section 741 of the New York Labor Law, focused on healthcare workers. This time, it’s Section 740, which applies to all private-sector employers. Below, we provide you with a run-down of the changes and how employers can prepare for the January 26, 2022 implementation date.

BACKGROUND

Although it has been around for decades, Section 740 is not the first law that comes to mind when an employer thinks of the various laws protecting its employees. That’s because the statute’s restrictions diminish its usefulness as a tool for employees seeking relief for an alleged retaliatory act. For example, the statute is narrow – it only applies when an employee discloses, or threatens to disclose, to the employee’s supervisor or a public body, an actual violation of law, rule or regulation that presents “substantial and specific” danger to public health or safety, or healthcare fraud. Even then, it only has a one-year statute of limitations and there is no right to a jury trial. And on top of that, even if an employee prevails, their remedies are limited to reinstatement, back pay, and attorneys’ fees, but not compensatory or punitive damages. Taken together, employees had little incentive to bring claims under Section 740.

KEY AMENDMENTS

On October 28, 2021, Governor Hochul signed Senate Bill S4394A, which implemented a significant expansion of almost every aspect of Section 740. The amendments create a law that is more similar to the Conscientious Employee Protection Act in neighboring New Jersey, which essentially prohibits retaliatory adverse employment actions that are against public policy. As a result, aggrieved employees in New York will now find at their disposal a far friendlier law to use against their employers, if they choose. These expansions include:

• Expanding the scope of who can sue under the law to include former employees and independent contractors;
• Lowering the standard for protected activity from requiring proof that the individual was blowing the whistle on an actual violation of law, rule, or regulation that presents a substantial or specific danger to public health or safety to allowing an individual to bring a claim based merely on the reasonable belief that there is a violation of a law, rule or regulation (regardless of whether it impacts public health or safety) or a reasonable belief there is a substantial and specific danger to public health or safety (regardless of whether any law, rule, or regulation has been violated).  Note that language regarding health care fraud was removed, likely because the new standards are all-encompassing.;
• Expanding the definition of “law, rule or regulation” to include federal, state, or local statutes, ordinances, and executive orders, as well as judicial or administrative decisions, rulings, or orders;
• Protecting individuals regardless of whether they were acting within the scope of their job duties;
• Including additional conduct that is considered retaliatory action by the employer, such as actually taking or threatening to take an adverse employment action against the individual, engaging in conduct or threatening to engage in conduct that would adversely impact an individual’s future employment prospects, or threatening to contact immigration authorities;
• Lengthening the statute of limitations from one to two years, and allowing for jury trials;
• Providing prevailing plaintiffs with additional relief, including front pay, punitive damages if the conduct is found to be willful, malicious or wanton, and $10,000 in civil penalties;
• Loosening the notice requirements for employees by providing that an individual need only make reasonable efforts to notify their employer of covered activities before blowing the whistle to a public body and such notification is not required at all if, among other things, there is an imminent and serious danger to public health and safety or the plaintiff reasonably believes notification would result in destruction of evidence or harm to the individual or another person; and
• Instituting a notice requirement for employers to post a notice regarding employee rights and obligations under Section 740 and for such notice to be posted “conspicuously in easily accessible and well-lighted places customarily frequented by employees and applicants for employment.” This posting requirement is also required for employers covered by Section 741 and the rights and remedies under that law.

WHAT SHOULD EMPLOYERS DO NOW?

The practical effect of these amendments is that many more individuals will now be covered by Section 740 and the incentive to bring such litigation is vastly increased, thereby all but ensuring a new wave of whistleblower claims.  The new “reasonable belief” standard also mean that these lawsuits will be hard to dismiss on the pleadings and may not be susceptible to motions for summary judgment either given the fact-intensive nature of the reasonable belief inquiry.  Put simply, employers may soon find themselves dealing with a growing chorus of purported whistleblowers.

With the January 26 implementation date just around the corner, employers should take three important steps now in order to prepare:

• Additional training of supervisors and managers: Supervisors and managers are critical components in an employer’s effort to comply with whistleblower laws. Accordingly, employers should implement training of supervisors and managers on the new amendments. This training should include an overview of the law, the protection it affords employees, and the strict prohibition against retaliation. Importantly, supervisors and managers must know who to contact in the organization if an employee discloses to them any activity that may fall within Section 740. Employers may want to consider, similar to harassment and discrimination complaints, that Section 740 complaints be reported to the human resources department. However, supervisors and managers must be aware that if they receive a complaint from an employee, they must report it up the chain.
• Post the required notice: Employers should post any required notice in all locations where they post usual workplace notices, such as minimum wage, workers’ compensation, and unemployment insurance. It is likely the Department of Labor will eventually develop a poster. In the interim, employers can engage their employment counsel to prepare a notice.
• Review policies: Review and revise all whistleblower and complaint procedure policies to include the new Section 740 requirements. Ensure these policies have a procedure for an effective and documented response to any potential Section 740 complaint.