On Oct. 28, 2021, Gov. Hochul signed legislation that significantly expands the scope of New York Labor Law Section 740 (NYLL 740), the state’s “whistleblower” protection law covering all private sector employees. Most notably, beginning in January 2022, employees and independent contractors will be protected for reporting employer activity that they reasonably believe violates any law, regardless of whether the law relates to public safety or whether the activity was an actual violation. 

Background

In general, employee whistleblower protection laws like NYLL 740 prohibit employers from retaliating against employees who disclose illegal or improper actions by the employer. Prior to this amendment, NYLL 740 was relatively narrow. It protected only those employees who disclosed employer activity that violated a law relating to public health and safety or healthcare fraud. This means that an employee who disclosed any other form of unlawful activity — such as consumer fraud or tax evasion, for example — had no protection from retaliation under NYLL 740. The existing law did not cover independent contractors. Courts also had held that NYLL 740 required proof of an actual violation of law in order for the employee to sustain a cause of action.

Coming Changes to NYLL 740

The most significant changes are that independent contractors will be covered by the law and that employees will be protected if they disclose activity that they reasonably believe violates any law — regardless of whether that law relates to public health and safety. Below is a summary of those and other changes: 

• More workers are covered: the definition of “employee” will include former employees and independent contractors.
• More governmental actions are “laws”: Executive orders and judicial or administrative decisions, rulings and orders will be within the definition of “law, rule, or regulation.”
• More employer actions are considered “retaliatory”: the revised law clarifies that for employer actions to be “retaliatory,” they need not be “personnel” actions, likely because former employees and independent contractors are now covered. In addition to actions that would commonly be understood to constitute retaliation, such as actual or threatened termination, suspension or demotion, employers may not (1) take action that would harm a former employee’s current or future employment, such as “blackballing” within an industry; or (2) report or threaten to report the immigration status of the employee or the employee’s family member. 
• The scope of protected activity is significant broadened: employees will be protected if they disclose or threaten to disclose to a supervisor or public body an activity, policy or practice that the employee reasonably believes (1) violates a law, rule or regulation; or (2) poses a substantial and specific danger to public health and safety. In the case of the former, the employee will not have to establish that the employer actually violated a law; the employee’s reasonable belief is enough. Employees will also be protected for disclosing an employer activity that presents a danger to public safety, even if that activity is not unlawful. 
• One protection for employers remains, but is watered down by exceptions: under the existing law, employees must first notify their employer of the alleged violation before reporting it to a public body. Under the revised law, an employee will only have to make a “good faith effort” to notify the employer, and that’s only if no exception applies. The employee will not have to make a good faith effort to notify the employer if the employee reasonably believes that there is: imminent danger to public safety; if the employee reasonably suspects that the employer will destroy evidence; if the employee reasonably believes physical harm would result; or if the employee reasonably believes the employer is already aware of the activity and will not correct it. In practice, these exceptions will likely remove the employee notice requirement in most cases. 
• The statute of limitations is increased to two years: this adds a year for employees to file lawsuits. The parties are also entitled to a jury trial. 
• Punitive damages and other new relief will be available: employers can be liable for punitive damages if the violation was willful, malicious or wanton. Front pay will be available to employees. Employers can also be assessed a civil penalty up to $10,000. 
• Notice requirements: employers will be required to post notice of employees’ rights under the law in conspicuous places customarily frequented by employees and applicants for employment. 

These changes to the law will become effective on Jan. 26, 2022. 

Impact

New York will now be among the states providing the broadest protection to workplace whistleblowers. Other states with similar laws, such as New Jersey, have seen a significant rise in related litigation. New York employers can likely expect the same. Several of the recent revisions, such as including “executive orders” in the definition of “law,” appear to have been in response to developments during the COVID-19 pandemic. The ongoing pandemic and related rules from various levels of government will likely present many opportunities for protected activity under the law. New York employers should prepare for the possibility of additional claims by reviewing and ensuring compliance with all applicable rules and regulations, health and safety practices, particularly related to the pandemic, confirm that they have a robust internal reporting structure to handle employee claims of non-compliance and malfeasance, and educate their managers and supervisors about these new legal requirements.

If you have any questions about the information presented in this memo, please contact Peter Wiltenburg, any attorney in our Labor and Employment practice or the attorney at the firm with whom you are regularly in contact.