On Oct. 28, 2021, New York Gov. Kathy Hochul signed a bill amending New York Labor Law (NYLL) Section 740 (Section 740) to expand whistleblower protections for employees. The bill, which went into effect Jan. 26, 2022, made several changes that transformed the law into a boon for the plaintiff’s employment bar.
The changes dramatically expand the scope and application of New York’s whistleblower law and the remedies available to individuals who claim to have been retaliated against for engaging in whistleblower activities.
Some of the biggest changes to Section 704 include:
- Expanding the definition of “employee.” The law’s definition of “employee” now includes former employees, as well as independent contractors working for the employer. Previously, the definition was limited to “an individual who performs services for and under the direction and control of an employer for wages or other remuneration.”
- Expanding protected activity. The amendments now protect employees against retaliation if they disclose any alleged violation, or if they object to, or refuse to partake in, an activity they reasonably believe is a violation of a law, rule or regulation or poses a substantial and specific danger to the public health or safety. In contrast, under the prior version of the statute, an employee was protected only if the reported violation was found to have actually occurred.
- Expanding the definition of “law, rule or regulation.” This definition previously was limited to “any duly enacted statute or ordinance or any rule or regulation promulgated pursuant to any federal, state or local statute or ordinance.” The amendment changes the law to now include executive orders and judicial or administrative decisions, rulings or orders.
- Expanding “retaliatory action.” A retaliatory action now not only includes discharge, suspension, demotion or an otherwise adverse employment action, but also any (1) actual or threatened adverse employment actions; (2) actions that would adversely impact future employment; or (3) reporting of the suspected citizenship or immigration status of employees, their family or their household members.
- Lengthened statute of limitations. The amendment expands the statute of limitations for a whistleblower retaliation claim from one year, to now two years.
- Expanding potential damages and providing new forms of relief. The amendment now allows plaintiffs to also seek front pay, punitive damages and a civil penalty of up to $10,000. Previously, a successful plaintiff could obtain only injunctive relief, reinstatement, compensation for lost payments and attorney’s fees.
- Plaintiffs are now entitled to a jury trial.
- Notice requirement. New York employers now must post a notice of employee whistleblower protections, rights and obligations in an easily accessible, well-lighted place customarily frequented by employees and applicants for employment.
- Lessening the precondition to filing a claim by lowering the internal disclosure burden. Previously, employees were required to internally report violations to their employer, and employers had a reasonable opportunity to cure any alleged violations before employees could report alleged violations to a public body. The amendment now requires employees only to make a “good faith effort” to notify their employers before contacting a public body. This requirement is removed entirely if (1) there is an imminent and serious threat to public health and safety; (2) the employee reasonably believes it will result in the destruction of evidence or concealment of the activity; (3) the practice could reasonably be expected to endanger a minor; (4) the employee reasonably believes physical harm may occur if there is prior notification; or (5) the employee reasonably believes the employer is already aware of the unlawful or harmful practice and will not correct the practice if reported. Expect employees to unitize these exceptions to effectively negate their internal reporting obligations.
Actions for Employers
With the dramatic expansion of this law and the opportunity for large damages awards, including punitive damages, employers in New York can expect increased whistleblower complaints and subsequent litigation alleging retaliation. New York employers should act quickly to ensure that their whistleblower policies are up to date and compliant with these amendments to Section 740, including posting the required notice informing employees and applicants of the new whistleblower protections. Additionally, employers should consider training human resources and managerial staff on the amendments to Section 740 to ensure compliance and to minimize the risk of potential violations.
For further information or questions about how this the amendment to Section 740 may impact your business, please contact the authors, your McGuireWoods contact, or a member of the firm’s labor and employment team.