Beginning January 26, 2022, amendments to the New York Labor Law will expand workers’ rights to assert claims of wrongdoing without reprisal. Among the significant changes, New York Labor Law Section 740, which only applies to private entities (not governmental employers), will now provide protections to independent contractors and former employees in addition to current employees. It also expands the covered whistleblower activities and provides new protections beyond adverse employment actions. This law will now broadly prohibit private businesses from retaliating in any manner against covered workers.

Pre-Existing Protections

Before these amendments, Labor Law Section 740 only protected “employees” who had disclosed to a supervisor or public body an unlawful activity, policy, or practice of their employer that creates and presents a substantial danger to the public health or safety” or “health care fraud.”

In addition, courts have applied the law to require proof of an actual violation of law by the employer to afford whistleblower protections.

Read this earlier article for more on New York whistleblower protections generally and before these amendments to Labor Law Section 740,

Areas of Expansion

With the amendments, NY Labor Law Section 740 will cover more workers in more circumstances. There are also additional penalties available in cases of proven retaliation.

Worker Coverage

For purposes of this whistleblower law, the definition of “employee” is defined to include people who are, in fact, not employees. Covered workers will now include “former employees, or natural persons employed as independent contractors to carry out work in furtherance of an employer’s business enterprise who are not themselves employers.”

Protected Activity

Under the amended whistleblower law, covered workers may not be retaliated against for:

• Disclosing or threatening to disclose to a supervisor or public body an activity, policy, or practice of the employer that 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.
• Providing information to, or testifying before, any public body conducting an investigation, hearing, or inquiry into any such activity, policy, or practice by such employer.
• Objecting to, or refusing to participate in, any such activity, policy, or practice.

With these expanded protections, workers are now entitled to be free from retaliatory action based on virtually any activity they take based on any employer activity, policy, or practice that the employee reasonably believes is against any law. Neither relation to health or safety nor actual violation is required.

Notice to Employer

Before the amendments, an employee had to bring the objected to activity to their employer’s attention before disclosing it to a public body. As amended, the law only requires employees to make a “good faith effort” to notify the employer in advance. Moreover, no such notice (or effort to provide notice) is required where:

• There is an imminent and serious danger to the public health or safety;
• The employee reasonably believes that reporting to the supervisor would result in a destruction of evidence or other concealment of the activity, policy, or practice;
• Such activity, policy, or practice could reasonably be expected to lead to endangering the welfare of a minor;
• The employee reasonably believes that reporting to the supervisor would result in physical harm to the employee or any other person; or
• The employee reasonably believes that the supervisor is already aware of the activity, policy, or practice and will not correct such activity, policy, or practice.

Retaliatory Action

Previously, employers could not take the following action against employees protected by the whistleblower law: “discharge, suspension or demotion . . . or other adverse employment action taken against an employee in the terms and conditions of employment.”

Now, employers are prohibited from engaging in a limitless scope of “retaliatory action,” defined broadly to include any manner of discrimination. Without limitation, the statute specifically includes the following examples:

• Adverse employment action or threats to take such adverse employment actions against an employee in the terms [or] conditions of employment including but not limited to discharge, suspension, or demotion.
• Actions or threats to take such actions that would adversely impact a former employee’s current or future employment.
• Threatening to contact or contacting United States immigration authorities or otherwise reporting or threatening to report an employee’s suspected citizenship or immigration status or the suspected citizenship or immigration status of an employee’s family or household member.

Penalties

Labor Law Section 740 permits employees to sue their employers for whistleblower retaliation. As amended, the law will now offer additional remedies for employees to recover and penalties for employers to pay.

Existing remedies included the availability of injunctive relief, orders of reinstatement to employment, compensation for lost pay and benefits, and payment of the employees’ attorneys’ fees and costs. The amendments provide for a new civil penalty of up to $10,000 and the payment of punitive damages for “willful, malicious or wanton” violations.

The amendments also expand the statute of limitations for whistleblower actions under this law from one to two years.

Notice by Employer

The amendments also impose a new affirmative obligation on all employers to inform their employees of the protections and rights afforded by Labor Law Section 740. Employers must do this by posting a notice “conspicuously in easily accessible and well-lighted places customarily frequented by employees and applicants for employment.”

Recognize that this may create a posting requirement for individuals and/or entities who do not qualify as an “employer” for any other purpose. Anyone (other than a governmental entity or agent thereof acting in that capacity) who uses the services of an independent contractor (who is not him/herself an employer) for a business purpose would seemingly qualify as an employer under this law and be obligated to make such posting.

While it’s likely the New York State Department of Labor will publish a model notice for this purpose, it does not appear to have done so at the time of publication of this article.

What “Employers” Should Do?

Other than satisfying the new notice posting requirement, there may be relatively little that employers must affirmatively do. But that doesn’t mean you should ignore these very significant amendments.

Most fundamentally, the amendments primarily require that employers follow the law–that is, all laws. Any legal violation could entitle a worker to protection from retaliation. And given the broad definition of what now constitutes retaliation, it is realistic to expect a substantial expansion of claims alleging whistleblower retaliation.

Otherwise, the expanded retaliation prohibitions do make some previously permissible business activities unlawful. Consequently, employers should carefully consider all actions that may negatively impact any employee who has engaged in any potentially protected whistleblower conduct. Consulting with an experienced employment attorney is advised.

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