Employers Beware: New York State Expands Whistleblower Protections Increasing Employer Liability

On October 28, 2021, New York Governor Kathy Hochul signed legislation amending the New York Labor Law (“Labor Law”) to substantially enhance the whistleblower protections afforded to private-sector workers who report alleged wrongdoing by their employers significantly increasing potential liability for New York employers. The legislation becomes effective 90 days after its signing, was amended to include a two-year statute of limitations, and significantly broadens the scope of covered individuals and protected activities. New York is now in line with New Jersey with one of the most pro-employee whistleblower statutes in the country.  

Amendments

Prior to these amendments, the Labor Law only protected current employees from “retaliatory personnel actions” for disclosing, or threatening to disclose, an actual violation of law, rule or regulation which posed a substantial and specific danger to the public’s health or safety. See Labor Law § 740.

The new amendments alter this protection in several important ways:

The new legislation eliminates the requirement that the alleged retaliatory action be a “personnel” action to be prohibited. This works in conjunction with the legislature’s amendment of the definition of “employee” to expressly include both former employees, and independent contractors who “carry out work in furtherance of an employer's business enterprise [but] who are not themselves employers.” Id. The amendments also clarify that employees are protected whether or not they were acting within the scope of their job duties, and that a “retaliatory action” now includes any action that “would adversely impact a former employee's current or future employment.” Id.

The new legislation also eliminates the requirement that an actual violation of a law, rule, or regulation takes place, and instead clarifies that employees are protected so long as they “reasonably believe” a violation has or will occur. Further, the legislature removed the requirement that the alleged violation pose a substantial and specific danger to the public’s health and safety, instead making such reports a separate protected activity. Thus, when the amendments become effective, employees will be protected from retaliation so long as they report what they reasonably believe to be a violation of any law, rule, or regulation, regardless of whether that violation actually occurred, and regardless of whether it posed a threat to public health and safety. Additionally, the definition of “law, rule or regulation” was expanded to explicitly include “executive orders” and “any judicial or administrative decision, ruling or order.” Id.

The legislature also provided for additional remedies in cases where liability is established. Before the amendments, employees were only entitled to injunctive relief; reinstatement; compensation for lost wages and/or benefits; and reasonable costs and attorney’s fees. The amendments now explicitly allow for front pay in lieu of reinstatement; a civil penalty not to exceed $10,000; and punitive damages where violations are found to be “willful, malicious, or wanton.” Id.

As part of the new amendments, employers are also now required to post or send employees notices of their rights under this section.

Impact

The Labor Law amendments represent significant steps towards Governor Hochul’s goal of affording employees maximum whistleblower protections. The amendments dramatically widen the scope of prohibited retaliatory conduct, extending employer liability beyond the employment relationship both temporally and in terms of what actions constitute retaliation. Before these amendments, former employees could not bring a claim for harmful actions employers took after the employee’s tenure because such actions did not fall within the pre-amendment definition of “retaliatory personnel actions.” Now, both current and former employees are protected from retaliatory actions that may extend beyond the employment relationship.

The elimination of the requirement that there be an actual violation of law, rule, or regulation is also significant as it creates employer liability regardless of whether the employer violated any law, rule, or regulation. This amendment shifts the focus of the inquiry away from whether the employer actually engaged in illegal conduct, and refocuses it on whether the employer retaliated against the employee for disclosing what the employee “reasonably believe[d]” to be a violation. The elimination of this requirement is intended to encourage employees to come forward about good-faith suspected violations by offering new protections even if the employee is mistaken. So long as the employee can show that they reasonably believed a violation occurred, their reports are protected.

These amendments bring the Labor Law more in line with other states’ whistleblower protections, closely mirroring the language of New Jersey’s Conscientious Employee Protection Act (“CEPA”), which already affords employees protection for reporting what they “reasonably believe” to be violations of the law. Like CEPA, the Labor Law now also provides protection to employees who report their concerns to a public body but not to their employer. Where before there was no protection, now an employee is protected so long as they a) reasonably believe that reporting the conduct to a supervisor would result in the destruction or concealment of evidence; or b) reasonably believe that a supervisor already knows of the conduct and refuses to address it. Notably, however, the NY legislature did not adopt CEPA’s additional exception – that the employee fears that disclosure to a supervisor will result in physical harm.

Bottom Line

The amendments to the Labor Law significantly increase the protections against retaliation afforded to whistleblowers in New York state. Not only do these amendments expand the scope of who is protected, but they significantly increase an employer’s potential liability once a report is made. Regardless of whether a violation has occurred, employers must be careful in how they receive and respond to whistleblower complaints as employers have lost the protection that actual innocence once afforded them. By refocusing the inquiry on how an employer behaves after a report is made, the legislature has sent a clear message that it is taking a no-tolerance approach to whistleblower retaliation. While the amendments do not take effect for another two and half months, New York employers should expect and prepare to receive retaliation claims for previously unprotected whistleblower activity.

For more information regarding these amendments and best practices when handling potential whistleblower complaints, please contact Partner Harris S. Freier, Esq. via email here, or Associate Thomas P. Bellifemine, Esq. via email here or call 973.533.0777.