Section 740 of the New York Labor Law protects employees and independent contractors who report (or threaten to report) violations of the law that present a “substantial and specific danger to public health and safety.” This includes a report or threat to report an action, policy, or practice by an employer that the employee reasonably believes: (i) violates any federal, state, or local law, rule, or regulation; or (ii) poses a substantial and specific danger to public health or safety.

The employee can make (or threaten to make) such reports to any federal, state, or local court, agency, law enforcement officer, or executive branch. The employee is protected, even if such reporting is outside of the scope of their employment duties. Moreover, they are protected, even if they incorrectly believe the employer’s actions constitute a violation of the law, as long as their claim is “reasonable.”

Section 740 has long prohibited employers from discharging, suspending, demoting, or taking other adverse action against employees for engaging in protected activity. The amendments say that a mere “threat” to take adverse action is in and of itself unlawful, if it concerns a protected activity. The amendments also prohibit retaliations like, “threatening to contact or contacting U.S. immigration authorities or otherwise reporting or threatening to report an employee’s suspected citizenship or their immigration status, or that of an employee’s family or household member.”

Prior to the amendments, an employee could only bring a Section 740 claim if he or she brought the allegedly problematic action, policy, or practice to the attention of a supervisor and gave the employer the opportunity to correct the issue before making an external report. Now, employees must only demonstrate a “good faith effort” to bring the matter to the supervisor’s attention before making the external report.

Further, employees are not required to make any internal report “where: (a) there is an imminent and serious danger to the public health or safety; (b) 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; (c) such activity, policy, or practice could reasonably be expected to lead to endangering the welfare of a minor; (d) the employee reasonably believes that reporting to the supervisor would result in physical harm to the employee or any other person; or (e) the employee reasonably believes that the supervisor is already aware of the activity, policy, or practice” and will not correct it.

Employers are required to notify employees of their and protections by posting a notice “conspicuously in easily accessible and well-lighted places customarily frequented by employees and applicants for employment.” The required posting can be found at: https://dol.ny.gov/system/files/documents/2022/02/ls740_1.pdf.

Employees have two years from the time of the alleged adverse action to bring a Section 740 claim. They also have the right to a trial by a jury. Section 740 also contains an employee-friendly standard of proof: a whistleblower only needs to show that his or her actions were a contributing factor in the adverse action, as opposed to the “but-for” causation standard applicable to certain federal retaliation claims.

Violation of Section 740 can result in a court ordering the employer to reinstate the employee, pay monetary damages (specifically, front pay) as an alternative to reinstatement. In addition, the law permits civil penalties up to $10,000 for costs and attorney fees. Also, if the employer’s violation is found to be willful, malicious, or wanton, uncapped punitive damages are available remedies.

Section 740 claims make it easy for employees (and now former employees and independent contractors) to prevail on those claims, resulting in higher cost settlements and judgments on such claims.  With the inclusion of independent contractors in the definition of “employee,” an individual’s independent contractor status is no longer a viable defense to liability.

Employers should review and update their policies to ensure that anti-retaliation prohibitions include conduct covered by Section 740. Employers should also post the required notice and send copies to all employees who work remotely and train supervisors concerning the appropriate handling of any employee reports under the amended provision.

Although the notice posting is the only affirmative obligation you must meet, employers need to take a hard look at their policies and practices to protect their company from retaliation claims. Fundamentally, they should strive to promote a culture of compliance, where employees are encouraged to raise concerns without fear of retribution. They should revisit their anti-retaliation policies to ensure they have strong language stating that the company will not retaliate against an employee for pointing out alleged wrongdoing. They should also consider training their managers, so they know how to respond to employee complaints.

Finally, employers need to tread carefully when taking any disciplinary action against an employee who has made a complaint. While employees who have made complaints are not insulated from disciplinary action for legitimate non-retaliatory reasons, employers need to be cautious before taking any action against such an employee. They need to ensure that there are well-documented, objective, non-retaliatory reasons for any adverse employment action and consult with employment counsel when necessary.

Please feel free to reach out if you have questions or would like assistance in complying with New York Labor Law Section 740.

Article by Steven J. Shanker, Esq.

Steven J. Shanker, Esq. is General Counsel to the Livery Roundtable, Inc. and the New York Independent Livery Driver Benefit Fund.

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