Enacts provisions providing protection to employees from retaliatory actions by employers where such employees report illegal business activities

* adding definitions of "agent" and "illegal business activity";

* specifying that an employee will be protected against retaliatory action for disclosure of employer activity that the employee reasonably believes has occurred and reasonably believes constitutes illegal business activity;

* adding a "good faith" requirement relating to the effort of the employee to bring the illegal activity to the attention of the employer in order to be protected;

* eliminating the requirement for employer notification where the public health or safety is in imminent danger, in cases where the employee reasonably believes that such notification will result in a destruction of evidence relating to the illegal activity, or where the employer has failed to inform its employees of the rights provided by this section;

* providing additional remedies for whistleblowers who suffer impermissible retaliatory personnel actions; and

* requiring employers to inform their employees of their rights under this section.

Section 2 of the bill amends Civil Service Law § 75-b(2) by: (a) adding protections, to conform to Labor Law § 740, for whistleblowers who provide information to investigatory bodies or refuse to participate in the alleged improper activity; and (b) eliminating the requirement for employer notification in the same circumstances as provided in Labor Law § 740.

Section 3 of the bill amends Civil Service Law § 75-b(3)(c) by providing a right of action under Labor Law § 740 to all public employees.

Section 4 of the bill adds a new subdivision 5 to Civil Service Law § 75-b, requiring employers to inform their employees of their rights under this section.

The bill takes effect ninety days following enactment.

Existing law

Labor Law § 740 prohibits private employers from firing or taking any other adverse employment action against an employee who refuses to participate in an illegal business activity, or who discloses such illegal activity to a public body, if the illegal activity presents a "substantial and specific danger to the public health or safety." This protection does not apply, however, unless the employee has brought the illegal behavior to the attention of a supervisor and has given the employer an opportunity to correct the behavior.

Civil Service Law § 75-b prohibits public employers from firing or taking any other adverse employment action against a public employee who discloses information: (1) regarding a violation of a law, rule or regulation presenting a substantial and specific danger to the public health and safety; or (2) regarding any action by a public employer which the employee reasonably believes constitutes a violation of any federal, state or local law, rule or regulation. Prior to disclosing the information, the employee must make a good faith effort to inform his or her employer and to give the employer a reasonable time to take appropriate action, unless there is an imminent and serious danger to the public health or safety.

Justification

Private and public employees in New York State who report illegal or improper activities by their employers are given certain protections under New York's whistleblower protection law, which was enacted in 1984. Specifically, Labor Law § 740 prohibits private employers from dismissing or punishing employees who refuse to participate in certain illegal business activities, or who disclose such illegal activities to a public body. Similarly, Civil Service Law § 75-b prohibits public employers from taking any adverse employment action against an employee who discloses certain violations of law, rule or regulations.

Unfortunately, there are several significant flaws in the whistleblower statutes which greatly limit the protections provided to employees, and thereby deter honest employees from revealing illegal activities of their employers, out of the legitimate fear that they can be dismissed for reporting such violations.

First, Labor Law § 740 only protects employees who disclose illegal activities that present a "substantial and specific danger to the public health or safety." Thus, if an employee becomes aware that his or her employer is knowingly defrauding its customers, or stealing government funds, the employee can be fired for revealing that information to government authorities, and the whistleblower law will provide no protection to the employee. For example, in Remba v. FEDERATION EMPLOYMENT AND GUIDANCE SERVICE , 149 A.D.2d 131, aff'd 76 N.Y.2d 801 (1990), the court denied whistleblower protection to an employee who reported fraudulent billing of the City of New York, because those fraudulent billings did not present a danger to public health or safety. Numerous other court cases similarly have denied whistleblower protection to those whose employers were engaged in fraud and larceny in connection with government contracts.

Second, a private employee who reasonably believes that his or her employer has engaged in actions which the employee reasonably believes constitute a violation of law can be terminated for revealing that information to government authorities, if it turns out that no violation can be proved. For example, in BORDELL V. GENERAL ELECTRIC CO. , 88 N.Y.2d 869 (1996), a nuclear health physicist whose preliminary testing revealed dangerously high employee exposure to radiation was fired for reporting that his employer had failed to reveal these excessive radiation levels to the Department of Energy. The court held that the plaintiff was not entitled to whistleblower protection, because he was unable to prove that the employer had actually failed to report the excessive radiation levels. Civil Service Law § 75-b was amended in 1986 to protect PUBLIC employees who reasonably believe that a violation has occurred, but private employees still do not have that protection.

The whistleblower statutes are also significantly flawed because they generally do not apply unless the employee has brought the illegal behavior to the attention of a supervisor and has given the employer an opportunity to correct the illegal behavior. Unfortunately, many employees do not know of this requirement, and are never told by their employers that they can be fired if they do not first tell the employer of the illegal activity. While the employer notification requirement set forth in Civil Service Law § 75-b does not apply to public employees who report an imminent and serious danger to public health or safety, that same protection does not exist in Labor Law § 740, which means that private employees can be fired for reporting violations even where such an imminent and serious threat exists.

Moreover, although Labor Law § 740 prohibits adverse employment actions against private employees who refuse to participate in illegal business activities, Civil Service Law § 75-b does not contain a similar provision. This means that public employees can be fired for refusing to violate the law. Finally, the remedies available to employees under Labor Law § 740 are clearly inadequate.

This bill addresses these numerous defects in the current whistleblower statutes. It implements certain recommendations made by the New York State Law Revision Commission following a five year study of the law, and enacts, for all employees, protections similar to those extended to healthcare workers during the 2002 legislative session. Specifically, the bill:

* extends whistleblower protections to private employees who report illegal activities of an employer, regardless of whether those illegal acts constitute a danger to public safety;

* provides private employees with the same protections that public employees have to report information they reasonably believe to constitute illegal activity;

* allows private employees, like public employees, to report imminent and serious dangers to the public safety directly to government authorities, rather than first informing their employer and waiting to see if corrective action is taken;

* eliminates the requirement for prior employer notification where: (a) the employer has failed to advise its employees of their rights under the whistleblower statutes; or (b) the employee reasonably believes that the employer will destroy evidence of the illegal activity;

* protects public employees who refuse to participate in illegal activities in the same manner that private employees are protected; and

* requires both public and private employers to publicize employees' rights under the whistleblower law.

New York State should encourage, not discourage, employees who wish to report violations of law by their employers. In 2002, Time magazine named three whistleblower employees - including Sherron Watkins of Enron and Cynthia Cooper of Worldcom - as its "Persons of the Year." This prestigious designation recognized the central role of honest employees in the fight against corporate wrongdoing, and the importance of protecting whistleblower employees against retaliation.

Although the "Whistleblower Law" enacted in 1984 was a good first step, experience over the past 20 years has shown that the law is simply inadequate. By making the necessary reforms to strengthen the law, this bill will act as a deterrent to employers who might otherwise engage in illegal activity, will protect the public from such wrongdoing, and will ensure that the honest and law-abiding employees who have the courage to reveal illegal activities are protected against retaliation by their employers.

Legislative history

A.8794 of 2003-04: 3rd Reading A.7185 of 2005-06: passed Assembly; A3487 of 2007-08: referred to Labor FISCAL IMPLICATIONS : This bill will have a positive fiscal impact by reducing fraud and misuse of public funds by government agencies and contractors.

Effective date

This act shall take effect ninety days after enactment.