Prohibits employer retaliation against employees in the financial services industry

Summary of specific provisions

Section 1 amends section 740(1) of the labor law by adding a new paragraph (h) to define "Financial institution' to mean:

(1) an insured bank;

(2) a commercial bank or trust company;

(3) a private banker;

(A) an agency or branch of a foreign bank in the United States;

(5) any credit union; a thrift institution;

(6) a broker or dealer registered with the Securities and Exchange Commission;

(7) a broker or dealer in securities or commodities;

(8) an investment banker or investment company;

(9) a currency exchange;

(10) an issuer, redeemer, or cashier of traveler's checks, checks, money orders, or similar instrument's;

(11) an operator of a credit card system;

(12) an insurance company;

(13) a dealer in precious metals, stones, or jewels;

(14) a pawnbroker;

(15) a loan or finance company;

(16) a travel agency;

(17) a licensed sender of money or any other person who engages as a business in the transmission of funds;

(19) a telegraph company;

(19) a business engaged in vehicle sales;

(20) persons involved in real estate closings and settlements;

(21) the Unites States Postal Service;

(22) an agency of the United States government or of a state or local government carrying out a duty or Power of a business described in this paragraph;

(23) an Indian casino, or other gaming operation;

(24)any business or agency which engages in any activity which the superintendent of the department of financial services determines to be an activity which is similar to, related to, or a substitute for any activity in which any business described in this paragraph is authorized to engage;

(25) or any other business designated by the superintendent whose cash transactions have a high degree of usefulness in criminal, tax, or regulatory matters.

Section 2 amends section 740(2)(a) of the labor law, as amended by chapter 442 of the laws of 2006, to prohibit an employer from taking any retaliatory personnel action against an employee who discloses, or threatens to disclose to a supervisor or to a public body an activity, policy or practice of the employer that is in violation of law, rule or regulation which constitutes a violation of the federal or state securities laws, financial or accounting fraud, or misappropriation or misuse of funds of a financial institution, a hedge fund or private equity firm, or of the clients or customers of such organizations.

Section 3 is the effective date.

Justification

In the wake of the financial crisis caused by fraudulent financial schemes, it is in the interest of the state to encourage employees of financial institutions to report illegal and unethical behavior to a supervisor or to a public body.

Current law only protects employees who report illegal behavior which creates and presents a substantial and specific danger to the public health or safety.

This law will protect employees who report or threaten to report illegal behavior in financial institutions and actions that constitute bribery of a public official.

The need for this legislation is highlighted by the May 2012 New York Court of Appeals decision in Sullivan v Harnisch. The majority of the Court rejected a wrongful discharge case brought by a compliance officer claiming that he was terminated for questioning the personal stock trades of the company's president and ruled that current law did not prohibit such discharge. In his dissenting opinion, the Court's Chief Judge said that the majority's decision created, "A great Potential for abuse in the financial services industry," which would need to be solved by legislation.

This law addresses that need by protecting employees in the financial services industry who report illegal behavior from retaliation, including retaliatory termination.

Without the efforts of employees willing to report and prevent illegal and unethical behavior, such behavior can continue until discovered and acted upon by a third party outside the company.

According to a United States Senate report, whistleblower tips identified 54.1%. of uncovered fraud schemes in public companies, while external auditors, including the Security and Exchange Commission, detected only 4.1% of uncovered fraud schemes.

As further stated in the Chief Judge's dissenting opinion, "These protections must exist not only to decrease the likelihood that the employees will succumb to pressures to ignore or violate their obligations for fear of termination, but also to protect the public."

Legislative history

None.

Fiscal implications

None.

Effective date

The act shall take effect immediately.