An amendment to New York Labor Law §740, effective Jan. 26, 2022, significantly expands protections for workers who report or object to their employer’s illegal or dangerous business activities. While the impact of these changes is yet to be determined, the body of case law that has developed across the Hudson River in New Jersey, which has had some of the most comprehensive whistleblower protections in the country for several years now, is an instructive starting point for those looking to anticipate the impact of New York’s whistleblower amendment.
While both New York and New Jersey have had whistleblower laws on their books for over 30 years, the trajectory of their respective laws has been divergent until now. Since its enactment in 1984, the New York whistleblower law has been narrowly construed, infrequently invoked, and, as a result, has generated little precedent. The same cannot be said of New Jersey’s Conscientious Employee Protection Act (CEPA). Enacted in 1986, CEPA has been more broadly interpreted, is frequently invoked, and has been extensively litigated—comprising a major aspect of New Jersey employment law.
With its recent amendment, New York’s law now matches—and in some ways, exceeds—the longstanding protections of New Jersey’s CEPA.
New York’s old whistleblower law protected only employees who reported the violation of a law, rule, or regulation by their employer that “creates and presents a substantial and specific danger to the public health or safety, or which constitutes health care fraud.” N.Y.L.L. §740(2)(a). These protections were designed to prohibit violations that affect the public at large, rather than individual plaintiffs. Employers seldom were susceptible to §740 claims.
Protection was triggered only by an actual violation of a law, rule, or regulation; meaning that an employee’s good faith but erroneous belief that such a violation existed was insufficient. See Webb-Weber v. Community Action for Human Services, 23 N.Y.3d 448 (2014). Additionally, the violation must have been of the kind that created a substantial and specific danger to the public health or safety. Remba v. Federation Empl. & Guidance Serv., 76 N.Y.2d 801, 802 (1990). This proved to be a difficult threshold for plaintiffs to cross. See, e.g., Starikov v. Ceva Freight, 153 A.D.3d 1377 (2d Dep’t 2017) (operating a customs business without a proper license considered insufficient); Cotrone v. Consolidated Edison Co. of New York, 50 A.D.3d 354 (1st Dep’t 2008) (leaving trucks containing hazardous materials unattended on a public street in violation of federal regulation deemed insufficient).
Among other protections, New Jersey’s CEPA prohibits employers from retaliating against an employee for engaging in any one of a range of protected activities, including disclosing, objecting to, or refusing to participate in an activity the employee reasonably believes (1) is in violation of a law or a legal regulation; (2) is fraudulent or criminal; or (3) is incompatible with a clear mandate of public health, safety, welfare or protection of the environment.
The New Jersey Supreme Court established the framework for analyzing CEPA claims in Dzwonar v. McDevitt. To establish a prima facie CEPA claim, plaintiffs must show: (1) they reasonably believed that their employer’s conduct violated a law, rule, or regulation promulgated pursuant to law or a clear mandate of public policy; (2) they performed a whistleblowing activity; and (3) a causal connection existed between the plaintiff’s protected activity and the adverse employment action. Dzwonar v. McDevitt, 177 N.J. 451 (2003). The court made clear that the goal of CEPA is not to make lawyers out of conscientious employees, but rather to prevent retaliation against those employees who object to employer conduct that they reasonably believe to be unlawful or indisputably dangerous to the public health, safety, or welfare. Id.
While New Jersey’s law imposes certain limits to what is considered a “reasonable” belief regarding a violation—in fact, the court in Dzwonar found plaintiff’s belief to be unreasonable as there was no substantial relationship between the complained of conduct and the law plaintiff claimed was violated—New Jersey courts generally find that the employee had a reasonable belief that a violation occurred. See, e.g., Hernandez v. Montville Tp. Bd. of Educ., 354 N.J. Super. 467, judgment aff’d, 179 N.J. 81 (2004) (elementary school custodian who objected to unsanitary conditions established that he reasonably believed school was in violation of health and safety regulations).
To proceed with a claim under CEPA, the court must find and enunciate the specific terms of a statute or regulation, or the clear expression of public policy (rather than a contract or company policy), that would be violated if the facts as alleged were true. For example, COVID-19 guidelines issued by New Jersey Gov. Phil Murphy, the Occupational Safety and Health Administration (OSHA), and the Centers for Disease Control (CDC) were found to be a sufficient basis for a CEPA claim. See Loeb v. Vantage Custom Classics (ESX-L-4762-20). On the other hand, in Hitesman v. Bridgeway, 218 N.J. 8, 24-41 (2014), the court found a violation of nursing code of ethics, an employee handbook, and a patient statement of rights insufficient to support a CEPA claim.
Consistent with claims for workplace discrimination, New Jersey courts examine circumstantial evidence to assess whether a plaintiff’s whistleblowing activity was a determinative or motivating factor in the alleged retaliatory action. For successful claims, plaintiffs have received damage awards of up to seven figures.
New York’s amended statute incorporates many aspects of the New Jersey law, and in some ways exceeds CEPA’s protections.
The amendment changes the law in several significant ways:
If claims brought under the New Jersey statute are any indication, New York employers that encounter whistleblower actions should expect case-by-case inquiries about certain threshold legal questions—including whether a worker held a “reasonable belief” of a violation and whether the court can articulate the specific terms of a law, rule, or regulation. The amended law should serve as another reminder to New York employers of the importance of documenting the legitimate business reasons for any adverse action taken against an employee, which may be critical evidence in defeating a §740 claim.
Reprinted with permission from the February 25, 2022 edition of the New York Law Journal © 2022 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or firstname.lastname@example.org.