BILL NUMBER: S6034

SPONSOR: SAVINO
 
TITLE OF BILL:

An act to amend the labor law, in relation to prohibiting employer
retaliation against employees in the financial services industry

 
PURPOSE OR GENERAL IDEA OF BILL:

To prohibit employer retaliation against employees in the financial
services industry who report violations of laws, rules or regulations to
a supervisor or to a public body.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1 amends section 740(1) of the labor law by adding a new para-
graph (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 regu-
latory matters.

Section 2 amends section 740(2)(a) of the labor law, as amended by chap-
ter 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 securi-
ties 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, includ-
ing 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 identi-
fied 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 obli-
gations for fear of termination, but also to protect the public."

 
LEGISLATIVE HISTORY:

2013-14 Sessions - S4453 - reported from Labor to calendar

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
The act shall take effect immediately.