Skip to Main Content
Services Talent Knowledge
Site Search


Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

January 19, 2021

New York Appellate Court Rules That Not-for-Profit Corporation Law Creates a Private Right Action Against an Employer for Retaliation for Whistleblowing

On December 9, 2020, the Appellate Division, Second Department, reversing Nassau County Supreme Court, became the first appellate level court in New York to recognize that an employee of a not-for-profit corporation that has 20 or more employees and in the prior fiscal year had annual revenue in excess of $1 million can assert a claim under Not-for-Profit Corporation Law § 715-b that their employment was terminated in retaliation for engaging in whistleblowing activity.

In Ferris v. Lustgarten Foundation, the plaintiff had been employed by the defendant, Lustgarten Foundation, a not-for-profit corporation, for almost 10 years when her employment was terminated in December 2015. She alleged that her employment was terminated in retaliation for reporting two instances of improper fundraising conduct at her not-for-profit employer. She sought damages for, among other things, her employer’s alleged violation of Not-for-Profit Corporation Law § 715-b. The defendant employer moved to dismiss that claim, arguing that Not-for-Profit Corporation Law § 715-b does not afford a private right of action for aggrieved employees. The trial court had dismissed that claim and, on appeal, the Second Department reversed.

Enacted in 2013 and amended in 2016, Not-for-Profit Corporation Law § 715-b requires not-for-profit employers with 20 or more employees and $1 million in revenue in the prior fiscal year to implement a whistleblower policy that protects from retaliation those employees who report suspected improper conduct. It does not expressly provide for a private right of action. The Second Department noted that the plaintiff employee could only recover under the statute if a legislative intent to create such a right of action may “fairly be implied” in the statutory provisions and their legislative history. Under well-established New York law, this inquiry involves three factors: (1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme.

Both the trial and appellate courts agreed that the first two factors were met. However, they disagreed as to whether the third factor, which is often noted to be the “most important” for a court to consider in determining whether to recognize an implied private right of action, was satisfied. The Second Department noted that there is no regulatory agency to enforce compliance with Not-for-Profit Corporation Law § 715-b, and a separate provision (Not-for-Profit Corporation Law § 112[a][7]) provides for the NYS Attorney General Office’s protection of the rights of members, directors, or officers of not-for-profit corporations. The latter does not specifically protect the rights of employees of not-for-profit corporations. Considering the Not-for-Profit Corporation Law’s statutory scheme as a whole, the Second Department held that § 715-b created an implied private right of action for employees who are retaliated against or subject to adverse employment consequences as a result of whistleblowing activities.

Whether the holding in Ferris will result in a significant expansion of the rights of employees of not-for-profit entities in the health care sector presents an interesting question. The reason is that Labor Law § 740, known as the Whistleblower Law, is available to any employee who discloses or threatens to disclose an employer activity or practice that is in violation of a law, rule, or regulation and creates a substantial and specific danger to the public health. And Labor Law § 741, often referred to as the Health Care Whistleblower Law, offers special protections to persons who perform health care services and disclose or threaten to disclose an activity, policy, or practice of the employer that the employee, in good faith, reasonably believes constitutes improper quality of patient care. New York courts have consistently dismissed claims brought under Labor Law § 740 and 741 where the plaintiff’s whistleblowing activity relates to disclosures or threatened disclosures of fraudulent or otherwise improper economic activity. Because the Labor Law contains comprehensive remedies to address retaliation against whistleblowers in the health care industry, it is reasonable to question whether public and private (implied through Not-for-Profit Corporation Law § 715-b) avenues of enforcement would be in harmony and whether a private right of action against not-for-profit employers in the health care industry could be fairly implied.

Whistleblower and retaliation claims have been on the rise in recent years. Attorneys in Barclay Damon’s Labor & Employment and Health Care Controversies Practice Areas have extensive experience representing both health care providers and employers in other industries in whistleblower and retaliation lawsuits and stand ready to assist you should one of your employees assert a claim of this nature.

If you have any questions regarding this legal alert, please contact Brian Culnan, partner, at, or another member of the firm’s Labor & Employment or Health Care Controversies Practice Areas.


Click here to sign up for alerts, blog posts, and firm news.

Featured Media


Website Accessibility Lawsuits: Several "Tester" Plaintiffs—Compres, Sanchez, Fontanez, Pajaro, Garcia, and Jaquez—Targeting Businesses in Recent Flurry of Lawsuits


Website Accessibility Lawsuits: Several "Tester" Plaintiffs—Competello, Fernandez, Liz, Riley, and Trippett—Targeting Businesses in Recent Flurry of Lawsuits


CDPAP Providers Get First Look at the Future of CDPAP Without FIs


New York State Fiscal Year 2025 Budget: Implications for Employers Unpacked


Lab Providers Under Increased Scrutiny From Civil and Criminal Agencies for OTC COVID-19 Test Claims


NYS Appellate Court Dismisses Claim Based on Material Misrepresentations in Insurance Application

We're Growing in DC!

We’re excited to announce Barclay Damon’s combination with Washington DC–based Shapiro, Lifschitz & Schram. SLS’s 10 lawyers, three paralegals, and four administrative staff will join Barclay Damon while maintaining their current office in DC’s central business district. Our clients will benefit from SLS’s corporate, real estate, finance, and construction litigation experience and national energy-industry profile, and their clients from our full range of services.

Read More

This site uses cookies to give you the best experience possible on our site and in some cases direct advertisements to you based upon your use of our site.

By clicking [I agree], you are agreeing to our use of cookies. For information on what cookies we use and how to manage our use of cookies, please visit our Privacy Statement.

I AgreeOpt-Out