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  • Elizabeth Cowit

New York Places Further Limits on Confidentiality Provisions in Settlement Agreements

New York Governor Kathy Hochul recently signed into law a bill which amends Section 5-336 of New York’s General Obligations Law (“GOL”), as related to non-disclosure and non-disparagement agreements included in settlement agreements between employers and employees.

A copy of the new law can be found here.

Importantly, under the new law, parties entering into agreements settling claims of discrimination, harassment and retaliation can no longer agree to liquidated damages or forfeiture provisions in the event a complainant violates a nondisclosure or non-disparagement obligation.

Specifically, under the amendment, a release in an agreement between an employer and employee resolving claims of discrimination, harassment or retaliation is unenforceable if:

  • The complainant is required to pay liquidated damages for breaching a nondisclosure or non-disparagement provision;

  • The complainant is required to forfeit all or part of the consideration for the agreement for violating a nondisclosure or non-disparagement clause; or

  • The agreement includes or requires any type of statement, assertion or disclaimer by the complainant that they were not subject to unlawful discrimination, harassment or retaliation.

The new law took effect on November 17, 2023 and applies to agreements entered into on or after that date.

The new law also impacts confidentiality preference agreements in New York between an employer and employee when resolving discrimination, harassment or retaliation claims. For settlement agreements that are pre-suit, a complainant is no longer required to wait the full 21-day review period before entering into a confidentiality agreement in connection with a settlement of discrimination, harassment or retaliation claims. Instead, complainants must be given “up to 21 days” to consider confidentiality provisions, and thus may sign confidentiality agreement before the 21-day period ends, if they choose to do so. The revocation period under the law remains unchanged. Thus, complainants still may revoke acceptance of a confidentiality provision within seven days after signing.

There has been no change, however, to the 21-day mandatory consideration period provided for under Section 5003-B of the New York Civil Practice Law and Rules (“CPLR”). Notably, the amendments to the GOL do not make clear whether the change to the consideration period is limited to claims arising pre-litigation. As such, absent further guidance from the legislature or courts, the full 21-day waiting period for a confidentiality preference agreement may still apply to settlement agreements which resolve claims filed in court (or are otherwise governed by the CPLR).

The Governor also signed into law an amendment to the New York State Human Rights Law, which extends the statute of limitations period for filing a claim for unlawful discrimination with the New York State Division of Human Rights, from one to three years. Currently, only claims for sexual harassment filed with the New York State Division of Human Rights are subject to a three-year limitations period.

A copy of the new law may be found here. The extended limitations period will take effect on February 15, 2024.

In light of the new requirements discussed above, employers should consult with employment counsel when resolving claims of discrimination, harassment and retaliation to address whether the waiting period is mandatory. Employers should also consult with employment counsel concerning whether any acknowledgment in their standard severance agreements or settlement agreements may be deemed an affirmative statement disclaiming discrimination in violation of the new law.

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