Attention New York Employers: New Prohibitions for Settlement Agreements Resolving Discrimination Claims
Effective November 17, 2023, Governor Hochul signed a new law impacting settlement agreements resolving claims of harassment, discrimination and retaliation. The new law, S4516 amends Section 5-336 of the New York General Obligations Law (known as New York’s #MeToo statute), which prohibits employers’ use of nondisclosure provisions in any settlement agreement resolving claims of discrimination, unless the condition of confidentiality is the complainant’s preference. Section 5-336 specifically targets provisions seeking to prevent complainants from disclosing the underlying facts and circumstances concerning incidents of harassment or discrimination, as part of a larger employee-friendly trend in New York legislation.
How does the new law amend Section 5-336?
The new law provides that a release of any claim including unlawful harassment, discrimination or retaliation is not enforceable if it contains any of the following provisions:
- A requirement that the complainant pay liquidated damages for violating a nondisclosure clause or nondisparagement clause;
- A requirement that the complainant forfeit all or part of the consideration for the agreement for violating a nondisclosure or nondisparagement clause; or
- A requirement that the complainant state or disclaim that the complainant was not in fact subject to unlawful discrimination, including discriminatory harassment or retaliation.
In addition, the new law makes several key changes to Section 5-336.
- First, it expands the scope of Section 5-336 to include claims of discrimination, harassment and retaliation.
- Second, the law now applies to settlement agreements with independent contractors and not just employees and potential employees.
- Third, the law now allows a complainant to waive the full 21-day waiting period to consider a settlement agreement containing a confidentiality provision preventing the disclosure of underlying facts and circumstances of a discrimination claim. The complainant still retains the right to revoke their acceptance within seven days of signing. The law previously mandated that a complainant wait the full 21-day period before signing and complainants now have “up to 21 days” to sign. It is important to note that Section 5003-b of New York Civil Practice Law & Rules (CPLR) still requires a 21-day waiting period before a complainant signs a settlement agreement containing a confidentiality provision preventing the disclosure of underlying facts and circumstances of a discrimination claim brought in litigation or an administrative proceeding.
What should employers do now?
Employers should carefully review any settlement agreements entered into after November 17th and any release agreements currently being drafted and negotiated, particularly if they contain nondisclosure provisions relating to the facts or circumstances of the underlying claims, a liquidated damages provision or a forfeiture provision.
If you have questions concerning employee settlement agreements, please contact a member of Kelley Drye’s Labor and Employment team.