Executive Summary: New York employers who use separation agreements or settle claims of harassment, discrimination, or retaliation must ensure they comply with a new amendment to Section 5-336 of the New York General Obligations Law.
Background: On November 17, 2023, New York Governor Kathy Hochul signed into law Senate Bill S4516, which became effective immediately upon signing. Prior to this amendment, in order to obtain confidentiality in settlement agreements alleging harassment, discrimination, or retaliation in New York, the complainant was required to: 1) attest that it was their preference for confidentiality; 2) be provided a confidentiality agreement separate from the general settlement agreement; 3) wait 21 days after being provided the separate confidentiality agreement before signing, then be granted up to 7 days after signing the confidentiality agreement to revoke their signature.
Impact of the Amendment: The amendment makes the following significant changes of which employers should be aware:
- Makes the 21-day waiting period for confidentiality waivable, while still providing 7 days from the date of signature to revoke;
- Requires that any confidentiality agreement specifically state that the agreement does not prevent the complainant from speaking to the NY Attorney General;
- Expands requirements covering confidentiality agreements to independent contractors;
- Makes unenforceable any release involving claims of discrimination, harassment, or retaliation if part of the agreement resolving those claims:
- Requires payment of liquidated damages for violation of a nondisclosure clause or nondisparagement clause
- Requires the complainant to forfeit all or part of the consideration for the agreement for violation of a nondisclosure clause or nondisparagement clause; or
- The agreement contains or requires any affirmative statement, assertion, or disclaimer by the complainant that the complainant was not in fact subject to unlawful discrimination, including discriminatory harassment, or retaliation.
The Bottom Line
This signals a significant change in how employers manage risk through confidentiality and nondisparagement in agreements. Of note is that the NY legislature has not amended CPLR 5003-B, which applies to claims in a lawsuit as opposed to pre-lawsuit settlements. As such, employers must still comply with CPLR 5003-B when obtaining confidentiality in connection with a settlement of a filed lawsuit. However, Section 5-336 contains broad language that may be construed to apply to all claims, either formally filed, pre-litigation, or even severance. As such, employers should carefully analyze the scope and need of any such provisions in all agreements.
