Effective November 17, 2023, New York law was amended to void releases of discrimination, harassment and/or retaliation claims if the settlement agreement has certain common provisions regarding confidentiality, non-disclosure, and non-disparagement.

Critical for Employers. Significantly, employment-related settlement and release agreements with confidentiality, non-disclosure, and non-disparagement provisions should be promptly reviewed and updated to ensure that the releases are valid under New York law. Additionally, employers would be well-advised to review and consider whether such provisions should be included in their separation/severance agreements.

History. As a result of the #MeToo movement, effective January 1, 2020, New York law made it more difficult for employers to include then-standard confidentiality, non-disclosure and non-disparagement provisions which prevented employees from disclosing the underlying facts supporting their claims for sexual harassment. See N.Y. Gen. Oblig. Law § 5-336. Such provisions were made unlawful unless the parties entered into a separate agreement making clear that the confidentiality, non-disclosure and non-disparagement provisions were the “employee’s preference.” The employee could not sign this stand-alone confidentiality agreement until a 21-day consideration period had expired, followed by a 7-day revocation period.

What’s More, the legislature is seeking to further curtail non-disclosure and non-discrimination provisions. The recent amendment makes inclusion of certain fairly common settlement agreement clauses awfully risky for employers. Specifically, the entire release is void if a settlement agreement for “any claim, the factual foundation for which involves unlawful discrimination, including discriminatory harassment, or retaliation” contains any of the following:

• A requirement that the complainant pay liquidated damages for violating a non-disclosure or non-disparagement clause;
• A requirement that the complainant forfeit all or part of the consideration for the agreement for violating a non-disclosure or non-disparagement clause; or
• A requirement that the complainant make any affirmative statement, assertion, or disclaimer that the complainant was not subject to unlawful discrimination, harassment or retaliation.

See N.Y. Gen. Oblig. Law § 5-336 (3).

Separately, the amendment provides claimants with “up to” 21 days, enabling the employee to sign the separate confidentiality agreement before the 21-day period has expired. The revocation period remains unchanged. The amendment also expands the scope of the law to cover releases with independent contractors as well.

Notably, section 5003-B of the New York Civil Practice Law & Rules (CPLR), which requires plaintiffs to wait for the full 21-day consideration period to expire before signing a settlement agreement with non-disclosure provisions has not been amended. Thus, when settling an active litigation, the parties may still need to wait for the full 21 consideration period to pass, as well as the seven day revocation period, before that settlement agreement is effective.

Inclusion of any of the above three clauses in settlement agreements that release claims, the factual foundation for which involves unlawful discrimination, harassment or retaliation, renders the entire release of claims – the benefit of the employer’s bargain – void and unenforceable. Accordingly, a careful review and possible update of these agreements is critical. New York employers should also consider a careful review of separation and severance agreements as well, particularly given the high stakes involved.