New York State recently enacted further restrictions limiting language that can be contained in employment-related release agreements (including severance, separation, and settlement agreements). The changes, which were enacted November 17, 2023, amend General Obligations Law Section 5-336 (GOL 5-336) to prohibit employers from including nondisclosure language within release agreements for claims involving “discrimination, harassment, or retaliation,” unless “the condition of confidentiality is the [individual’s] preference.” The amendments also enable individuals to waive the previously non-waivable 21-day consideration period. Further, the amendments prohibit employers from seeking liquidated damages or forfeiture of consideration for an individual’s breach of a confidentiality provision.

Employers must be mindful that while New York law may not prohibit the inclusion of nondisclosure language within release agreements, certain restrictive language may violate the National Labor Relation Act under the National Relations Board’s decision in McLaren Macomb, 372 NLRB No. 58 (2023). For a further discussion on McLaren Macomb, please refer to NLRB Says No to Confidentiality, Nondisparagement Provisions in Severance Agreements.

Background on GOL 5-336

In 2018, New York revised GOL 5-336 to prohibit employers from requiring confidentiality of underlying facts in sexual harassment settlement agreements unless the alleged victim preferred to include a confidentiality provision. Since then, and largely in response to the #MeToo movement, the statute has been amended multiple times to expand the scope of coverage. Most notably, prior to November 17, 2023, GOL 5-336 applied to all employment discrimination claims, but not “harassment or retaliation” claims. GOL 5-336 also required individuals to wait 21 days prior to agreeing to the confidentiality language and this consideration period (the Consideration Period) was not waivable.

2023 Amendments to GOL 5-336

Effective November 17, 2023, employers cannot include nondisclosure language within settlement agreements where, “the factual foundation…involves discrimination, harassment or retaliation, in violation of laws prohibiting discrimination, including discriminatory harassment or retaliation...unless the condition of confidentiality is the [individual’s] preference.” This “preference” must be in writing.

These amendments also give individuals “up to twenty-one (21) days to consider” inclusion of the confidentiality provision. This amendment effectively makes the previously non-waivable Consideration Period waivable; individuals are now able to sign off on confidentiality language immediately upon being presented with the release, rather than waiting three weeks. Significantly, this law does not amend Section 5003-B of the New York Civil Practice Laws & Rules (CPLR) which requires plaintiffs to wait the full 21 days before signing an agreement containing a nondisclosure provision that would prevent the underlying facts and circumstances of any discrimination claim. This CPLR provision applies only to pending litigations and filed administrative charges, not pre-litigation disputes (including release of claims through a separation/severance agreement).

In addition, a release of claims in an employment agreement, separation agreement, release agreement, or similar agreement is unenforceable if it requires the individual who has breached a confidentiality provision of such agreement to pay liquidated damages or to forfeit the agreement’s consideration (i.e., money paid by the employer or former employer per the terms of the agreement). Furthermore, such agreements cannot contain language where an individual states that the individual “was not in fact subject to unlawful discrimination, including discriminatory harassment, or retaliation[.]” Should the agreement contain such language the release of claims in the agreement would be void.

Takeaways

• Employers cannot include nondisclosure language within an employment agreement, separation agreement, release agreement, or similar agreement involving claims of discrimination, harassment, or retaliation unless it is the individual’s preference to include such language. This preference must be memorialized in writing.

• For pre-litigation releases, the 21-day consideration period may be waived. The waiver must be expressly acknowledged in writing.

• Releases cannot include language requiring an individual to pay liquidated damages or forfeiture of consideration for breach of the confidentiality provision.

• Releases cannot include language where an individual states that they were “not in fact subject to unlawful discrimination…harassment, or retaliation.”

Employers should review – and modify where necessary – their separation, severance and settlement agreements that include release of New York-based claims to ensure compliance with these amendments to New York law. Employers should also review agreements that are currently being considered or have been entered into from November 17 to present to ensure compliance and to determine whether modification (retraction, amendment, or supplementation) is necessary.

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