TLDR; A Significant Win for Employee Rights and an Important Clarification of New York Law
We’re proud to announce a recent significant victory for our client, a former healthcare employee who was sued by her employer for allegedly violating a confidentiality provision contained in an employment discrimination settlement agreement. In an April 2026 decision dismissing the lawsuit, the New York County Supreme Court not only ruled that the confidentiality provision was unenforceable, but also provided important guidance on a previously unsettled issue under New York General Obligations Law § 5-336: whether parties must execute a separate confidentiality preference agreement before entering into a settlement agreement containing confidentiality provisions. The court answered that question with a clear and unequivocal yes.
The decision serves as both an important victory for employees’ statutory rights and a cautionary tale for employers. It clarifies a developing area of New York law while illustrating a simple but powerful lesson: sometimes litigation can undermine the objective it was intended to achieve.
THE BACKGROUND
Our client, a nurse practitioner, resolved pregnancy discrimination claims through mediation and entered into a settlement agreement with her employer. Months later, the employer sued her, alleging she violated the agreement’s confidentiality provision by discussing the settlement with others. The employer sought damages for breach of contract.
THE UNSETTLED LEGAL ISSUE
Our defense centered on New York General Obligations Law § 5-336, which imposes strict requirements on confidentiality provisions in employment discrimination settlements. The statute requires that an employee’s preference for confidentiality be memorialized in an agreement containing specific notices, a 21-day consideration period, and a 7-day revocation period.
Despite the statute’s language, there had been little judicial guidance on whether strict compliance with this sequencing requirement was mandatory. Employers and practitioners were left wondering whether confidentiality language could simply be included in a settlement agreement or whether a standalone preference agreement had to be executed first.
We argued that the law requires a true two-step process: first, a separate confidentiality preference agreement; second, after that agreement becomes effective, a settlement agreement containing confidentiality provisions. In our case, there was no separate preference agreement.
THE COURT CLARIFIES NEW YORK’S TWO-AGREEMENT RULE
The court agreed with our interpretation. Recognizing the limited authority interpreting § 5-336, the court concluded that the Legislature intended a two-agreement process, not a single settlement agreement containing confidentiality language. The decision provides meaningful clarity on an issue that had remained unsettled.
Because the employer failed to utilize a separate preference agreement, the court held that the confidentiality provision was unenforceable. Without an enforceable confidentiality provision, there could be no breach. The lawsuit was dismissed in full.
LESSON ONE: SEQUENCE MATTERS
This decision gives employers, employees, HR professionals, and practitioners important guidance. When settling employment discrimination claims in New York, confidentiality provisions should not simply be inserted into a settlement agreement. A separate confidentiality preference agreement should be executed first, in compliance with the statute. Failure to follow that process may render confidentiality provisions unenforceable.
LESSON TWO: BE CAREFUL WHAT YOU WISH FOR
The employer’s goal was straightforward: preserve confidentiality. Yet by filing a lawsuit to enforce the confidentiality provision, it helped achieve the opposite result.
To prosecute its claim, the employer needed to place the settlement agreement before the court and sought to seal it. We opposed that request. Ironically, after dismissing the lawsuit, the court denied the sealing application. The result was enlightening: the same agreement the employer wanted to keep confidential now became part of the public court record in full.
The broader lesson extends well beyond employment law. Litigation strategy must align with business objectives. Before filing suit, parties should consider not only whether they can pursue a claim, but whether doing so advances the outcome they actually seek. Sometimes the litigation itself creates the same risk a party hoped to avoid.
PROTECTING EMPLOYEE CHOICE
At its core, New York’s confidentiality statute is designed to ensure that employees make informed and voluntary decisions regarding confidentiality. This decision reinforces those protections while providing welcome clarity regarding New York’s two-agreement requirement.
We are proud to have secured this outcome for our client and pleased to have contributed to the developing body of law interpreting these important protections. The decision serves as both a significant clarification of New York law and a reminder that legal strategy and business strategy should always work hand in hand.
Authors of this article and the attorneys who handled the litigation:
Dan Braverman – Chair, Employment Department
Curtis Fuller – Associate Attorney
The case is New York County Supreme Civil Term 653037/2025.