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December 8, 2023 | EmploymentLitigationNew York

New York’s New Law: Settling an Employment Discrimination Claim with Confidentiality Obligations

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Author(s)
Ellie Sanders

Graduate Law Clerk

On November 17, 2023, New York Governor Kathy Hochul approved a new law, Bill S4516, which amends Section 5-336 of the New York General Obligations Law and adds further restrictions on settlement agreements relating to discrimination claims.  Both employers and employees should take care to familiarize themselves with their new rights and obligations under Bill S4516.  If you have questions about how this law impacts you, a qualified employment attorney can help provide tailored guidance based on your circumstances.

Immediate Implementation: Applies to Agreements After November 17, 2023

The new law, effective immediately, applies to all agreements signed or entered into after November 17, 2023.

Expands the Scope of Employee Protection

Previously, New York law prohibited employers from including certain provisions in settlement agreements related to discrimination claims.  With the passage of this new law, now these restrictions also apply to harassment and retaliation claims, including those made by independent contractors.

Confidentiality Provisions

The law currently prohibits employers from including provisions in pre-litigation settlement agreements that prevent the disclosure of the facts and circumstances of discrimination, harassment, or retaliation claims unless the employee prefers confidentiality.  Further, these confidentiality provisions are only valid in a settlement agreement if the employer presents them clearly to the employee in a separate agreement and gives the employee 21 days to consider signing.  Under current law there is a requirement that the employee must wait a full 21 days before signing this separate agreement, but now the employee may waive the 21-day waiting period at any point within that timeframe.

It is important to note that the newly approved amendment does not apply to Section 5003-b of the Civil Practice Law and Rules, which requires that employees wait the full 21 days to confirm their preference for confidentiality in any settlement agreement resolving a claim that has been filed in court.  In other words, the new law allows employees to waive the 21-day waiting period when signing a pre-litigation settlement agreement, but if the employee is seeking to settle a claim already filed in court, they must wait the 21 days before signing a settlement agreement with a confidentiality provision.

The employee may express their preference for confidentiality, as noted above, by signing a separate agreement, with a mandatory seven-day revocation period.  This revocation period allows the employee to sign a confidentiality agreement or nondisclosure agreement in connection with their settlement agreement, and then revoke their consent to confidentiality within seven days from signing.  If the employee revokes consent within the seven-day period, the employer must remove that clause from the settlement agreement.

Voiding Releases: Conditions for Invalidation

The law also voids releases of discrimination, harassment, or retaliation claims if the employee has to pay liquidated damages, forfeit consideration, or make an affirmative statement denying unlawful discrimination.  In simpler terms, if these conditions are in the settlement agreement, the release becomes invalid.

Impact on Settlement Dynamics

This new law introduces more requirements for employers seeking confidentiality in settling discrimination, harassment, and retaliation cases.  It may impact settlement dynamics, as the enforcement of non-disclosure and non-disparagement clauses could be challenging without certain provisions.  The law suggests that employers specify in these clauses how a breach would harm their business to strengthen claims for damages.

However, with the law voiding releases containing certain provisions, employers might be hesitant to pay for confidentiality or non-disparagement without clear enforcement mechanisms.  This could lead employers to reconsider requesting these clauses, especially when such requests often result in reciprocal demands from employees.

Conclusion

This new law impacts both employees and employers in New York.  Employees should consider what their New York discrimination claim is worth before signing a settlement agreement with their employer.  Employers should review their standard settlement agreements, as certain provisions are prohibited under this new law.  Because this new law applies as of November 17, 2023, it is a good time for employers to reevaluate their policies and handbook to ensure compliance.  For more information about how Bill S4516 affects you, reach out to a member of our team.

 

 

Photo by Sebastian Herrmann on Unsplash

 

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