New York imposes significant restrictions on non-disclosure and non-disparagement provisions in release agreements
At a glance
- The new law prohibits the use of certain commonly found provisions in release agreements.
- Under the law, it is now possible to waive the 21-day consideration period prior to litigation.
- The law extends to independent contractors.
- Employees must be notified of their right to contact an attorney or other official about a provision that seeks to prevent disclosure of certain information about discrimination.
On 17 November 17 2023, New York Governor Kathy Hochul signed into law Senate Bill S4516, which amends Section 5-336 of the New York General Obligations Law to further restrict the use of non-disclosure and non-disparagement provisions in release agreements involving claims of discrimination, harassment, or retaliation. The new law went into effect immediately and applies to any agreements entered into on or after 17 November 2023.
Our alert discusses the implications of this new law.
The new law prohibits the use of certain commonly found provisions in release agreements.
Senate Bill S4516 renders unenforceable the release of “any claim, the factual foundation for which involves unlawful discrimination, including discriminatory harassment, or retaliation,” if any of three prohibited provisions are “part of the agreement resolving such claim”:
- “the complainant is required to forfeit all or part of the consideration for the agreement for violation of a non-disclosure clause or non-disparagement clause”
- “the complainant is required to pay liquidated damages for violation of a non-disclosure clause or non-disparagement clause” or
- “it 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.”
It is unclear whether these prohibitions will apply either to asserted claims that are being resolved by a settlement and release agreement or to an employer’s standard separation and release agreement in situations where such claims might be asserted in the future, or both.
Under the new law, it is now possible to waive the 21-day consideration period prior to litigation
The new law amends the portion of New York General Obligations Law § 5-336 that prohibits employers from including in any settlement agreement a provision requiring confidentiality of the underlying facts and circumstances of a discrimination, harassment, or retaliation claim, unless the confidentiality provision is the employee’s preference, and the employee is given 21 days to consider the confidentiality provision and 7 days to revoke it.
Previously, § 5-336 required an employee to wait the full mandatory 21 days before entering into a confidentiality agreement (without waiving any part of this period, even if represented by counsel). However, the amendment now allows employees to sign the agreement sooner, stating that “the complainant shall have up to 21 days to consider” a confidentiality provision.
The new law does not amend Section 5003-B of the New York Civil Practice Law & Rules. This section, which applies to pending litigations, still mandates that employees wait the full 21 days before signing an agreement containing a non-disclosure provision that would prevent the disclosure of the underlying facts and circumstances of any discrimination, harassment, or retaliation claim. This means that, if the settlement agreement resolves claims in litigation, employees are required to wait a full 21 days before signing an agreement with a non-disclosure provision.
The new law extends to independent contractors
The amendment broadens the scope of New York General Obligations Law § 5-336 to cover independent contractors in addition to employees and potential employees. Accordingly, § 5-336 now governs any covered settlement agreement with an independent contractor.
Under the new law, employees must be notified of their right to contact the Attorney General
S4516 now requires employers to notify employees of their right to contact the New York Attorney General, law enforcement, the Equal Employment Opportunity Commission (EEOC), the state or local commission of human rights, or an attorney retained by the employee or potential employee, in connection with any provision that would otherwise “prevent[] the disclosure of factual information related to any future claim of discrimination.” Failure to include this notification would make the underlying provision “void and unenforceable.”
New York employers are strongly encouraged to review any release agreements drafted after 17 November 2023, to ensure compliance with these amendments.
