In 2019, largely in response to the #MeToo movement, the New York Legislature amended the New York General Obligations Law to prohibit the use of a non-disclosure provision in any document resolving a claim in which sexual harassment was alleged. This prohibition did not apply, however, if the complainant chose to include the non-disclosure language in the document and then signed the agreement after a specified waiting period. In response to numerous complaints regarding the statute, the law was amended on November 17, 2023.
The 2019 legislation (Section 5-336) required that the employee take 21 days to decide whether to sign a document with a non-disclosure provision and provided an additional seven days after signing to change his or her mind. The result was that frequently the payments that were part of the resolution were not received by the employee for up to 28 days after an agreement in principle was reached. Section 5-336 also did not prohibit employers from including provisions for liquidated damages and forfeiture of the amounts paid under the agreement if the employee were to breach the agreement.
The amendments change the law in three key areas. First, the statute now provides that the 21-day consideration period is waivable by the complainant unless a discrimination claim is being resolved in a matter which had been filed in Court, where the 21-day period is not waivable. The seven-day revocation period remains but the employee can now receive payments sooner if he or she waives the consideration period.
Second, the statute now applies not only to employees, but also to independent contractors who previously had not been covered by the statute. This amendment makes the statute consistent with the New York State Human Rights Law which was amended in 2019 to protect both employees and independent contractors from discrimination, discriminatory harassment and retaliation.
The third and most important change is that employers that are resolving claims of unlawful discrimination (including discriminatory harassment or retaliation for reporting discrimination) are no longer permitted to include terms or conditions which require the employee (or contractor) to:
- Make an affirmative statement that the complainant had not been subject to unlawful discrimination, harassment or retaliation.
- Forfeit some or all of the payment he or she received in the event he or she violates the non-disclosure or non-disparagement clauses.
- Pay liquidated damages in the event of a violation of those clauses.
The statute further states that a release contained in any agreement which includes any of the above prohibited terms would be unenforceable.
These amendments do not permit employees to disregard their obligations under settlement agreements. Indeed, employers who can prove they have been damaged by a breach of a non-disclosure and/or non-disparagement provision can still pursue claims for such breach in court. However, they can no longer include agreed upon liquidated damage amounts or “clawback” (forfeiture) provisions and will be required to establish their actual damages.
The amended law appears to be a further attempt to level the playing field between an employer and an employee who claims discrimination.
If you are either an employee or employer and need help with a settlement agreement contact one of our attorneys.