Category: Uncategorized

PAGA Reform Likely to Bring Significant Changes to Future Litigation

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In the face of a potential ballot measure threatening the elimination of Private Attorneys’ General Act (PAGA) actions, Governor Gavin Newsom signed Assembly Bill 2288 and Senate Bill 92 into law yesterday (July 1), both of which take effect immediately.

Under the amended laws, employers are expected to finally have some relief from the extreme financial burdens imposed by PAGA. While PAGA will continue to be an avenue for employees and former employees to bring representative actions, these actions and the related penalties will be far more limited. Some of the key changes built into the amended laws are summarized as follows:

1. Plaintiffs must experience a given violation themselves, within the applicable statute of limitations, to bring a PAGA claim. To date, Plaintiffs have been able to bring claims on behalf of others, even if they did not experience the violation personally.

2. Certain penalties will be capped where employers have taken all reasonable steps toward compliance. This incentivizes employers to cure and allows an opportunity to reduce penalties where policies and practice are no longer violative. For example, there will be a 15% cap on penalties for employers who took all reasonable steps toward compliance before receiving a PAGA notice and a 30% cap on penalties for employers who took all reasonable steps toward compliance within 60 days after receiving a PAGA notice. This will be particularly beneficial to help reduce serial litigation against the same employer. There will also be reduced penalties for wage statement violations and violations that only occurred within a limited time period.

3. In addition to civil penalties, Plaintiffs will now be able to seek injunctive relief under PAGA.

4. Courts will now be specifically empowered to rule on manageability concerns which includes limiting evidence at trial and limiting the scope of PAGA claims in a given case. This is particularly important given the dearth of procedural mechanisms to combat these cases.

The amended laws also provide clarification on when larger penalties are permissible and creates other limitations, including on derivative claims. All of these changes should be carefully reviewed, as they will certainly impact future litigation.

While the reform will only apply to civil actions filed after June 19, 2024, we expect that courts may find this action persuasive and consider this change when awarding PAGA penalties with respect to currently pending litigation. That being said, employers should leverage this legal update and the related legislative history to argue for reduced penalties, as possible.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

Don’t Change Those Menus: New Legislation Exempts Restaurants from “Junk Fees” Law

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As business finalize preparations to comply with SB 478 “Junk Fees” law, Senate Bill 1524— recently passed by the California Assembly and Senate and signed into law by Governor Gavin Newsom—creates an exemption for restaurants and other food-related businesses from the new inclusive pricing requirements.

BACKGROUND ON SB 1524

SB 1524, an emergency measure introduced by Senator Bill Dodd—the same senator behind SB 478—was intended to prevent the comprehensive pricing transparency requirements of SB 478 from applying to restaurants, bars, food concessions, grocery stores, grocery delivery services, and menus or contracts for banquet or catering services. Now that it has been enacted, prices on restaurant, room service and food delivery menus and point-of-sale systems will not be required to display all-inclusive pricing. This measure comes in response to concerns raised by the restaurant industry about the practicality and impact of the new pricing rules on their operations.

LEGISLATIVE PROGRESS AND URGENCY

The push to pass SB 1524 was unprecedented and extraordinarily swift. Last week, on June 25, the California Assembly unanimously approved the bill, and two days later, on June 27, it passed the Senate as well. Governor Gavin Newsom signed the measure over the weekend. Given the tight timeline, with the compliance deadline for SB 478 looming on July 1, the legislature’s expedited efforts highlight the urgency of addressing industry concerns.

IMPLICATIONS FOR THE FOOD AND BEVERAGE INDUSTRY

For restaurants and other affected businesses, the enactment of SB 1524 means they can continue to apply mandatory service charges, gratuities, and other fees without including these in the advertised price of individual items, provided these fees are clearly disclosed to consumers before purchase. This approach offers flexibility in covering operational costs such as employee benefits, credit card fees, and other expenses without significantly raising menu prices.

CONCLUSION

The swift legislative movement surrounding SB 1524 reflects the significant impact these pricing laws have on the food and beverage industry. With its enactment, restaurants and other food-related businesses can breathe a sigh of relief.

California’s New “Junk Fees” Law Brings Big Changes for Businesses 

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On July 1, SB 478 takes effect in California, introducing major changes regarding pricing for businesses, particularly those in the hospitality industry. Businesses should begin preparing for these changes immediately to ensure compliance before the effective date that is less than two months away.

Prohibition of “Drip Pricing”

The new law aims to prohibit “drip pricing,” which occurs when a business advertises a price that is less than the actual cost for a good or service. Specifically, it prohibits businesses from “[a]dvertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges” other than government-imposed taxes and fees or reasonable shipping costs.

Applicability and Scope

This mandate applies to the sale of most goods and services, including those offered by hotels and restaurants. The Attorney General’s Office recently published a Frequently Asked Questions guide clarifying that the law’s effects will be significant. Businesses can charge whatever they wish for items sold and services rendered, but advertised prices must include the total cost a consumer will pay, including service fees, automatic gratuities, and the like. As otherwise stated, all charges must be specified up front; however, taxes and other limited fees need not be calculated into advertised prices.

Mandatory Fees in Advertised Prices

Businesses cannot comply with SB 478 by disclosing additional required fees before a transaction is complete. For example, a hotel advertising a room for $100 per night cannot then add resort fees, cleaning fees, or other surcharges to that price, even if the consumer is made aware of these additional costs in advance of payment being issued. Similarly, the cost initially provided to
potential customers for events hosted at hotel properties must include all fees, such as room rental, food charges, and service fees.

Compliance with SB 478 will be particularly tricky for restaurant owners and operators because, going forward, the price of individual items on their menus will have to include any proportionate service fees, automatic gratuities, or other fees charged. Consequently, restaurants may have to increase menu prices to account for these fees.

Automatic Gratuities

With regard to automatic gratuities, these tips have to be designated in the cost of each menu item with a note explaining as much to customers. Likewise, the automatic gratuity must be allocated directly to employees’ wages, necessitating careful calculations to avoid wage claims.
To be sure, restaurants will need to work with point-of-service and payroll service providers to ensure compliance. Alternatively, restaurants can eliminate automatic gratuities, leaving tip amounts to the customer’s discretion, though this could unintentionally result in lower tips for food service employees.

The Attorney General’s Office has indicated it does not intend to focus initial enforcement efforts on fees paid directly and entirely to workers, such as automatic gratuities. That being said, businesses may still be liable in private actions, potentially resulting in significant exposure. To avoid potential liability, businesses should consult with legal counsel to discuss compliance options.

Exclusion of Conditional Fees

Businesses do not need to set forth conditional fees that a consumer may incur, such as fees for smoking in a non-smoking room, in advertised prices. Only mandatory fees must be included.

Conclusion

Without question, SB 478 will present challenges across industries in California, especially the hospitality sector. As such, businesses should begin reviewing their policies and practices now to prepare for the law’s effective date on July 1.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

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The New York Fashion Workers Act Slowly Progressing Forward

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By Warren Koshofer

As a means to regulate modeling and creative agencies and provide basic labor protections to the creative workforce behind the fashion industry—models, influencers, artists, and stylists—the New York Fashion Workers Act (FWA) was introduced by Senator Brad Hoylman-Sigal and Assemblymember Karines Reyes back in March 2022. Recently, legislators in New York amended the bill to require fashion companies to obtain written consent to use a model’s digital replica, as more designers and brands leverage artificial intelligence to supplement traditional photography. The amendment aside, it has been more than two years since the introduction of the FWA and progress toward the legislation becoming law remains slow. Yet for those who are the literal faces of the fashion industry, passage of the FYA cannot come soon enough.

Closing a Loophole

The FWA seeks to address the current treatment of models, influencers, artists, and stylists as “independent contractors” under the terms of the Fair Labor Standards Act. Unlike talent agencies, modeling and creative agencies are considered “management companies” under New York State General Business Law §171(8)—commonly known as the “incidental booking exception,” which allows these entities to escape licensing and regulation. As a result, fashion creatives are generally deprived of basic labor protections.

Along with Paris, Milan and London, New York City is one of the four global fashion capitals of the world, a distinction highlighted every year during the semiannual New York Fashion Week that pumps hundreds of millions of dollars into the local economy. Adding to its stature as a fashion mecca, New York is also home to three of the most prominent fashion design schools in the country: the Fashion Institute of Technology, Parsons School of Design, and Pratt Institute.

By virtue of the importance of the fashion industry to the state, Senator Hoylman-Sigal continues to fight for passage of the FWA, making clear that New York must ensure that models and other creative workers are not exploited and instead are afforded workplace protections that guarantee fair compensation and treatment.

Fairness for Models in Particular

The exploitation of models has been a hot-button topic for years. This is because modeling agencies generally have power of attorney as part of their agreements with models. Consequently, they can accept payments on behalf of models, deposit checks, deduct expenses, book jobs, negotiate rates of pay, and give third parties permission to use a model’s image. This leaves models unprotected outside the terms of their individual contracts that tend to be agency friendly.

For their part, models often wait months to get paid for jobs, and only after commissions (up to 20%) and various other fees are deducted. To make matters worse, young models are frequently crowded into apartments and charged monthly rents that exceed market value—this on top of them being held to exclusive, multi-year contracts without any promise of work or timely payment.

In response, the FWA would, among other things, require modeling agencies to provide models with copies of contracts and agreements, notify formerly represented models when royalties are collected on their behalf, and protect models’ health and safety, including by establishing a zero-tolerance policy for abuse. Bigger picture, the bill, as proposed, would impose a fiduciary duty on these agencies to act in the best interests of the talent.

Affirmative Obligations

The FWA would also force the discontinuation of certain offensive existing practices; among them, imposing powers of attorney as a necessary condition for models to obtain contracts, collecting signing fees or deposits from models and interest on their earnings, charging more than fair market rates for rent, deducting fees or expenses beyond agreed upon commissions, renewing contracts without a model's affirmative consent, insisting on commissions greater than 20% of a model's compensation, taking retaliatory actions against models for filing complaints, and engaging in discrimination or harassment of any kind.

Likewise, the FWA would require clients hiring models to provide overtime pay and meal breaks for work that exceeds eight consecutive hours and liability insurance to cover the health and safety of models. Pursuant to the FWA, clients additionally would be compelled to allow models on the job to be accompanied by chaperones and otherwise adhere to zero-tolerance policies in terms of abuse.

The Clock Is Ticking

Just last month, the New York Senate Labor Committee passed the FWA for the third year in a row. Now, the Model Alliance, which co-sponsored the bill, is urging state lawmakers to pass the FWA in both chambers before the legislative session ends in June. While ambitious in timing, it seems that there is room for optimism. Indeed, the FWA, like the New York Fashion Sustainability and Social Accountability Act, is gaining momentum as lawmakers in New York are poised to reshape the fashion industry.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations. 

 

 

Is the New York Fashion Sustainability and Social Accountability Act Gaining Steam?

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By Warren A. Koshofer

The New York Fashion Sustainability and Social Accountability Act (Fashion Act) is back on the agenda of the New York State Legislature. Introduced in 2022, and then reintroduced in 2023, the bill seeks to level the playing field among fashion companies by requiring improved due diligence on both environmental and human rights issues. The Fashion Act would not only govern companies based in New York, but also those that sell product in New York. In essence then, every major fashion company would be affected by its passage. Suffice to say the legislation is no small matter to the $2.5 trillion fashion industry.

If the Fashion Act is ultimately signed into law, apparel, footwear, and handbag companies with global revenue of $100 million or more would have to map out their entire supply chain, undertake mandatory due diligence, commit to science-based targets to reduce greenhouse gas emissions, and publish details on their management of chemical usage.

The Justification for Legislative Action

Sponsors of the Fashion Act stress the fashion industry has an enormous environmental and social footprint as a leading greenhouse gas emitter, user of industrial chemicals, and exploiter of global labor. Specifically, they cite that the sector is responsible for up to 8% of the world’s greenhouse gas footprint, and project this to increase dramatically as new “fast fashion” industry players like Shein continue to thrive. So too, they cite that the fashion space is a significant user of chemicals, with manufacturing processes in textile mills resulting in toxic waste. That waste, if mismanaged, can not only impact textile workers’ health but can also be released to local waterways impacting surrounding communities. Finally, backers point to the fashion industry’s heavy reliance on cheap labor to produce goods leads to exploitation ranging from underpayment to poor working conditions to physical abuse of the child or predominantly female workforce.

Those supporting the bill also stress that it is needed to “level the playing field,” as those fashion companies who are voluntarily acting responsibly as environmental and social stewards are at a significant competitive disadvantage. Their operational and production costs are necessarily higher than those fashion companies that emphasize the bottom line over the environment, sustainability goals, and labor impacts. A case in point is the rapid success of new fast fashion players like Shein, which is taking over market share as it doubled profits last year to more than $2 billion by offering products to an impulsive consumer base at rock bottom prices and nearly instantaneous production which largely remains unchecked.

Compliance & Enforcement

The New York Department of State, working alongside relevant state agencies, would be tasked with developing regulations to guide fashion company compliance with the Fashion Act and enforcement would fall to the New York Attorney General, or the Attorney General's designated administrator. Companies found to be out of compliance, and which do not remedy that non-compliance within three months of notice, could be fined up to 2% of annual revenues. The revenue generated by such fines would go toward environmental benefit or worker protection programs.

Gathering Momentum

The Fashion Act, which has been languishing in the New York State Legislature for two years, seems to be gaining steam. Indeed, backers say the legislation has renewed momentum, but still faces a battle to compete for attention with other pressing issues during this busy 2024 election year. The momentum is calculable as fashion brands and celebrities alike throw support to passage of the Fashion Act.  For example, Angelina Jolie’s fashion label, Atelier Jolie, has recently joined the ever-growing list of companies supporting passage. Other leading companies that would themselves be regulated by the Fashion Act but are nevertheless behind it include Stella McCartney, Patagonia, Eileen Fisher, Ganni, Mara Hoffman, Reformation, Thrilling, Another Tomorrow, L’Estrange, and Everlane. Celebrity support is driven by the likes of Leonardo DiCaprio, Rosario Dawson, Jane Fonda, Cameron Diaz, Andie MacDowell, Ciara, Russell Wilson, and Zooey Deschanel, all of whom are lending their endorsement to the Fashion Act.

Is Now the Time That New York Regulates Fashion?

The short answer: this remains to be seen.

Many claim the Fashion Act seeks to impose a heavy burden on fashion companies, particularly smaller ones. The legislation’s extensive supply chain due diligence requirements, under which fashion companies would be required to identify, cease, prevent, mitigate, and account for actual and potential adverse impacts to human rights and the environment in their own operations and supply chain, are significant. Likewise, the requirement to perform mandatory due diligence, coupled with independently verified disclosure, around wages is viewed as a daunting task.

At the same time, some critics claim that the bill does not go far enough. They assert that the Fashion Act in its current form does not provide a means to hold fashion companies accountable for the damages they cause. These critics highlight that the legislation only requires the disclosure of information on supply chains, not actual improvement of their sustainability. Accordingly, naysayers suggest that the Fashion Act is too focused on how a fashion company communicates its targets and operations, rather than on how it will actually achieve remedial goals.

In addition, critics note it is unclear how the science-based targets to reduce greenhouse gas emissions would be monitored, as the Fashion Act does not obligate fashion companies to act on the targets or attempt to hit them. And finally, those critical of the bill state that while it asks companies to disclose 50 percent of their supply chain, the legislation does not specify which part of the chain they should detail, allowing room for interpretation and the ability to be selective in what information fashion companies actually share—giving rise to concerns that the Fashion Act is weaker than similar measures being undertaken in France and other countries.

A Reason for Optimism

While passage of the Fashion Act continues to be stalled by a busy New York State legislative agenda and concerns about whether there is too much or not enough teeth in the bill, winds are blowing in a favorable direction. Indeed, momentum seems to be growing for New York to reshape the fashion industry with the passage of the Fashion Act in an effort to foster a more sustainable, ethical, and socially responsible fashion ecosystem.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations. 

Closing the Loophole: The Foreign Extortion Prevention Act

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By Omer Er

On December 14, 2023, a significant stride was made in the battle against global corruption when the U.S. Congress passed the Foreign Extortion Prevention Act (FEPA). This landmark legislation addresses a critical gap that has long existed within the framework of the U.S. Foreign Corrupt Practices Act (FCPA).

The FCPA, a cornerstone in the fight against corruption, prohibited U.S. companies and individuals from engaging in the act of offering bribes to foreign officials. Despite its broad scope, a glaring omission was evident: it did not tackle the demand side of bribery, leaving a loophole that could be exploited. This contrasts sharply with the anti-corruption laws of other nations such as the UK, France, Germany, and Switzerland, which address both sides of the bribery equation.

FEPA has now boldly stepped in to criminalize the demand side of bribery, marking a watershed moment in legal and ethical standards for international business operations.

The Jurisdictional Reach of FEPA

FEPA extends its jurisdictional arm to cover bribery demands made by foreign officials directly to issuers of U.S. securities, U.S. domestic concerns, or any person on U.S. soil. These demands could be in exchange for any act or omission in their official capacity that confers a business-related benefit. This broad reach ensures that FEPA has the muscle to tackle corruption head-on, regardless of where it occurs.

Who Counts as a Foreign Official?

Under FEPA, the definition of a 'foreign official' is both detailed and expansive, building on the foundation laid by the FCPA. It includes not just officials of foreign governments and public international organizations, but also individuals acting in any official capacity on their behalf. Furthermore, it encompasses senior foreign political figures, their family members, executives of government-owned businesses, and even those acting unofficially for or on behalf of foreign entities. Despite certain challenges due to diplomatic and other immunities, this broad definition is a crucial tool in the U.S. prosecutors' arsenal, allowing them to address a wide range of corrupt practices.

The Consequences of Violating FEPA

The stakes for violating FEPA are high, with the law imposing severe penalties. Individuals found guilty of breaching its provisions face up to 15 years in prison, alongside a hefty fine that could reach $250,000 or three times the value of the bribe involved. These stringent consequences underscore the U.S. government’s fight against international corruption.

Implications for Businesses

The enactment of FEPA signifies a clear commitment to combating international corruption. This development necessitates that companies revisit and, if necessary, update their FCPA compliance programs to align with the new legal landscape. It is imperative that businesses educate their employees about FEPA’s provisions to ensure full compliance and avoid the severe repercussions of law breaches.

A New Chapter in the Fight Against Corruption

FEPA represents a bold step forward in the global fight against corruption. By closing a critical loophole in existing legislation, it strengthens the hand of those working to maintain integrity in international business practices and foster a corruption-free world.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations. 

 

 

Sustainability and Circularity: Priorities in the Luxury Goods Industry

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By Warren Koshofer and Prachi Ajmera

The world’s top 100 luxury goods companies experienced substantial growth in 2023, recording a 13.5 percent year-over-year increase in composite sales, reinforcing their prominence and profitability. This coincides with an industry-wide push to promote environmentally responsible practices within the fashion space, according to the Global Powers of Luxury Goods 2023 report published by Deloitte this past January—a report that underscores the growing integration of digital technology and artificial intelligence as catalysts for sustainability.

Indeed, major luxury brands are actively embracing the circular economy and prioritizing sustainability in their core strategies and Environmental, Social, and Governance (ESG) criteria. Notably, Prada recently joined the Sustainable Markets Initiative’s Fashion Task Force, alongside other industry giants like Burberry, Brunello Cucinelli, and Giorgio Armani. This coalition is dedicated to advancing sustainability initiatives in fashion, including the development of the Digital Product Passport, which provides consumers with transparency regarding a product's origin, sustainability credentials, ownership history, and recycling information.

To their credit, luxury companies are diligently monitoring their sustainability commitments and objectives such as net-zero targets and supply chain traceability are being increasingly driven by consumer awareness of ESG matters. This heightened sensitivity is influencing product offerings, prompting luxury brands to explore environmentally friendly materials and adopt sustainable practices throughout the product lifecycle, epitomizing the concept of "sustainable by design."

Government regulations and reporting requirements are also shaping the sector's transition to environmental responsibility. The proposed New York Fashion Sustainability and Social Accountability Act, for instance, would mandate companies with annual revenues exceeding $100 million disclose global supply chain maps and chemical management details, with non-compliance subject to penalties.

Challenges Persist

The fashion industry has long been criticized for the environmental impact of its production processes and consumption practices—and skeptics remain. The rise of "instant fashion," characterized by “mobile commerce, AI, live shopping and real time, real-cheap product creation,” as dubbed by Harvard Business Review, poses environmental risks due to increased carbon emissions and water contamination. Exhibit A: Shein, the instant-fashion leader and a company that thrives on an impulsive consumer base and a data driven supply chain model that strives (and succeeds) at meeting the demands of its consumers by offering products at rock bottom prices and nearly instantaneous production. While surveys indicate that consumers seek more environmentally conscious products and fashion companies desire to meet these demands through sustainability and related efforts, there has been little progress toward those ends, as suggested in a recent Harvard Business Review article. So too, there is undeniable profitability in the Shein “fast fashion” model. Case in point, Shein doubled its profit last year to more than $2 billion and awaits approval from U.S. and Chinese regulators as it prepares for what is expected to be the biggest IPO of the year.

Nevertheless, luxury brands are adapting to evolving consumer preferences by exploring avenues like the second-hand market to extend product lifecycles and appeal to environmentally conscious consumers. These companies are discovering how the preowned category can help extend the lifetime of products and increase the relevance of their brands among younger, more environmentally conscious consumers. To be sure, investments in digitalization and innovative business models, such as resale and rental, underscore the industry's commitment to sustainability and resource efficiency.

These transformations align with broader shifts in the luxury market, including younger generations driving consumption and online platforms emerging as primary channels for high-end purchases. Moreover, efforts to appeal to environmentally conscious consumers are evident in the luxury industry's focus on developing sustainable biomaterials and refining sustainable practices across the value chain.

Conclusion

The likes of Shein notwithstanding, the shift in the fashion space towards sustainable practices, transparency and circular economy principles represents a straight line to a more responsible future. As luxury brands continue to adapt to regulatory pressures and consumer demands, the integration of sustainability into their core operations will be crucial for their continued success and environmental stewardship.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations. 

 

 

Delta’s Legal Challenge: The High Cost of Ignoring Workplace Reimbursement Policies

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By Marc Jacobs

Late last month, Delta Air Lines was on the receiving end of another class action lawsuit concerning a common workplace policy that most businesses face. In Garnett v. Delta Air Lines Inc., a Private Attorneys General Act (PAGA) representative suit, the plaintiff (Garnett) claims that the company failed to reimburse him and his colleagues for work-related use of their personal cellphones necessary to perform their job responsibilities.  

Garnett's action on behalf of all aggrieved Delta employees (estimated at more than 90,000 in 2022) alleges violations of California Labor Code § 2802, which requires that employees be reimbursed for expenditures necessary to carry out their job duties. By way of the lawsuit, it is alleged that Delta requires employees to use their personal cellphones and computers for business-related purposes without reimbursement. 

The potential liability to Delta is significant. The litigation seeks statutory penalties ($100 for the initial breach and $200 for each subsequent breach thereafter per employee, per pay period), prejudgment and post-judgment interest, litigation costs, and attorney fees. Assuming Delta has an employee count north of 90,000, the case subjects the company to hundreds of millions of dollars of aggregate exposure (estimated at as much as $468,000,000 for every year this practice persisted). 

Key Takeaway #1: Even small employers can face massive damages if found to be in violation of Section 2802. A company with only 10 employees that failed to reimburse them for the business use of personal cellphones would face upward of $52,000 in penalties (not counting prejudgment interest owed, the actual cost of reimbursement and attorneys’ fees) for each year the practice persisted.  

Key Takeaway #2: With more businesses permitting remote work, attention to business expense reimbursement policies is critical. This is especially true in the wake of the decision in a case called Thai v. IBM, in which it was determined that an employer is required to reimburse an employee “for all necessary expenditures …incurred by the employee in direct consequence of the discharge of his or her duties.”  

Key Takeaway #3: Lawsuits like the one initiated against Delta, which are entirely avoidable, illustrate how important it is for companies to have skilled employment counsel with particular experience in wage and hour compliance. 

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations. 

 

 

Further Restrictions on Release Agreements Involving Discrimination, Harassment and Retaliation Claims in New York

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By Lara Shortz & Ally Miller

Last month, Governor Kathy Hochul signed an amendment to New York law that adds restrictions on certain release agreements executed in the state. This move is of real importance to companies doing business in New York and impacts agreements entered into on or after November 17, 2023.

The law, as amended, makes a release based on a claim for unlawful discrimination, harassment or retaliation unenforceable when, as part of the agreement resolving such a claim:

(a) the complainant is required to pay liquidated damages for violation of a nondisclosure or non-disparagement clause;

(b) the complainant is required to forfeit all or part of the consideration for the agreement for violation of a nondisclosure or non-disparagement clause; or

(c) the release 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.

While existing restrictions (those in effect prior to the amendment) applied only to “any settlement, agreement or other resolution of any claim,” the new restrictions attach to a “release of any claim.” This is much broader language that courts, in the coming months, are sure to interpret and clarify. In the meantime, it is unclear whether the newly amended law is intended to apply to separation agreements in addition to settlement agreements.

It is important to understand that the new restrictions are in addition to the existing restrictions in place for releases in settlement agreement executed in New York; specifically, those that relate to claims of discrimination, harassment or retaliation. Pursuant to these prior restrictions, a release for any such claim cannot include a nondisclosure agreement unless the employee requests one.

Under the revised version of the law (Section 5-336 of the New York General Obligations Law), an employee must be given up to 21 days to consider a nondisclosure provision in pre-litigation matters. As otherwise stated, the amendment now allows an employee to sign prior to the end of the 21-day consideration period, should he/she/they choose. However, under Section 5003-B of the New York Civil Practice Law & Rules, which is unchanged, an employee must wait 21 days before signing an agreement containing a nondisclosure provision when a claim has been filed in court. In either scenario, the employee may also have 7 days after signing to revoke his/her/their agreement.

By virtue of the updated law, employers should immediately review their releases—including those set forth in separation and settlement agreements—to ensure compliance.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

Required Use of New Form I-9 Just Weeks Away

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By Lara Shortz & Ally Miller

During onboarding, new hires in the U.S. are required to complete Form I-9 and present proper documentation to allow employers to verify their identity and employment authorization. Beginning next month on November 1, a new version of Form I-9 must be used, which can be found on the U.S. Citizenship and Immigration Services (USCIS) website, here. Of note, although mandatory use of the new Form I-9 begins on November 1, employers may begin using it immediately or any time prior to that date.

Until now, I-9 verification documents (driver’s licenses, passports, social security cards, etc.) had to be reviewed in person. While employers may continue to inspect all I-9 documentation in person should they choose, the new Form I-9 allows for a remote verification option— for employers enrolled in and in good standing with E-Verify. To use remote verification, eligible employers must adhere to the following procedure:

1. Ensure enrollment in—and good standing with—E-Verify.

2. Engage via live video with the given employee to verify that the verification documentation presented “reasonably appears to be genuine and related to the individual.” More specifically, employers should examine all Form I-9 documents (including the front and back of any double-sided documents) to confirm authenticity and that they match the information entered by the given employee in Section 1 of Form I-9.

3. Complete Section 2 of Form I-9 and check the box indicating that an alternative procedure was used to examine I-9 documentation. The date of examination (i.e., the date an employer performed a live video interaction as required under the alternative procedure) should be added to the Section 2 Additional Information field on the Form I–9.

4. Retain a “clear and legible” copy of the verified documentation (including the front and back of any double-sided documents).

5. Create a case in E-Verify (for new hires).

It is important to understand that employers should use the alternative, remote procedure consistently for either all employees at a given worksite or use it only for remote employees. If the procedure is not applied consistently, discrimination claims may arise.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.