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.