If you were not aware, back on November 17, 2023, Governor Kathy Hochul signed significant amendments to New York’s General Obligations Law § 5-336, impacting how confidentiality provisions (also known as non-disclosure agreements or NDAs, whether separately or within settlement or other agreements) can be structured in settlements involving claims of discrimination, harassment, or retaliation.
Here’s what business leaders and employers need to know:
Key Changes in Confidentiality Provisions
- No More Penalties for Violating NDAs. Previously, employers often included liquidated damages clauses or clawback provisions in settlement agreements to deter breaches of confidentiality terms. Now, such provisions are expressly prohibited.
Employers can no longer:
- Require employees to pay liquidated damages for breaches of confidentiality.
- Claw back or require repayment of settlement funds if confidentiality provisions are breached.
Agreements containing these prohibited provisions will be considered unenforceable, although employers will still be required to pay any settlement amounts agreed upon. Damages for breach of the agreement may still be awarded to the employer, however.
- Removal of Mandatory Affirmative Statements. Employers can no longer require employees to include statements denying that discrimination, harassment, or retaliation occurred as part of the settlement. This means employers should carefully review and remove such language from any agreements.
- 21-Day Consideration Period Is Now Waivable. Previously, employees were required to wait a full 21 days to consider the confidentiality terms of a settlement agreement. Now, in pre-litigation situations, employees can choose to waive this period, potentially speeding up settlement resolutions. However, if a discrimination claim is already filed in court, the full 21-day consideration period remains mandatory.
- Independent Contractors Are Now Included. New protections now explicitly extend to independent contractors. Like employees, they are now covered under these NDA restrictions, reflecting broader legal trends toward increased protection for non-traditional work arrangements.
Implications and Recommended Next Steps
These amendments alter the landscape of confidentiality agreements in New York. Employers should immediately:
- Review and update all settlement, separation, and severance agreement templates involving discrimination, harassment, or retaliation claims.
- Remove liquidated damages, clawback provisions, and any affirmative disclaimers about discrimination.
- Include a clear notice of employee rights to speak with government agencies, now specifically including the attorney general, within confidentiality provisions.
Practical Considerations
While these changes enhance employee protections, they may also raise concerns about how employers can effectively protect their interests against breaches of confidentiality. It’s important to work with legal counsel to develop alternative approaches that remain effective and legally compliant.
Conclusion
These updates aim to balance the power in settlement negotiations between employers and employees, encouraging transparency and fairness. Employers must proactively adapt their agreements to maintain compliance and effectively manage workplace disputes involving sensitive claims . And executives should be aware of these changes as well as they tend to issue the agreements and are largely recipients of such agreements; .
If you have questions about adapting your agreements or navigating these legal changes, contact us, our experienced litigation attorneys are here to help you craft solutions aligned with current laws and best practices. You may learn more about us and how we operate by visiting these pages: About Us and What Sets Us Apart.
If you are interested in this topic, here are a few related blog posts from our firm:
Understanding NDAs and Damages: Protecting Your Assets and Reputation in High-Stakes Disputes
Understanding the Recent Changes to Independent Contractor Regulations
This blog post is for informational purposes only and does not constitute legal advice. For specific legal counsel, please contact our office directly.