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Heads up, New York employers. New York recently expanded its #MeToo statute to bar some of the most common terms for which employers bargain in settlement agreements involving claims of discrimination, harassment or retaliation. On November 17, 2023, Governor Hochul signed S4516 into law, amending Section 5-336 of the General Obligations Law (“GOL”) (New York’s #MeToo statute) so that settlement agreements involving claims of discrimination, including discriminatory harassment or retaliation, cannot:  

  • Require the complainant to forfeit any consideration for the agreement if the complainant violates the nondisclosure or nondisparagement clause;
  • Require the complainant to pay liquidated damages if the complainant violates the nondisclosure or nondisparagement clause; or
  • Include or require an affirmative statement, assertion, or disclaimer that the complainant was not subject to unlawful discrimination, including discriminatory harassment or retaliation.

If settlement agreements contain these provisions, the complainant’s release is unenforceable (but the employer may still have an obligation to pay the settlement amount). The new law is effective as of November 17 and applies to all agreements entered on or after that date.

Other changes under S4516 for employers to know

21-day consideration period for complainant’s confidentiality preference can be waived

Under Section 5-336, New York employers are prohibited from including (or requiring to be included) in a settlement agreement any provision requiring nondisclosure of the underlying facts and circumstances of a sexual harassment or other employment discrimination claim, unless the condition of confidentiality was the complainant’s preference. If the complainant prefers confidentiality, certain steps are required (and this is where employers will see a change under S4516).

  • Before S4516, the complainant had to wait 21 days (the “consideration period”) before entering into a confidentiality agreement. If after the consideration period the complainant wished to move forward with confidentiality, the parties were required to enter into a separate agreement that memorialized the complainant’s preference for confidentiality and incorporated the preference into the larger settlement agreement. The complainant had 7 days in which to revoke the confidentiality preference before it became binding.
  • Under S4516, complainants can now waive the 21-day consideration period if they choose–but the requirements of a separate preference agreement and 7-day revocation period remain. Significantly, however, employers should note, for settlement agreements resolving employment discrimination claims in litigation, Section 5003-b of New York Civil Practice Law & Rules (CPLR) still requires a full 21-day review period before an employee signs an agreement containing a provision preventing the disclosure of underlying facts and circumstances of the discrimination claim.

Certain protections extended to independent contractors–and employers must notify complainants of a right to contact the Attorney General

In addition, under the existing provisions of Section 5-336, any provision in an agreement between the employer and employee / potential employee preventing the disclosure of factual information related to any future claim of discrimination is unenforceable unless the provision notifies the employee / potential employee that it does not prohibit the complainant from speaking with law enforcement, the Equal Employment Opportunity Commission (EEOC), the New York State Division of Human Rights, a local human rights commission, or an attorney employed by the employee / potential employee.

Now, under S4516, these protections apply to independent contractors as well. And employers must now also notify employees, potential employees and independent contractors of their right to speak to the Attorney General (in addition to the parties referenced above).

Takeaways

  • Employers must ensure that any template settlement agreements, agreements in progress or future agreements do not include liquidated damages clauses, forfeiture clauses, or clauses stating that the complainant was not subject to unlawful discrimination, including discriminatory harassment or retaliation. The inclusion of such clauses will now render the release of claims of discrimination, harassment, or retaliation unenforceable–but may not affect the employer’s obligation to pay the settlement amount.
  • Employers should ensure any template agreements used with employees, potential employees and independent contractors preventing the disclosure of factual information related to future claims of discrimination are updated to comply with the changes under S4516 (including notification of the right to speak to the Attorney General).
  • Employers should be careful to differentiate between the 21-day consideration period provided under S4516 for a complainant preferring confidentiality in a release agreement (which can now be waived) and the 21-day consideration period required under Section 5003-b of CPLR for employees resolving employment discrimination claims in litigation or in an administrative proceeding (which cannot).

For any questions related to S4516, please contact your Baker McKenzie attorney.