Before Bill S4516 was ratified, Section 5-336 of the New York General Obligations Law prevented a settlement agreement from containing any provision that prevented facts of a discrimination claim from being disclosed. There was an exception, however, if the employee wished to maintain their confidentiality, after being afforded a non-waivable 21 days and an additional 7-day revocation period to consider such restriction. Section 5-336 originally only applied to employees and not independent contractors. As a result of Bill S4516, harassment, and retaliation are now considered as part of the law, in addition to discrimination claims. The 21-day period also may now be waived if a court action has not yet been filed. Moreover, independent contractors are now covered under the law.
Bill S4516, which amended Section 5-336 of the New York General Obligations Law, was signed into law on November 17, 2023. Both employers and employees should take care to familiarize themselves with their new rights and obligations under Bill S4516. If you have questions about how this law impacts you, a qualified employment attorney can help provide tailored guidance based on your circumstances.
The following new additions apply to all settlement agreements that were entered into on or after November 17:
- Harassment and Retaliation Claims Now Included: While Section 5-336 originally only applied to discrimination claims, Bill S4516 now encompasses claims made relating to harassment and retaliation.
- Independent Contractors Now Included: Section 5-336 originally only applied to employees, but now Bill S4516 allows independent contractors to qualify under the law.
- Employees Allowed to Waive 21-Day Signing Period: Section 5-336 mandated that all employees must be given 21 days to sign any proposed release agreement. As a result of Bill S4516, employees are now permitted to waive the 21 day period and sign whenever they please within the three week period. It is important to note, however, that this does not affect any claims that were filed in court, as per CPLR 5003-B.
The Bill’s Effect on Release Agreements
Bill S4516 now makes release agreements unenforceable if any of the following language is included within the agreement:
- Requiring the employee to pay liquated damages should the employee breach the nondisclosure clause;
- Requiring the employee to “forfeit all or part of the consideration for the agreement” should they breach the nondisclosure clause; and
- Requiring the employee to attest or affirmatively state that they were not subject to any harassment, discrimination, or retaliation.
What Employers Should Do
As a result of the changes outlined above, employers must ensure that they are in compliance with the new laws. First, employers should ensure that any release agreements with employees that were entered into on or after November 17, 2023, are free of any potentially problematic language. As explained above, any language that would require an employee to pay liquated damages or forfeit consideration of the agreement if they breach the non-disclosure provisions must be removed. Additionally, all employers should not include any language requiring an employee to attest that they were not subject to harassment, discrimination, or retaliation.
To ensure compliance with the new law, employers should be sure to update their settlement and severance agreements as well as applicable internal policies.
Conclusion
Ultimately, Bill S4516 has made some important changes to the laws surrounding release and non-disclosure agreements. All employers and employees asked to sign such an agreement should familiarize themselves with the changes. Any language as mentioned above should be removed and avoided. Employers should keep in mind that if they retain independent contractors, these new laws will also affect them. Contact one of our experienced employment attorneys today to help.
Contributions to this blog by Dylan Diamond.
