New Laws Affecting Non-Disclosure Provisions in Employment-Related Settlement Agreements in 2024

I am often told by clients when settling employment-related discrimination claims to "make sure there is a non-disclosure provision in the agreement!"  Meaning, employers typically do not want the terms of any settlement they reach with an employee to be disclosed publicly.  Well, New York has now recently passed a number of amendments to its non-disclosure law, NY General Obligations Law 5-336, that will affect the way these settlement agreements are drafted. 

First, the law now also covers claims of harassment and retaliation, not just discrimination, and therefore is much broader.  So, no employer in New York can include a nondisclosure provision in a settlement agreement where the employee's claims involved discrimination, harassment or retaliation--unless confidentiality is the employee's preference.

Second, independent contractors, not just employees, are now also protected.  Any agreement entered into after January 1, 2020, may not prohibit the future disclosure of information relating to claims of discrimination unless the nondisclosure agreement (NDA) makes clear that the employee or independent contractor is not prohibited from speaking to law enforcement, the EEOC, the state Human Rights Division, the City Human Rights Commission, the Attorney General, or an attorney.  Because of the retroactive nature of the amendment, employers should review any previously entered-into agreements and amend them accordingly.

Third, a complainant now has up to 21 days to consider a confidentiality or nondisclosure provision. Previously, this 21-day period was non-waivable, meaning the employee was required to wait 21 days before effectively accepting this provision, and then had a 7-day period in which acceptance could be revoked.  The 21-day period is now waivable and the employee therefore need not wait out the period.  However, the 7-day revocation period remains.  This change will certainly speed-up the settlement process for those individuals who do not have an issue with confidentiality.  It should be noted, however, that this amendment only applies to agreements entered into before litigation is commenced.

Lastly, releasing a claim involving discrimination, harassment or retaliation, is now unenforceable where:  (a)  the complainant is required to pay liquidated damages for violating a Nondisclosure Agreement or non-disparagement clause;  (b)  the complainant is required to forfeit all or part of the consideration for the agreement for violating the NDA or non-disparagement; or (c)  the release contains or requires an affirmative statement or disclaimer by the complainant that he or she was not in fact subject to unlawful discrimination, harassment or retaliation.

The Bottom Line: It is time to re-think nondisclosure and confidentiality provisions in settlement agreements, and recognize New York's increasing trend toward greater employee protections.