New York State Limits Remedies for Breach of Nondisclosure Provisions in Settlement Agreements

New York State has banned liquidated damages and clawback provisions designed to protect confidentiality.

New York State Limits Remedies for Breach of Nondisclosure Provisions in Settlement Agreements

On November 17, 2023, New York Governor Kathy Hochul signed a law—which is effective immediately—banning clauses in agreements settling discrimination, retaliation, or harassment claims from requiring a complainant to pay liquidated damages or forfeit consideration for breaches of non-disparagement or confidentiality. If such clauses are included, the agreement's release would be unenforceable, but the employer may still remain bound by all other provisions, including the obligation to pay any agreed-upon settlement amount.

The new law, which amends N.Y. Gen. Obligations Law § 5-336, contains a few additional provisions. First, it prohibits agreements to settle discrimination, retaliation, or harassment claims from requiring an affirmative statement by the complainant that they were "not in fact subject to unlawful discrimination." Second, it amends N.Y. Gen. Obligations Law § 5-336 to state that employees must be given up to 21 days to consider an agreement to keep the facts and circumstances underlying discrimination claims confidential, but can sign in less than 21 days if they choose. The prior version of the law required that employees take the full 21 days to consider the agreement. Finally, the new law makes clear that it applies to independent contractors as well and provides that complainants must be free to speak to the attorney general under any agreement not to disclose factual information related to future claims of discrimination.

Going forward, employers should remove the banned provisions from their settlement agreements involving claims of discrimination, retaliation, or harassment, and should consider revising any agreements in progress. The law only applies to agreements settling discrimination, harassment. or retaliation claims, so no changes need to be made to standard separation agreements. Confidentiality provisions can be difficult to enforce, and one of the main functions of liquidated damages and clawback provisions often is to deter employees from breach. Employers should seek counsel on alternatives to these types of provisions. 

 

Author: Jones Day

Source: JDSupra

Customer Stories

See how leading enterprise in-house teams have scaled smarter with Legal.io's high-caliber flex talent.

More from Legal.io


Exceptional Immigrants – The EB-2 Visa and National Interest Waivers
Exceptional Immigrants – The EB-2 Visa and National Interest Waivers

Our last article was about the EB-1 Visa, which is set aside for “Aliens of Extraordinary Ability.”

Aug 19, 2015
Read More
Solve Intelligence Lands $40M Series B, Expands Into Patent Litigation Automation

Solve Intelligence secures $40M Series B funding and launches a new AI-driven patent litigation product as investor interest in legal AI continues to accelerate.

Dec 12, 2025
Read More
2024 ACC CLO Survey Shows Expanding Definition of Role
2024 ACC CLO Survey Shows Expanding Definition of Role

The ACC study reveals Chief Legal Officers are pivotal in enhancing corporate governance and efficiency, emphasizing the dual role of CLO and Corporate Secretary.

May 06, 2024
Read More
Employment Authorization for H-4 Dependent Spouses Available in May.
Employment Authorization for H-4 Dependent Spouses Available in May.

Currently dependent spouses on H-4 visas cannot lawfully seek employment in the United States, but that will be changing soon!

Aug 19, 2015
Read More
BigLaw Firms Embrace Threads (Meta) Challenging Elon Musk's Twitter
BigLaw Firms Embrace Threads (Meta) Challenging Elon Musk's Twitter

Threads, the new social media platform by Meta, has gained immense popularity since its launch earlier this month.

Jul 13, 2023
Read More
Ready to hire?

Schedule a free consultation to discuss your hiring needs.

Free 15-min consultation
Legal.io Platform
5 star reviews
Hiring made smarter

Easy-to-use platform for hiring legal talent, managing spend, and optimizing your panel — plus an average savings of 50%.

Need Immediate Help?

Submit a hiring request and let our experts handle the entire process for you.