New Law in New York State Impacts Settlement Agreements
Thursday, November 30, 2023

On November 17, 2023, Governor Kathy Hochul signed SB 4516, an amendment to N.Y. General Obligations Law §5-336 that prohibits liquidated damages clauses in nondisclosure provisions of settlement agreements involving discrimination, harassment or retaliation claims, and adds additional protections for individuals alleging such claims.  The amendment applies to agreements signed on or after November 17, 2023.

The new law is part of a broader legislative initiative to prevent and address sexual harassment and other workplace abuse.  Previously, settlements with nondisclosure clauses that provided for liquidated damages served to prevent victims from disclosing the circumstances underlying the settlement.  Now, since liquidated damages provisions are unenforceable in this context, actual harm must be proven if the company seeks to recover monetary damages as a result of the breach of a nondisclosure provision.

The amendment prohibits—and renders void—agreements in settlement of discrimination, harassment or retaliation claims from requiring the complainant to (1) pay liquidated damages for violating a nondisclosure clause; (2) forfeit all or part of the consideration for the settlement for violating a nondisclosure clause; or (3) sign a statement affirming that he or she was not in fact subject to unlawful treatment.

Also, individuals (now including independent contractors) may agree in writing to confidentiality before the expiration of the 21-day consideration period, whereas, prior to this amendment, individuals had to wait for the entire 21-day period to pass before signing.  The confidentiality preference also now applies to settlements of discrimination, harassment and retaliation claims.  (The seven-day revocation period of the confidentiality preference remains the same.)

 

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