New York Disallows Certain Provisions in Settlements of Employee Discrimination and Harassment Claims

New York state has recently enacted a significant legal change impacting employers and settlement agreements. Bill S4516 amends the state’s General Obligations Law to impose restrictions on non-disclosure and non-disparagement provisions in settlement agreements involving claims of discrimination, harassment, or retaliation.

For employers, this new law brings about crucial changes in how settlement agreements are structured and enforced:

1. Restriction on Liquidated Damages:

Settlement agreements in claims involving sexual harassment or other forms of discrimination cannot include terms that require the complainant to pay liquidated damages if they violate a non-disclosure agreement.

2. Protection for Complainants

The law aims to protect individuals from financial penalties for disclosing their experiences of harassment or discrimination. Employers cannot include provisions in settlement agreements that financially penalize complainants for breaching non-disclosure terms.

3. Prohibition of Certain Terms

The law bars employers from requiring complainants to forfeit any part of the settlement or to sign statements negating their experiences of discrimination or retaliation in the event of violating non-disclosure provisions.

The law is effective immediately.