New NY Law Limits Penalties to Employees for Breach of Settlement Agreements
November 27, 2023
On November 17, 2023, New York Governor Kathy Hochul signed into law SB S4516, prohibiting settlement agreements in claims involving sexual harassment, or other form of unlawful discrimination, from containing any condition that requires payment of liquidated damages for violations of a non-disclosure or non-disparagement clause included in such settlement agreement. The law, effective as of Gov. Hochul’s signature, will apply to all settlement agreements between employees and employers entered into on November 17, 2023 or later.
The new law will be relevant to settlement agreements dealing with various issues, including claims of unlawful harassment, discrimination, and retaliation. In effect, such agreements will be prohibited from requiring a defendant found to have breached the agreement to either pay a set amount of money indicated in the agreement, forfeit settlement payments, or make any affirmative statement, assertion, or disclaimer that the complainant was not in fact subject to unlawful harassment, discrimination, or retaliation. No release of a claim involving unlawful discrimination, including discriminatory harassment or retaliation, will be enforceable if it is determined to be in violation of the new law.
While the law applies only to agreements entered into on or after November 17, 2023, Gov. Hochul signed another bill extending the statute of limitations on all unlawful discriminatory practices claims to three years. Prior to the amendment, most complaints of unlawful discrimination were required to be filed with the Division of Human Rights within one year, while a three-year statute of limitations only applied for claims of sexual harassment. The 3-year statute of limitations will be in place as of claims arising on or after February 15, 2024.
The new laws should help fill the void left by the New York’s Adult Survivors Act, which expired on November 24, 2023. The now-expired law gave survivors of sexual assault who were 18 or older at the time of the alleged abuse a one-time opportunity to file civil lawsuits against their abusers, even when the statute of limitations had run out. The new limitations on release of claims and the extension of the time to file complaints of unlawful discrimination are intended to strengthen the rights and protections of New York employees generally.
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