Effective November 17, 2023, New York State has banned liquidated damages and cashback provisions designed to protect confidentiality in settlement agreements related to discrimination, retaliation, or harassment claims. The law applies to any agreements entered into on or after that date.
The law specifically prohibits clauses that require a complainant to pay liquidated damages or forfeit consideration for breaching non-disparagement or confidentiality terms, making any agreements containing these clauses unenforceable. However, the employer remains bound by the obligation to pay any agreed-upon settlement amount.
The law also eliminates the previous requirement that a complainant be provided a firm 21-day period to consider any confidentiality provisions in a settlement or resolution of a discrimination claim before the agreement may be finalized. Now, complainants must be provided “up to 21 days” to consider such terms and may enter into the agreement sooner than the 21-day period if they so choose. Complainants must still be provided with a 7-day period to revoke a signed agreement before any such confidentiality provisions take effect.
Furthermore, the law clarifies that confidentiality provisions must be the preference of the complainant in any settlement, agreement, or other resolution of claims that involve discriminatory harassment or retaliation, as well as other forms of discrimination; and expands protections regarding the disclosure of factual information related to any future claim of discrimination to independent contractors, as well as employees.
Next Steps
Employers who utilize settlement agreements for resolving harassment, discrimination, or retaliation claims should work with their legal counsel to review and update these agreements as needed. Employers should also update their procedures with regard to the time limit for completing said agreements and ensure that those who would be responsible for overseeing these claims have been properly trained on these updates.
