New York Amends Its Release Agreement Law: What NY Employers Need to Know

On November 17, 2023, New York Gov. Kathy Hochul (D) further limited the terms employers may include in release agreements relating to claims of harassment, discrimination, and retaliation, by signing Bill S. 4516 into law. In 2018, following the Weinstein scandal and the #MeToo movement, New York enacted New York General Obligation Law Section 5-336 (Section 5-336), which prohibited employers from including in any agreement that resolves claims of discrimination terms or conditions that would prevent the disclosure of the underlying facts and circumstances to the claim — unless the inclusion of such terms is the employee’s choice. This Update discusses how Bill S. 4516 amended Section 5-336 by further broadening the restrictions on release agreements relating to discrimination.

History: Section 5-336

Section 5-336, enacted as a part of New York’s 2018-19 budget bill, was one of the first state laws to target nondisclosure provisions contained in release agreements. Passed in the wake of the #MeToo movement, Section 5-336 prohibited employers from including terms or conditions that would prevent the disclosure of the underlying facts and circumstances to the claim in any agreement resolving a sexual harassment claim unless the employee chose to include such terms or conditions. Section 5-336 was amended in 2019 to expand this nondisclosure restriction to all claims of discrimination.

Because release agreements with nondisclosure provisions are allowed only if the employee chooses to include such provisions, any release agreement containing nondisclosure provisions with respect to the underlying facts and circumstances of the claim had to be executed in two parts:

1. Document Memorializing Employee’s Preference. All parties involved needed to sign an agreement stating that the nondisclosure provisions are at the request of the employee. Any proposed nondisclosure term or condition would first be provided in writing to all parties. The employee would then have to wait 21 days from the date such terms or conditions were provided to consider whether such terms or conditions should be included in the release agreement. If after 21 days such terms or conditions remained the preference of the employee, such preference could then be memorialized in an agreement signed by all parties. The employee also would have seven days following the execution of such an agreement to revoke the agreement.
2. Release Agreement. Once the employee’s preference was memorialized, all parties would then need to enter into “whatever documents incorporate the preferred terms or conditions as part of the larger resolution between the parties.”

S. 4516 Amendment

S. 4516, effective November 17, 2023, made several notable additions and changes to Section 5-336 including:

• Law Expanded to Include Claims Involving “Discriminatory Harassment and Retaliation.” Prior to S. 4516, Section 5-336 covered only agreements relating to claims of discrimination. Now, claims involving discriminatory harassment and retaliation are expressly included.
• Some Release Agreements Will Now Be Completely Unenforceable. Release agreements that involve unlawful discrimination will be unenforceable if, as part of the release agreement, the employee is (1) required to pay liquidated damaged for violating a nondisclosure or nondisparagement clause, (2) the employee is required to forfeit all or part of the “consideration” for the agreement, for violating a nondisclosure or nondisparagement clause; or (3) the release agreement contains or requires any affirmative statement, assertion, or disclaimer by the employee that the employee was, in fact, not subject to unlawful discrimination.
• Independent Contractors Are Covered. Prior to S. 4516, only agreements with employees and potential employees were covered by Section 5-336. Now, agreements with independent contractors are also covered.
• The 21-day Consideration Period for Employees to Sign Release Agreement May be Waived. The procedural requirement that employees need to wait a full 21 days before signing release agreements with nondisclosure provisions is now waivable. Employees may choose to accept the terms of a release agreement containing nondisclosure provisions prior to the expiration of the 21-day period.

In light of these new changes, employers should review their New York release agreements and consult counsel to ensure compliance with Section 5-336. Because the statute applies to all agreements entered into after November 17, 2023, it is imperative that employers address agreements currently under consideration immediately.