Under new legislation signed by New York Governor Kathy Hochul on November 17, 2023, the legal landscape for breach of nondisclosure provisions in settlement agreements has been greatly altered. This law has been enacted with immediate effect, and any violations come attached with significant implications.
Specifically, the new law prohibits clauses in agreements that settle discrimination, retaliation, or harassment claims from compelling a complainant to pay liquidated damages or forfeit consideration for breaches of non-disparagement or confidentiality.
This regulation holds exceptional weight in corporate environments, with their frequent reliance on nondisclosure agreements (NDAs) in resolving sensitive disputes, whether they involve employees, partners, or other entities. The new ruling, hence, has the potential to upend standard practice in dispute settlements, necessitating a recalibration of present legal strategies.
Interestingly, if such clauses are included under the new laws, the agreement’s release would be unenforceable. In essence, this could disenfranchise an employer from enforcing an agreement in case of a breach of confidentiality or non-disparagement provisions. However, the employer may still remain bound by all other provisions, particularly the obligation to pay any settlements or damages.
This legal evolution puts an additional onus on legal teams to revise their current settlement strategies to align with this shifting landscape, ensuring appropriate protection against potential breaches. Moreover, this regulatory change underscores the re-orientation of the balance of power towards the complainant, redrawing the traditional dynamics in dispute resolution.
It is critical for the corporate and legal communities to carefully assess the repercussions of this regulation, as it signals a transformative shift in the management and resolution of claims related to discrimination, retaliation, and harassment.
For a deeper understanding of the legislation, the complete legal analysis by Jones Day may be accessed here.