In a significant development for the corporate legal world, Governor Kathy Hochul signed SB 4516 on November 17, 2023, amending the N.Y. General Obligations Law §5-336. This amendment provides noteworthy changes affecting settlement agreements, specifically those involving allegations of discrimination, harassment, or retaliation claims.
This amendment specifically targets nondisclosure provisions. It prohibits the inclusion of liquidated damages clauses within these provisions. Liquidated damages refer to an agreed-upon sum that a party will pay if they break a specific part of a contract. In this case, it pertains to the nondisclosure aspects of the settlement agreements.
The crucial implication of this law is it strengthens protections for individuals making claims of discrimination, harassment, or retaliation. If a nondisclosure clause of a settlement agreement is breached, the implicated party is no longer liable to pay the predefined monetary damages previously stated in the agreement.
It’s worth noting that this modification only applies to settlements signed on or after the law went into effect on November 17, 2023. It doesn’t offer retroactive applicability to agreements drafted before its enactment. Such current norms and implications suggest that this law could alter the way corporations and law firms approach nondisclosure clauses in settlement agreements.
With monitoring developments and providing timely counsel as key functions for legal professionals, understanding the nuances of this amendment should take precedence. Continue to watch for how this law’s implementation may direct the trajectory of future settlement agreements and the strategies used in their negotiation.