The 2018-2019 New York State Budget, which was enacted on April 12, 2018, (see our previous client alert here) includes several new state laws concerning sexual harassment in the workplace that will affect both public and private employers. These laws went into effect on July 11, 2018. The State Budget added the following sections to its Rules: (1) Section 7515 to the New York Civil Practice Law and Rules, which prohibits mandatory arbitration clauses; (2) Section 5003-B to the New York Civil Practice Laws and Rules, which bans nondisclosure agreements; and (3) Section 5-336 to the New York General Obligations Laws, which also bans nondisclosure agreements. The new state laws will impact private employers by:

Ban of Nondisclosure Agreements

The laws prohibit settlement agreements that prevent individuals from disclosing or discussing the facts underlying sexual harassment claims. An employer may include confidentiality language in a settlement agreement only when it is the settling individual’s preference. Furthermore, similar to the federal Age Discrimination in Employment Act, employers must provide settling individuals with twenty-one (21) days in which to consider whether to accept the confidentiality language covering their sexual harassment claims. The complainant or plaintiff is entitled to a seven (7) day revocation period after he or she signs the settlement agreement. The nondisclosure clause will not become effective or enforceable until after the revocation period has expired. The new law, however, does not impact provisions in settlement agreements that require a settling individual to maintain the confidentiality of the terms of the agreement.

Prohibition of Mandatory Pre-Dispute Arbitration Clauses

For employers with more than four employees, the new law prohibits contractual provisions, which may be present in company handbooks and which require confidential arbitration as the mechanism for resolving sexual harassment claims. One major exception to the rule exists where the law is inconsistent with federal law. Additionally, the new law only applies to employment relationships entered into after the law’s effective date—July 11, 2018 and the prohibition does not apply to mandatory arbitration provisions included in collective bargaining agreements.

The Bottom Line

The new laws will surely impact employers decision making in determining whether to engage in settlement negotiations or to litigate disputes. Employers will feel less likely to settle and pay out when they are unable to ensure the confidentiality of the allegations. While the new laws may seem complex or even daunting to navigate, teaming up with trusted advisors to help settle disputes and to review and update company policies can facilitate compliance.


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