Drafting an enforceable NDA in a New York employment settlement has gotten harder every year since 2018, and the November 17, 2023 amendments to General Obligations Law § 5-336 made the standard form NDA unenforceable in a meaningful percentage of cases. Most employers still use settlement and separation agreements that have not been updated since the 2019 amendments, and those documents now contain provisions that void the entire release if the matter involves discrimination, harassment, or retaliation. A New York business law attorney reviewing employment settlement agreements regularly finds three or four problems in the same template that worked fine four years ago. The cleanup is straightforward when caught before signing and irreversible when caught after.
Here is what the layered restrictions actually require, where the drafting traps sit, and what an updated template should look like.
The Two Statutes That Govern NY Employment NDAs
Two statutes, working together, control non-disclosure provisions in agreements resolving employment discrimination claims in New York.
General Obligations Law § 5-336 governs pre-litigation settlements. Originally enacted in 2018 to address sexual harassment specifically, expanded in 2019 to cover all employment discrimination claims, and amended again in November 2023 to cover harassment, retaliation, and independent contractor relationships, the statute prohibits an employer from including a confidentiality provision that would prevent disclosure of the underlying facts and circumstances of the claim, unless confidentiality is the complainant’s preference.
CPLR § 5003-b governs settlements reached after a lawsuit has been filed. The same general restrictions apply, with one critical difference: the 21-day consideration period is not waivable in court-filed cases, while it is waivable in pre-litigation settlements following the 2023 amendments.
The distinction matters because most employers still treat these as a single regime. They are not. An agreement signed pre-litigation under § 5-336 looks different from one signed after a complaint is filed under CPLR § 5003-b, and the wrong assumption about which regime applies produces unenforceable agreements.
The 21-Day Period and the 7-Day Revocation Window
When an employer wants to include a confidentiality provision in a settlement of a discrimination, harassment, or retaliation claim, the complainant must be given:
- A written confidentiality provision identifying the terms
- Up to 21 days to consider the confidentiality provision (waivable pre-litigation, not waivable in court-filed cases)
- A separate 7-day revocation period after signing, during which the complainant can rescind the agreement
The 7-day revocation period is not waivable in either context. An NDA signed today cannot take effect for at least seven days, and the agreement is not finalized until the revocation window passes.
This is where pre-litigation settlements have gained meaningful flexibility. Under the original 2018 statute and through 2023, a complainant had to wait the full 21 days before signing, which meant a settlement could not be finalized for at least 28 days. Under the November 2023 amendments, the complainant can sign immediately if they choose, and only the 7-day revocation period remains. For employers trying to close out a pre-litigation matter quickly, that change matters.
The Three New Prohibitions That Void the Release
The November 2023 amendments added § 5-336(3), which makes any release agreement unenforceable if it contains any of three specific provisions when the factual foundation involves unlawful discrimination, harassment, or retaliation.
The prohibited provisions are:
- A liquidated damages provision tied to breach of a non-disclosure or non-disparagement clause
- A forfeiture provision requiring the complainant to repay or forfeit any portion of the settlement consideration for breach of a non-disclosure or non-disparagement clause
- An affirmative statement, assertion, or disclaimer by the complainant that they were not subject to unlawful discrimination, harassment, or retaliation
Every one of these provisions appears in standard employment settlement templates that predate the amendments. Liquidated damages clauses tied to confidentiality breaches were drafted into agreements as a matter of course, because actual damages for an NDA breach are notoriously hard to prove. Forfeiture-of-consideration clauses were the most common workaround, allowing the employer to claw back the settlement payment if the complainant talked. The “no discrimination” affirmation was a routine recital used to defeat any later claim by the complainant that the conduct actually occurred.
All three are now disqualifying. Including any one of them does not just make that clause unenforceable. It makes the entire release unenforceable, which means the employer paid the settlement amount and got nothing in exchange.
What a New York Business Law Attorney Drafts Instead
The amendments did not eliminate confidentiality protection. They constrained the enforcement mechanisms.
Employers can still include a non-disclosure provision when it reflects the complainant’s preference, set forth in writing, with the required consideration and revocation periods. Employers can pursue actual damages for breach of an NDA, drafted with appropriate language preserving that remedy. Employers can include reciprocal non-disparagement provisions, although these face their own restrictions in some contexts. Employers can include carve-outs from confidentiality permitting the complainant to discuss the underlying facts with the EEOC, the New York State Division of Human Rights, the New York City Commission on Human Rights, the New York Attorney General (added in 2023), and the complainant’s own attorney.
The required carve-out language has expanded with the 2023 amendments. The Attorney General must now be specifically identified as a permitted recipient of information that would otherwise be subject to the NDA. Older templates that named only the EEOC and state and local human rights agencies are out of compliance with the current statute.
Independent contractors are now covered. Settlement agreements with 1099 workers were previously outside the statute and treated like ordinary commercial NDAs. The 2023 amendments closed that gap, and any settlement with a freelance consultant, contractor, or one-person LLC alleging discrimination, harassment, or retaliation is now subject to the same restrictions as an employee settlement.
Separation Agreements Versus Settlement Agreements
A specific question that keeps coming up is whether the 2023 amendments apply to standard separation agreements that release unasserted claims rather than resolving an actual complaint.
The statute uses the term “complainant,” and the legislative history focuses on settlements resolving identified claims. The stronger reading is that ordinary separation agreements releasing unasserted claims are outside the scope of the new restrictions, although they remain subject to the broader requirements of GOL § 5-336 if they contain confidentiality provisions covering discrimination, harassment, or retaliation conduct.
This is one of the open questions the courts will work out over the next several years. Until they do, the conservative approach is to draft separation agreements as if the restrictions apply, particularly for departures connected to any actual or threatened complaint of discrimination, harassment, or retaliation.
A Compliance Audit Worth Running
Companies using New York settlement and separation agreement templates should pull every template currently in use and check for several specific problems.
Verify whether liquidated damages provisions for NDA or non-disparagement breaches still appear. If they do, the agreement is voidable under the 2023 amendments where the underlying claims involve discrimination, harassment, or retaliation. Verify whether forfeiture-of-consideration clauses appear. Same risk. Check for affirmative statements by the employee that they were not subject to unlawful discrimination, harassment, or retaliation. This was the most common drafting recital in pre-2023 templates, and it now disqualifies the release. Confirm that the carve-out language includes the New York Attorney General. Verify the document distinguishes pre-litigation from post-filing settlements and applies the correct consideration and revocation rules.
Independent contractor settlement and separation templates need the same review. They were previously outside the statute and likely have not been touched.
When to Bring in a New York Business Law Attorney
NDA drafting in New York is a meaningfully different exercise than it was four years ago, and the 2023 amendments are not the last changes the legislature is likely to make. A New York business law attorney updating settlement and separation templates can identify the disqualifying provisions, replace them with enforceable alternatives, and align the document workflow with the timing rules under both § 5-336 and CPLR § 5003-b.
The Mundaca Law Firm advises New York employers on settlement and separation agreements, employment compliance, and the broader employment law issues that surface alongside them. If your settlement and separation templates have not been reviewed under the November 2023 amendments and the current statutory framework, an audit before the next dispute is materially less expensive than discovering an unenforceable release after the settlement payment has gone out.
