New York has some of the most restrictive confidentiality agreement laws in the United States, particularly when it comes to employment settlements. While NDAs remain legal in many contexts, New York law significantly limits when employers can require confidentiality clauses in settlements involving harassment, discrimination, and other workplace violations.
Under New York Labor Law §5-336, employers generally cannot include confidentiality provisions in settlement agreements related to discrimination or harassment claims unless specific conditions are met. This represents a major shift from previous practices where broad NDAs were standard in employment settlements.
The key distinction lies in the type of claim being settled and whether the employee genuinely prefers confidentiality. New York’s approach prioritizes transparency and employee rights while still allowing for confidentiality when it serves legitimate interests and respects worker autonomy.
New York’s 2019 Confidentiality Law Changes
New York dramatically transformed its approach to employment confidentiality agreements in 2019 with the passage of Labor Law §5-336. This legislation marked a significant departure from the previous legal landscape where employers routinely included broad confidentiality clauses in virtually all settlement agreements.
The 2019 law specifically targets confidentiality provisions in settlements related to:
- Sexual harassment claims
- Discrimination based on protected characteristics
- Retaliation for reporting violations
- Other workplace misconduct involving public safety
Before these changes, New York employers could generally require employees to sign comprehensive NDAs as part of any settlement agreement. The new framework reflects growing recognition that excessive secrecy around workplace misconduct can perpetuate harmful patterns and prevent other victims from coming forward.
At [Law Firm Name], we help New York employers and employees navigate these complex confidentiality requirements to ensure compliance with current state law while protecting legitimate business interests.
When Confidentiality Clauses Are Prohibited in NY
New York law creates clear prohibitions on confidentiality provisions in specific types of employment settlements. Employers cannot include confidentiality clauses when settling claims involving:
Harassment and Discrimination Claims
The most significant restriction applies to settlements addressing harassment, discrimination, or retaliation claims. New York Labor Law §5-336 generally prohibits confidentiality provisions in these contexts, recognizing that public awareness of such conduct serves important policy interests.
Workplace Safety Violations
Settlements involving workplace safety issues that could affect other employees or the public cannot include broad confidentiality requirements. This ensures that information about hazardous conditions can be shared with relevant authorities and coworkers.
Pattern of Misconduct Cases
When settlements involve repeated violations or patterns of misconduct, New York law disfavors confidentiality provisions that might conceal systemic problems within an organization.
The underlying principle is that certain types of workplace violations have implications beyond the individual parties to a settlement, making transparency a matter of public interest.
Exceptions: When NDAs May Still Be Allowed
Despite the general prohibitions, New York law recognizes limited circumstances where confidentiality provisions may still be appropriate in employment settlements. These exceptions require careful compliance with specific statutory requirements.
Employee Preference Exception
The most significant exception occurs when the employee genuinely prefers confidentiality. However, this preference must be documented through a specific process:
- The employee must have at least 21 days to consider the agreement
- A clear written statement of preference for confidentiality must be included
- The employee must have meaningful opportunity to consult with an attorney
- The confidentiality terms cannot be broader than necessary
Protecting Trade Secrets and Proprietary Information
New York continues to allow confidentiality provisions that protect legitimate business interests unrelated to the underlying misconduct. These might include:
- Trade secrets and proprietary business information
- Customer lists and business relationships
- Financial information not related to the settlement amount
- Strategic business plans and competitive information
Settlement Amount Confidentiality
In some cases, parties may agree to keep the financial terms of a settlement confidential while allowing discussion of the underlying facts and legal claims.
Notice Requirements and Employee Rights
New York’s confidentiality laws include specific procedural requirements designed to protect employee rights. Employers must provide clear notice about confidentiality restrictions and employee options.
Mandatory Disclosure Language
Settlement agreements must include specific language explaining:
- The employee’s right to discuss the underlying facts
- Limitations on what can be kept confidential under New York law
- The employee’s right to file complaints with government agencies
- Protection against retaliation for reporting violations
Cooling-Off Period
Employees must receive adequate time to consider any confidentiality provisions, typically at least 21 days. This period allows for meaningful consultation with legal counsel and ensures decisions are not made under pressure.
Right to Legal Consultation
New York law emphasizes the employee’s right to consult with an attorney before agreeing to any confidentiality provisions. Employers cannot discourage or interfere with this consultation process.
Federal vs. State Law: The SPEAK Act Impact
The federal SPEAK Act adds another layer of complexity to confidentiality agreements in New York. While New York’s laws are generally more restrictive than federal requirements, understanding both frameworks is essential for compliance.
Federal Baseline Protections
The SPEAK Act prohibits confidentiality clauses that prevent employees from:
- Filing charges with the Equal Employment Opportunity Commission
- Participating in EEOC investigations
- Discussing the facts underlying discrimination or harassment claims
New York’s Enhanced Protections
New York law goes beyond federal requirements by:
- More broadly restricting confidentiality in harassment and discrimination settlements
- Requiring specific procedural safeguards
- Imposing stricter notice requirements
- Providing broader protection for employee communications
When both laws apply, employers must comply with the more restrictive provisions, which typically means following New York’s enhanced requirements.
Enforceability and Compliance Standards
The enforceability of confidentiality agreements in New York depends heavily on compliance with statutory requirements. Courts will scrutinize these agreements carefully and may void provisions that violate state law.
Key Enforceability Factors
New York courts consider several factors when evaluating confidentiality agreement enforceability:
- Compliance with procedural requirements (notice, timing, consultation rights)
- Scope of confidentiality restrictions (narrow vs. overly broad)
- Employee’s genuine understanding and consent
- Whether confidentiality serves legitimate business interests
Common Enforceability Problems
Agreements may be unenforceable if they:
- Fail to provide required notice and waiting periods
- Include overly broad restrictions on employee communications
- Attempt to prevent protected disclosures to government agencies
- Lack proper documentation of employee preference for confidentiality
At [Law Firm Name], we regularly assist New York businesses in drafting compliant confidentiality provisions that protect legitimate interests while respecting employee rights under state and federal law.
Penalties for Violations
New York imposes significant penalties for violations of its confidentiality agreement restrictions. Both civil and administrative consequences can result from non-compliance.
Civil Penalties
Employers who violate New York’s confidentiality laws may face:
- Monetary damages to affected employees
- Attorney fees and litigation costs
- Potential punitive damages in egregious cases
- Court orders voiding improper confidentiality provisions
Administrative Actions
State agencies may also impose penalties, including:
- Fines and administrative penalties
- Investigation and enforcement actions
- Public disclosure of violations
- Requirements for policy changes and training
Retaliation Protections
New York law provides strong protection against retaliation for employees who challenge improper confidentiality provisions or report violations. Retaliation claims can result in additional damages and penalties.
Practical Guidance for Employers and Employees
Understanding New York’s confidentiality laws requires attention to both legal requirements and practical implementation. Both employers and employees need clear strategies for navigating these complex rules.
For Employers
Employers should:
- Review existing settlement agreement templates for compliance
- Train HR personnel on current confidentiality restrictions
- Develop clear procedures for evaluating when confidentiality may be appropriate
- Work with qualified legal counsel to ensure compliance
For Employees
Employees considering settlements should:
- Understand their rights under New York law
- Take advantage of consultation periods and legal advice opportunities
- Carefully review any proposed confidentiality provisions
- Consider the long-term implications of confidentiality agreements
Documentation Best Practices
Proper documentation is crucial for enforceability and compliance:
- Clear written statements of employee preference for confidentiality
- Detailed explanation of what information can and cannot be disclosed
- Proper notice and timing documentation
- Evidence of meaningful opportunity for legal consultation
Navigate New York’s Complex Confidentiality Laws with Confidence
Understanding New York’s evolving confidentiality agreement laws requires expertise in both state regulations and federal requirements. The interplay between Labor Law §5-336, the federal SPEAK Act, and traditional contract law creates a complex legal landscape that demands careful navigation.
Whether you’re an employer seeking to protect legitimate business interests while complying with New York’s restrictions, or an employee evaluating a settlement offer with confidentiality provisions, professional legal guidance is essential. Our experienced employment law attorneys help New York businesses and workers understand their rights and obligations under current confidentiality laws. We provide practical strategies for compliance, draft enforceable agreements that respect employee rights, and represent clients in confidentiality disputes. Call us today to discuss your specific confidentiality agreement questions, or contact us online to schedule a consultation about your New York employment law needs.
