USA – NEW YORK Trends and Developments Contributed by: Joshua Stanton, David Russell and Torie Feldman, Perry Law
Conclusion Although the legislature set out with broad aspi- rations, the resulting statute turned out to be more nuanced, leaving ample room for savvy employers and employees to still be able to negotiate for the terms that are most important to each side. For employers, Section 5-336 makes it more dif- ficult to enforce confidentiality obligations in set- tlements with employees who have raised dis- crimination, harassment and retaliation claims. However, with a good understanding of Section 5-336’s boundaries and a little creative thinking, employers can still get most of what they want. As regards employees, Section 5-336 allows them to trade confidentiality for significant com- pensation by expressing their affirmative prefer- ence for confidentiality and entering into protec- tive confidentiality agreements. Alternatively, it also allows employees to preserve their disclo- sure rights if that is what they prefer.
include significant disincentives for breach ‒ even though such disincentives (eg, liquidated damages) would likely make the release unen- forceable. In the context of non-frivolous claims, however, the calculus changes. The value of a release of such claims may be substantial to the compa- ny. In that case, the company could rationally make the decision not to include any provisions that could make the release unenforceable, such as liquidated damages. Even in that case, though, the final agreement could still include some clauses that would strongly disincentiv- ise breach of the confidentiality requirements. By way of example, a confidential arbitration clause for future claims ‒ again, providing for attorney’s fees ‒ would suggest to the employee that defending against a claim for breach could be exceptionally costly.
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