This blog post is Part XXIX of our series, “Key Employment Law Issues for Businesses & Companies in New York.” In Part XXVIII, we reviewed the concept of confidentiality and why it may be included when drafting restrictive covenants and mentioned that employers should use confidentiality agreements as a way of preventing former and current employees from divulging or misappropriating confidential information or trade secrets. We also added that in order to ensure that all the information being sought to be protected has been included, employers should make sure that the term “confidential information” has been comprehensively and appropriately defined.
In our next blog post, we have provided insight into how to address discrimination claims, an issue that may arise when employees are required to sign contractual covenants.
Addressing Discrimination Claims when Signing Contractual Covenants
To address the problem that discrimination claims may arise as a result of contractual covenants, employers should consider what the law says about two, among other critical issues, including “non-disclosure provisions” and “confidential settlements.”
As mentioned above, employers should be aware of what the law says about “non-disclosure provisions.” Usually, employers and employees may, depending on the industry and nature of employment, sign several agreements and agree to various provisions as a normal routine in employment contracts.
However, it is critical for employers to understand that pursuant to N.Y. Gen. Oblig. Law § 5-336(2), the law requires employees or potential employees to be notified that an employment agreement or contract provision, entered into on or after January 1, 2020, does not prevent them from cooperating with law enforcement or participating in an investigation with (1) a self-retained attorney duly permitted and admitted to practice law, (2) a local human rights commission, (3) the New York State Division of Human Rights, (4) or the Equal Employment Opportunity Commission (EEOC).
This implies that, based on provisions of this statute mentioned above, any agreement or contract provision entered before the date mentioned above and through which an employee or a potential hire is prevented from disclosing factual information related to any future discrimination claim will be rendered unenforceable and void by courts.
Additionally, employers should also be aware of the legal issues surrounding the confidentiality of settlement agreements. For instance, pursuant to N.Y. Gen. Oblig. § 5-336, if an underlying claim has a factual foundation involving laws on discrimination specific to New York, employers are prohibited, when entering into a settlement agreement, from requiring employees to sign a non-disclosure clause.
However, the statute also provides an exception, which concerns a situation where the preference of the complainant is confidentiality. Under the statute, if confidentiality is the preference, the complainant is required to memorize, through a written agreement, the confidentiality preference, as well as have a mandatory 3 weeks to consider the condition of non-disclosure. Complainants must understand that while the 3-week window cannot be waived, the preference agreement should be a separate agreement. Nonetheless, the carveout is that the complainant may, within seven days of execution, revoke and, maybe, change or do away with the agreement concerning their preference.
In Part XXX of this series and our blog post titled “Whistleblowing Exceptions in Contractual Covenants/Agreements,” we will discuss how to address discrimination claims that may arise when employers require employees to sign confidentiality covenants at the point of hiring and onboarding employees.
As usual, stay tuned for more legal guidance, training, and education. In the interim, if there are any questions or comments, please let us know at the Contact Us page!
Always Rising Above the Bar,
Isaac T.,
Legal Writer, Author, and Publisher.