Confidentiality of Settlement Agreements Is an Uphill Battle in New York: Here Is What Employers Can Do

Businesses face omnipresent legal risk—and employment-related claims—alleging discrimination, harassment, or retaliation—continue to represent significant litigation exposure. Employment-related claims span a wide array of subjects, including unfair hiring and promotions, payment disputes, and discrimination based on age, disability, race, ethnicity, religion, gender, or sexuality.  Large employers can spend upwards of seven figures on a single litigation, especially when faced with a class action suit or a suit by a high-earning employee.  Litigation is costly—it takes time, costs money, and can generate negative publicity for a business. The ability to enter into a confidential settlement agreement with an employee is a vital tool to combat employment-related claims. 

            New York state law places additional restrictions on settlement agreements for employment discrimination claims (i.e., claims involving harassment, discrimination or retaliation). A settlement agreement between an employer and employee to resolve employment discrimination claims may only include a confidentiality provision if that is the settling employee’s preference—an employer cannot insist on such provision.  New York courts have found entire settlement agreements unenforceable where employers did not strictly comply with the law.  Further, courts have chastised employers that try to circumvent the law and violate public policy by punishing employees who exercise their rights under the law.  These restrictions have left employers scrambling.  Fortunately, there are steps employers can take to ensure settlement agreements are enforceable and confidential. 

New York’s Restrictive Laws

New York law errs on the side of being more friendly to employees than employers.  Settlement agreements containing a confidentiality provision for employment discrimination, harassment, and retaliation claims are subject to New York General Obligations Law Section 5-336 and New York Civil Practice Law and Rule 5003-B.  Such settlement agreements cannot contain a confidentiality provision unless confidentiality is the “complainant’s preference,” which must be memorialized in a writing signed by all parties.  N.Y. General Obligations Law (“N.Y. GOL”) § 5-336(1)(a-b); N.Y. C.P.L.R. § 5003-B.  Employees have 21 days to consider a settlement agreement and 7 days to revoke the agreement after signing.  N.Y. GOL § 5-336(1)(b); N.Y. CPLR § 5003-B.  The 21-day consideration period is waivable for pre-litigation settlements, N.Y. GOL § 5-336(1)(b), and is non-waivable for settlements that occur after a case is filed, N.Y. CPLR § 5003-B. 

             N.Y. GOL § 5-336 has become stricter over time.  First enacted in 2018 in response to the #MeToo movement, it covered only sexual harassment claims.  By 2019, the law was applicable to all types of employment discrimination claims.  N.Y. GOL § 5-336 was amended in 2023, and its protections were expanded to independent contractors filing claims of employment discrimination, harassment, and retaliation.  N.Y. GOL § 5-336(1)(a).  The latest amendment also articulates specific provisions that make a settlement agreement unenforceable, such as a provision that contains or requires any “affirmative statement” that the employee was not subject to unlawful discrimination.  N.Y. GOL § 5-336(3)(c). 

Courts Respond: The Shift to Strict Compliance

Courts have quickly taken notice of the 2023 amendment and its impact is reflected in court rulings.  In January 2025, a court held that an entire settlement agreement will be rendered unenforceable if employers do not follow the restrictions laid out in N.Y. GOL §  5-336.  Separ v. Cnty. of Nassau, No. 21-CV-00010, 2025 WL 51206, at *4 (E.D.N.Y. Jan. 8, 2025).  There, an employee sued her former employer and the county for unlawful discrimination and retaliation.  Id. at *1.  The parties verbally reached a settlement agreement, memorialized the settlement in writing, and signed the agreement.  Id.  Importantly, the settlement stated that it “shall not take effect until . . . [employee’s] execution of the Confidentiality and Non-Disparagement [sic] Acknowledgment” which was attached as a separate exhibit.  Id. at *3.  After the employee refused to sign the exhibit, the defendants moved to enforce the settlement.  Id. at *1.  The court found that the settlement agreement was never effective because the acknowledgment was a “material component” of the broader settlement agreement and a “condition precedent” to effectuate it.  Id. at *4.  By not signing the acknowledgment, the employee exercised her right to consider the confidentiality provision for up to 21 days under GOL § 5-336, and she decided not to move forward with the settlement.  Id.

            Separ is instructive.  It shows that the improper insertion of a confidentiality provision will destroy enforceability of the entire settlement agreement.  This was not always the case.  As recently as two years before Separ, the common practice was to invalidate only the confidentiality provision of a settlement agreement—not the entire agreement.  Sanchez vs. S&P Global, Inc., No. 23-cv-00576, 2023 WL 9857442 (S.D.N.Y. Oct. 27, 2023) (emphasis added) (noting that Judge Failla reads GOL  5-336 to invalidate a problematic non-disclosure provision rather than the entire agreement).  Separ does not appear to be an anomaly; three months ago another New York federal court reiterated Separ’s holding.  The Southern District of New York stated that “an employer may make assent to an NDA a condition of settlement” but “the failure to sign the NDA or a revocation of the NDA voids entire settlement.”  Hadzijic v. Art Food LLC, No. 24 CIV. 7205, 2025 WL 2886104, at *7 (S.D.N.Y. Oct. 10, 2025).  Further, a settlement agreement with a provision stating that the employee “agrees” to sign a separate confidentiality agreement cannot compel the employee to actually sign the separate agreement.  Id. at *6.  An agreement to sign is not sufficient to show that the inclusion of the confidentiality provision was the “complainant[’s] preference” under GOL § 5-336.  Id.

Public Policy Regarding Confidentiality

In New York, freedom of contract is an important public policy.   See, e.g., Com'rs of State Ins. Fund v. Strekte Corp., No. 451792/2021, 2025 WL 3634691, at *3 (N.Y. Sup. Ct. Dec. 12, 2025).  An agreement can only be found unenforceable where “statute or public policy dictates that the interest in freedom to contract is outweighed by an overriding interest of society.”  Id.

            Here, Courts have found that, as a matter of public policy, a party’s freedom of contract is outweighed by the Court’s need to protect employees accusing employers of employment discrimination.  Accordingly, courts will not enforce a settlement agreement when the agreement punishes an employee who exercises her statutory rights to consider a settlement agreement for 21 days and to later reject it, up to seven days after execution of the agreement.  In another case, Simons, the employer refused to pay employee the $75,000 settlement amount after the parties signed a pre-litigation settlement agreement.  Simons v. Lee Litigation Group, PLLC, No. 151692/2020, 2021 WL 3624940, at *1-2 (N.Y. Sup. Ct. Aug. 12, 2021).  The employee sued the employer for breach of contract and the employer filed a counterclaim for violation of the confidentiality provision.  Id. at *2.  There, the confidentiality provision stated that if the employee “is required to provide any confidential disclosure, as compelled by law,” or if the employee revokes her agreement to confidentiality, the settlement agreement shall be reduced to $100.  Id. at *1.  The court noted that these conditions are rights afforded to complainants, not employers, under GOL § 5-336.  Id. at *4.  Accordingly, it held that the confidentiality provision “improperly attempts to circumvent the intent of recent amendments to General Obligations Law § 5-336” to  “honor the plaintiff’s preference.”  Id. at *4 (noting that this goal is not met when only the employee is subject to punishment because that illustrates that the confidentiality provision was intended solely to protect the employer).  Further, the court stated that the employee did not violate the confidentiality provision contained in the settlement agreement by bringing the suit because New York has a “deep-rooted, long-standing public policy in favor of a person’s right to make statements during the course of court proceedings without penalty.”  Id. at *4 (quoting Denson v Donald J. Trump for President, 180 A.D.3d 446, 453-54 (1st Dept. 2020)).

            Relatedly, New York public policy supports a presumption of public access to judicial documents, which are documents “relevant to the performance of the judicial function.”  Lugosch v. Pyramid Co., 435 F.3d 110, 119 (2d Cir. 2006).  In practice, this means that if a case settles after the case is filed, the settlement can be filed on the public docket.  To avoid public disclosure, a party must move to seal the filing.  However, court records will not be sealed “absent the most compelling reasons,” id., and a written finding of “good cause,” N.Y. Comp. Codes R. & Regs. tit. 22, § 216.1 (2026).  This holds true in employment discrimination cases even where the employer and employee agree to keep the settlement agreement confidential.  Welch v. Bio-Reference Labortories, Inc., No. 19-CV-0846, 2021 WL 1850930, at *4 (N.D.N.Y. May 10, 2021) (denying the employer’s motion to seal the settlement agreement because “bargained-for confidentiality” is not a compelling reason sufficient to overcome the presumption of access to judicial documents). 

Next Steps: Guidance for Employers

Even with courts’ steadfast adherence to New York law, there are still ways employers can maintain confidentiality while keeping their settlement agreements enforceable.

            Confidentiality Without Complainant’s Preference:  Employers can require confidentiality of certain settlement information regardless of whether it is the employee’s preference.  For example, employers can include a non-disclosure provision regarding the actual terms of a settlement, including the amount, and the facts and circumstances leading up to it.  Hadzijic, 2025 WL 2886104, at *6 (S.D.N.Y. Oct. 10, 2025).  Such a provision is distinct from preventing disclosure of the “underlying facts and circumstances to the claim” and therefore does not implicate the protections under GOL§ 5-336.

            Separate Confidentiality and Settlement Agreements:  The law does not expressly require that the confidentiality agreement be kept as a separate document from the overall settlement agreement.  Frequently Asked Questions: Nondisclosure Agreements, New York State, https://www.ny.gov/combating-sexual-harassment-workplace/combating-sexual-harassment-frequently-asked-questions (last visited Jan. 13, 2026).  While a standalone confidentiality agreement will not sidestep the restrictions of GOL § 5-336—the law applies with equal force to any “agreement” that contains a provision prohibiting disclosure of the underlying facts and circumstances of a discrimination claim,  GOL § 5-336(1)(a)—separate agreements can benefit an employer when the goal is to have an enforceable settlement agreement.  To start, a settlement agreement without a confidentiality provision regarding the discrimination claim itself is not subject to GOL § 5-336.  Therefore, the 21-day consideration period and 7-day revocation period do not apply to such an agreement; the employee can sign the settlement agreement immediately and has no right to revoke it once executed.  This is consistent with GOL § 5-336’s purpose of allowing employees “adequate time to consider NDAs, not to consider settlements that do not require the signing of an NDA.”  Hadzijic, 2025 WL 2886104, at *7.  The key to retaining this benefit is to refrain from requiring confidentiality of the underlying claim as a condition of the settlement.  See Separ, 2025 WL 51206, at *4.  Although this creates a risk that the employee reaps the benefits of a settlement without guaranteeing the employer’s confidentiality—as the employee may choose not to sign the confidentiality agreement—it does protect an employer from having the entirety of a settlement agreement invalidated.

            Pre-Litigation Settlements:  In some cases, it may be in the employer’s interest to settle an employment dispute before a case is filed.  First, if an employer settles pre-suit, the employee may waive the 21-day consideration period.  See CPLR § 5003-B; GOL § 5-336(1)(b).  Second, court records are presumptively public.  Lugosch, 435 F.3d at 119.  Even if the parties’ settle, and the complainant prefers to include a confidentiality provision, the alleged facts of the underlying claim are already on the public docket.  Practically, this moots any sense of confidentiality.  Although an employer can move to seal these records, the “good cause” standard to seal such records is a high bar to meet.  See Welch, 2021 WL 1850930, at *4.  Third, public filings can attract media attention.  Instead of an employee sharing the facts of the underlying alleged discrimination, the media can freely access those facts through the court system.  This is not ideal for employers looking to maintain confidentiality.  Settling a case before suit is commenced keeps the settlement within the private sphere.

            Compliance with Requirements:  Employers should strictly follow New York’s laws and recent case rulings.  Courts will not hesitate to call out an employer that attempts to “circumvent” them.  Simons, 2021 WL 3624940, at *4.  Courts are quick to invalidate an entire settlement agreement when even only one aspect of the agreement is improper.  An employee that signs a settlement agreement with a provision stating that she “agrees to sign” a separate confidentiality provision is not sufficient to meet the requirement that confidentiality is the employee’s preference.  Hadzijic, 2025 WL 2886104, at *6.  Therefore, employers should include explicit language that confidentiality is “in the complainant’s preference” rather than language that the employee simply agrees that the settlement and the underlying facts and claims are confidential.  GOL § 5-336(1)(a).

Conclusion

There is no doubt that when it comes to maintaining the confidentiality of settlements relating to employment discrimination claims, the most critical element is to explicitly memorialize the employee’s preference for confidentiality.  However, there is doubt stemming from the unknown:  there is an unsurprising lack of case law on pre-litigation settlement agreements because those agreements never made it to the courtroom.  And for good reason—pre-litigation settlement agreements offer employers, and employees, the best opportunity to maintain confidentiality of the underlying alleged discriminatory activity.  To have the best chance at ensuring that settlements involving employment discrimination claims remain confidential, employers should avoid cutting corners and focus on strictly abiding by New York’s law and recent case decisions.