Non-Disparagement Clauses in New York: Current Rules

New York has moved to restrict non-disparagement clauses significantly, especially in employment-related agreements. Recent legislative changes have shifted the landscape.

New York's Legal Framework

New York General Obligations Law Section 5-336, effective November 2023, restricts the use of non-disparagement clauses in employment settlement and separation agreements. Under this law, employers releasing claims must inform employees in writing that the agreement does not prevent them from speaking with law enforcement, the EEOC, state or local human rights agencies, or an attorney.

Additionally, the clause cannot prohibit disclosure of the underlying facts of any claim involving discrimination, harassment, or retaliation. Employees must be given 21 days to consider the agreement and 7 days to revoke it.

What Makes a Clause Enforceable

• Commercial context: Non-disparagement clauses in business-to-business contracts, partnership agreements, and M&A transactions face fewer restrictions and are generally enforceable if reasonable.
• Adequate consideration: In employment, severance payments or other financial consideration support enforceability. A non-disparagement clause in an at-will employment agreement without additional consideration is weaker.
• Specificity: Clauses that define what constitutes disparagement and include clear boundaries are more likely to be enforced than vague, sweeping restrictions.

Red Flags in New York

• Employment settlement agreements that restrict disclosure of facts related to discrimination or harassment claims
• Clauses that do not include the required statutory carve-outs for government agency communications
• No 21-day consideration period and 7-day revocation period in separation agreements
• Overly broad language that could chill protected speech about workplace conditions

When to Consult a Lawyer

Given the evolving legal landscape in New York, consider having an employment attorney review any non-disparagement clause before signing, particularly in severance or settlement agreements. The statutory requirements are specific and non-compliance can render the clause void.

This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.