New York Employers Beware: Claimant Must Sign Confidentiality Preference Acknowledgement for Employer to Enforce Entire Settlement Agreement

Seyfarth Synopsis: On January 8, 2025, a New York federal court held that an employee’s refusal to sign a confidentiality and non-disparagement acknowledgement form that was part of a settlement agreement rendered the entire settlement agreement unenforceable. This decision is an important reminder for employers to carefully prepare settlement agreements containing confidentiality provisions in line with legal requirements to ensure enforceability.

As discussed previously here and here, Section 5-336 of the New York General Obligations Law prohibits employers from including non-disclosure language in a settlement agreement unless the “condition of confidentiality is the complainant’s preference” and the complainant has 21 days to consider the agreement and 7 days to revoke. Similarly, N.Y. C.P.L.R. § 5003-B prohibits a condition of confidentiality in a settlement agreement reached in response to a filed complaint unless such a condition is the plaintiff’s preference. The statutes provide a mechanism for the complainant to acknowledge their preference for confidentiality via a separate acknowledgment form.

In Separ v. Cnty of Nassau, the parties entered into a settlement agreement to resolve plaintiff’s allegations of discrimination and retaliation. The settlement agreement contained a “review and revocation” clause that provided the employee the required consideration and revocation periods under GOL § 5-336 and CPLR § 5003-B. The settlement agreement also contained an “effective date” clause which stated that the settlement agreement would not take effect until it was executed by the parties.

The parties eventually agreed upon settlement terms and the employee executed the settlement agreement, within the 21-day consideration period, but refused to sign the confidentiality and non-disparagement preference acknowledgement form. The employer thereafter filed a motion to enforce the settlement agreement.

Ultimately, the court ruled that the settlement agreement could not take effect without the signed confidentiality and non-disparagement preference acknowledgement. The court rejected the employer’s argument that the confidentiality and non-disparagement preference acknowledgement form was “separate and apart from the settlement agreement,” and instead, held it was a “material component of the broader settlement agreement.”

This decision serves as a cautionary tale to employers because even meticulous adherence to both GOL § 5-336 and CPLR § 5003-B may still render a settlement agreement unenforceable if the employee refuses to sign a confidentiality and non-disparagement acknowledgement. It is therefore critical for employers to review their settlement procedures and templates to ensure all material components of a settlement agreement are fully executed before assuming the agreement is enforceable.

Seyfarth will continue to monitor developments in this space and provide updates when available.  In the meantime, feel free to reach out to any of the authors of this alert, or your regular Seyfarth contact, with any questions.