The New York Legislature has passed the Anti-Waiver of Employment Rights Act (the Act). If Governor Kathy Hochul signs Senate Bill S4424-A into law, the Act would broadly prohibit employers from requiring employees to waive their rights under the state’s Labor Law and Human Rights Law, with some exceptions.

If enacted, the Act would take effect immediately. Employers with New York employees should prepare now.

General Anti-Waiver Provisions

The Act would void any express or implied contractual provision that waives or limits an employee's substantive or procedural rights (e.g., minimum wage, overtime, anti-discrimination protections, and the right to bring claims within the legal time limits or as part of a class action), legal remedies or claims under the New York Labor Law or Human Rights Law. The Act’s prohibition on waivers also applies to waivers of rights that are unasserted and of claims that may not yet be legally cognizable. The statute does not elaborate on the meaning of these terms, but it is possible that the statute is referring to unripe claims.

The Legislature stated that such waivers “have always been and continue to be against public policy,” and that prior court decisions permitting them were erroneous.

Four Key Exceptions

While the Act is drafted broadly, it also allows four key exceptions:

• Waivers may still be included in the settlement of a “bona fide dispute” (a term that the Act does not define) not raised or initiated by the employer.
• Waivers in agreements entered upon or following the termination of employment remain valid – meaning properly structured separation agreements are largely unaffected.
• The Act does not apply where federal law preempts it, which will likely generate litigation over the Federal Arbitration Act's reach.
• Dispute resolution processes in collective bargaining agreements are preserved.

What This Means in Practice

The Act was most likely drafted to target employment agreements, offer letters, handbooks and contracts signed during employment that seek to limit an employee’s right to sue or otherwise reduce their ability to pursue legal claims. Arbitration agreements were also likely a target of the Act, but federal preemption provides a potential defense to employers who utilize such agreements. Accordingly, it is likely that arbitration agreements could still pass muster, though this issue will probably be litigated. Employers should monitor developments closely.

For the affected agreements, contract provisions that are likely endangered include class and collective action waivers, broad general releases signed during employment and provisions limiting available statutory remedies (e.g. agreements that waive the right to sue for certain legal claims, or agreements that limit the time period wherein an employee could pursue their legal rights).

Employers may still include waivers that release legal claims and rights in settlement agreements drafted in response to lawsuits or other “bona fide disputes” raised by employees, ordinary separation agreements, and, potentially, where arbitration agreements apply. In such cases, an employer will still be able to settle a legal dispute without worrying about whether the employee gets another bite at the apple.

Next Steps

Because the Act would take effect immediately upon the Governor's signature, employers should begin auditing their employment agreements, offer letters, handbooks and other documents for provisions that would be void if the bill is signed. Separation agreement templates should be reviewed as well to confirm whether or not they would fall within the post-termination exception. Contact experienced employment counsel for guidance.

For more information, please contact Glenn S. Grindlinger ggrindlinger@foxrothschild.com, Ryan W. Lee at rwlee@foxrothschild.com, or another member of For Rothschild’s Labor & Employment Department.

This information is intended to inform firm clients and friends about legal developments, including the decisions of courts and administrative bodies. Nothing in this alert should be construed as legal advice or a legal opinion. Readers should not act upon the information contained in this alert without seeking the advice of legal counsel. Views expressed are those of the authors and not necessarily this law firm or its clients.