New York State Legislature Passes Anti-Waiver of Employment Rights Act

On May 13, the New York State Assembly passed Bill S4424A, the Anti-Waiver of Employment Rights Act, which seeks to limit employee waivers of substantive and procedural rights under the New York Labor Law and New York State Human Rights Law in employment agreements. The bill has already passed the New York Senate and is awaiting delivery to Gov. Kathy Hochul, who is expected to receive it later this year to approve or veto. If approved, the Anti-Waiver of Employment Rights Act will be effective immediately.

The stated purpose of the Anti-Waiver of Employment Rights Act is to ensure that employees’ rights under the New York Labor Law and New York State Human Rights Law are mandatory and nonwaivable through private agreement. According to Section 2 of the act, the New York Legislature found that courts had previously allowed employees to waive such statutory rights, which resulted in employers requiring employees to sign waivers that shortened the statute of limitations for bringing their claims or surrendered their rights and the procedural mechanisms to enforce those rights. The Anti-Waiver of Employment Rights Act is expressly intended to change that, reaffirming that statutory rights under the Labor Law and Human Rights Law are nonwaivable as a matter of public policy.

Accordingly, the proposed act will void all waiver agreements — whether express, implied, or otherwise limiting an employee’s substantive or procedural rights, remedies or claims — with two very important exceptions:

1. Waiver agreements made in the context of a settlement of a bona fide dispute not initiated by an employer.
2. An agreement made upon or after the termination of employment.

The Anti-Waiver of Employment Rights Act also includes provisions that preserve existing employee rights under other laws, collective bargaining agreements and provisions in employment contracts that afford rights to employees. The act also ensures that it will not apply where federal law would preempt it.

If signed by the governor, the Anti-Waiver of Employment Rights Act will primarily affect agreements entered into during an individual’s term of employment. For example, a waiver required in connection with a change in employment terms, such as a promotion, a payment of a bonus or vesting of deferred compensation, may no longer be valid. Employers must also exercise caution when obtaining a waiver from terminated employees in exchange for severance. As a general rule, most employers do not obtain a waiver until after the employee’s last day to ensure it will apply to all potential employment-related claims. But under this new statute, waiting until on or after an employee’s last day to secure a waiver becomes imperative, as an earlier waiver may not come within the act’s exceptions.

The statute also provides employers with a greater incentive to adopt arbitration agreements. If covered by the Federal Arbitration Act, an arbitration agreement can still include a class action waiver and potentially other limitations, and the new statute will not likely apply given the availability of federal preemption. On the other hand, certain employers that had concerns about using arbitration and instead opted for a jury waiver in their agreements will likely find those waivers invalidated.

If enacted, employers need to review existing agreements and their risk mitigation strategies to ensure they remain protected.

Paul Hastings is monitoring the progress of the statue and will provide updates accordingly.