Earlier this year, New York Governor Andrew Cuomo signed into law the State’s Budget Bill for fiscal year 2018-19. Astute employers may recall that the Budget Bill has in the past been the Governor’s preferred mechanism for enacting sweeping employment law reforms. For example, the 2016-17 Budget Bill included provisions that will ultimately increase the statewide minimum wage to $15/hour by 2021. The 2016-17 Bill also laid the groundwork for the State’s paid family leave law, which took effect on January 1 of this year.

In this year’s Budget Bill, the Governor pivoted his attention to the recent groundswell of high-profile sexual harassment allegations. Indeed, as we previously reported, the Budget Bill imposes a myriad of new obligations and restrictions intended to remedy sexual harassment in the workplace. Two of the more prominent portions of the Budget Bill, discussed below, took effect on July 11, 2018.

First, the Budget Bill bars employers from including in any agreement that resolves a sexual harassment claim, a “term or condition that would prevent the disclosure of the underlying facts and circumstances to the claim or action” – i.e., a confidentiality clause – unless the inclusion of such a clause is the complainant’s preference. If the complainant prefers the inclusion of a confidentiality clause, the Bill then attaches a required 21-day consideration period and a subsequent 7-day revocation period (similar to the requirements levied by the Older Workers Benefit Protection Act for waivers of federal age discrimination claims). Notably, this part of the Budget Bill appears to apply to both judicial and extrajudicial agreements resolving sexual harassment allegations/claims. This means that, where sexual harassment allegations have been raised, an employer’s standard severance and settlement agreements will likely need to be revised.

Second, the Budget Bill proscribes employers from including in employment contracts signed on or after July 11, 2018, provisions that require employees to submit sexual harassment claims to mandatory arbitration. The Bill includes an important caveat, however – namely, that the ban on mandatory arbitration agreements does not apply where it would be “inconsistent with federal law.” This is a clear nod to the Federal Arbitration Act, which likely preempts this portion of the Budget Bill. The tension between State and federal law in this regard will undoubtedly spur an influx of litigation and, ultimately, require resolution by the judiciary.

Given the expansive new constraints levied by the Governor Cuomo’s Budget Bill, Empire State employers should immediately evaluate their employment practices and policies, including their inclusion of confidentiality and/or arbitration provisions in work-related contracts. For more information regarding these new laws, please contact your existing Reed Smith attorney.