Confidential settlements pre-suit discrimination cases may be in jeopardy

Employment Law

On October 1, 2021, the New York State Division of Human Rights (“NYSDHR”), the agency responsible for enforcement of the New York State Human Rights Law (“NYSHRL”) issued a notice announcing a significant change to the agency’s processes for complaint resolution. Effective October 12, 2021, the NYSDHR will no longer grant requests for discontinuance of complaints due to confidential private settlements.

In the event that a complainant seeks to discontinue an action prior to a hearing, the complainant’s attorney will now be required to state in writing why the discontinuance is sought. If the reason is a private settlement has been reached between the parties, the discontinuance will not be granted. Instead, the parties will be permitted to (a) settle the matter publicly through an order after stipulation that includes the terms of the settlement, or (b) proceed through the NYSDHR’s public hearing process. Reports state that the NYSDHR’s reasoning is that public settlements are “in the public interest for transparency and good governance.”

This policy change has far-reaching implications. A major incentive for employers to settle matters pre-suit is to maintain confidentiality surrounding the dispute, as well as the terms of the settlement. Therefore, this policy change effectively eliminates the main incentive for an employer to settle with the employee. Therefore, there may be a shift in settlement practice amongst attorneys in that parties may attempt to settle the matter privately before filing with the NYSDHR or to file with the U.S. Equal Employment Opportunity Commission instead.

As always, Mackey Butts & Wise, LLP will continue to monitor these changes closely to keep our readers and clients apprised of developments. 

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