Two bills recently introduced in New York’s legislature could have a major impact on New York employers seeking to enter into employment-related agreements with employees.

Invalidating “Unconscionable” Contract Terms

On January 8, 2025, Assembly Bill No. 636 was introduced to amend the New York General Business Law (GBL). If passed, the bill would add a new section to the GBL that would invalidate certain terms in standard form contacts regarding dispute resolution on the grounds that such terms are substantively unconscionable. A “standard form contract” is defined in the bill as “any contract to which only one of the parties is an individual and that individual does not draft the contract.”

The bill outlines a rebuttable presumption that the following terms are substantively unconscionable, and therefore impermissible, when included in a standard form contract:

• A requirement for the parties to resolve legal claims in an “inconvenient venue;”
  • For state claims, an “inconvenient venue” is defined as “a place other than the county where the individual resides or the contract was consummated;” and
  • For federal claims, an “inconvenient venue” is defined as “a place other than the federal judicial district where the individual resides or the contract was consummated.”
• A waiver of an employee’s right to assert claims or seek remedies under state or federal law;
• A waiver to seek punitive damages;
• A requirement to bring an action prior to the expiration of the applicable statute of limitations; and
• A requirement that an employee pay fees and costs to bring a legal claim that substantially exceeds the fees and costs to initiate a state or federal court action.

The bill states that these unconscionable terms “discourage valid claims” and further describes them as “unfair to the party that is forced to agree to these terms.” The bill also provides that standard form contracts must advise an individual of their right to consult with an attorney concerning the legal document, and give a reasonable time in which to review the contract with such attorney.

Under the bill, aggrieved employees would have a private right of action where they could seek statutory damages of $1,000 per violation. Additionally, an employer’s violation would be considered an “unfair and deceptive trade practice” that may be prosecuted by the Office of the New York State Attorney General.

If passed, the bill would take effect on the first of January next succeeding the date in which it becomes a law, and will apply to contracts entered into after such date. On February 14, 2025, an identical Senate Bill was also introduced. 

Invalidating Waiver of Employment Rights

On February 4, 2025, Senate Bill No. 4424 was introduced that would amend the New York Labor Law (NYLL) and the New York State Human Rights Law (NYSHRL). If passed, the bill would add new sections to both laws and invalidate contractual provisions waiving or limiting “any employee’s substantive or procedural rights, remedies, or claim.” 

Notably, the bill carves out significant exceptions for waivers mutually agreed to and included in “the settlement of any good faith bona fide dispute in which an employee raises a claim against their employer” or “an agreement entered upon or following the termination of an employee’s employment.” The bill clarifies that the provisions of this subdivision shall not apply where application of such provisions “would be preempted by federal law.”

If passed, the bill would take effect immediately. On February 13, 2025, an identical Assembly Bill was also introduced.

What Do Employers Need to Know?

These bills have not been signed into law, so employers are currently under no new obligations when entering into employment-related agreements with employees. However, the introduction of these bills signals an interest in the New York State Legislature to restrict certain terms in employment-related agreements.

Employers should keep an eye on these bills moving forward, and should review their employment agreements to ensure compliance if these bills are ultimately enacted.