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

As stated in the Division’s notice, if a complainant seeks to discontinue an action prior to a hearing, the complainant’s attorney will be required to state in writing why the discontinuance is sought and if the reason is private settlement, 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 Division’s public hearing process. The Division states that this is “in the public interest for transparency and good governance.”

Why is this significant?

The NYSHRL (Article 15 of the New York Executive Law) is a far-reaching law prohibiting, among other things, discrimination in employment. In recent years, New York State has expanded this law considerably – particularly with respect to sexual harassment claims. For example, New York State broadened its statutory definition of covered workers who can bring harassment claims, lowered the standard for hostile work environment claims, prohibited mandatory pre-dispute arbitration clauses, and required employers to maintain sexual harassment policies and provide training (see detailed explanations set forth in prior advisories here, here, and here). Significantly, New York State added provisions (N.Y. General Obligations Law § 5-336 and N.Y. Civil Practice Law § 5003-b) that essentially ban nondisclosure clauses that would prevent the disclosure of the underlying facts and circumstances in settlements, agreements, or other resolutions of harassment claims, unless the condition of confidentiality is the complainant’s preference. The new Division policy appears to preclude a complainant from choosing confidentiality of settlement terms.

It has been a common practice for employers and complainants to negotiate settlement of discrimination claims, particularly where the Division’s initial investigation results in a finding of probable cause. Indeed, the Division often attempts to broker settlements before or after findings of probable cause through its conciliation process, but, frequently, parties pursue private settlement in the interest of privacy and towards an outcome that is mutually beneficial. According to the Division, some 77% of post-probable cause cases result in settlements, and nearly half of those are reached privately. For complaints filed after October 12, 2021, private confidential settlements will no longer be an option.

What is the impact?

Parties to a complaint before the Division will still be able to settle, but a major incentive for doing so – confidentiality – is effectively eliminated by this policy change.  The Division’s notice states that it will no longer issue Commissioner’s Orders simply discontinuing complaints after a private settlement, but will instead require public disclosure of settlement terms, through either an Order or a public hearing. Several details remain unclear at this time, specifically: (a) whether the Division’s new position only applies to those cases in which it has issued a “probable cause” determination while still allowing for private settlements prior to any such determination; (b)what would happen if complainants withdrew their complaints prior to a hearing, as permitted under the Division’s Rules of Practice; and (c)which precise terms of any settlement would need to be included in an Order after Stipulation. Generally, the Division has permitted parties to pending complaints to keep agreements regarding settlement amounts confidential, even if they cannot keep the underlying facts and circumstances confidential.

It is almost certain that this new policy will discourage private settlement of complaints pending at the Division. In cases where a potential litigant has presented a plausible claim and is considering filing a NYSDHR complaint, it may be in all parties’ interest to raise the question of a private settlement before a complaint is ever filed.