Proposed New York Legislation Could Reshape Employment Agreements: What Employers Need to Know

This article is from The National Law Review: https://ow.ly/3vU750ViuHu Two newly introduced bills in the New York State Legislature could have a significant impact on how employers structure employment-related agreements moving forward. Aimed at increasing employee protections and limiting contract terms deemed unfair or burdensome, these proposals—Assembly Bill No. 636 and Senate Bill No. 4424—signal the legislature’s growing focus on contract fairness and worker rights.

Although these bills are not yet law, New York employers should monitor their progress closely and begin considering how their standard employment agreements may need to change if either measure passes.

Bill #1: Targeting “Unconscionable” Contract Terms in Standard Agreements

Assembly Bill No. 636, introduced on January 8, 2025, proposes an amendment to the New York General Business Law (GBL). The bill would create a new section targeting “standard form contracts,” which it defines as agreements where only one party is an individual who did not draft the contract—a definition that captures most employment agreements.

If passed, the law would invalidate contract provisions that are deemed “substantively unconscionable,” including:

• Requiring employees to litigate in an “inconvenient venue”

  • For state claims: any county other than where the employee resides or the contract was signed

  • For federal claims: any federal district other than where the employee resides or the contract was signed

• Waivers of legal claims or remedies under state or federal law

• Waivers of the right to seek punitive damages

• Clauses that shorten the applicable statute of limitations

• Requirements for employees to pay legal fees significantly higher than what would be required in court

The bill also mandates that employers notify individuals of their right to consult with legal counsel before signing and allow reasonable time for review.

Violations would expose employers to:

• $1,000 in statutory damages per violation

• Enforcement by the New York State Attorney General, treating violations as unfair and deceptive trade practices

An identical Senate bill was introduced on February 14, 2025.

Bill #2: Prohibiting Waivers of Employee Rights

On February 4, 2025, Senate Bill No. 4424 was introduced to amend both the New York Labor Law (NYLL) and the New York State Human Rights Law (NYSHRL). If enacted, the law would invalidate any employment agreement that waives or limits an employee’s substantive or procedural rights, remedies, or claims.

However, the bill provides important exceptions, allowing for:

• Mutual waivers included in a good faith settlement of a bona fide dispute

• Agreements made at or after the time of termination

• Provisions that would otherwise be preempted by federal law

This bill would take effect immediately upon enactment. A corresponding Assembly Bill was introduced on February 13, 2025.

Key Takeaways for Employers

While neither bill is currently law, employers should consider the following action steps:

1. Review your current employment agreements, including offer letters, arbitration clauses, severance agreements, and restrictive covenants, to identify terms that might conflict with the proposed legislation.

2. Consult with legal counsel before implementing or enforcing provisions related to venue, waivers, statute of limitations modifications, or legal fee responsibilities.

3. Stay informed on legislative developments. If either of these bills is signed into law, affected employers will need to act quickly to ensure compliance.

4. Train HR and legal teams on the potential impact of these laws, especially for multi-state employers with New York-based employees.

   
   

Final Thoughts

These proposed amendments reflect a broader legislative trend toward increasing protections for employees and limiting employers' use of certain contractual provisions. Whether these bills pass in their current form or are amended along the way, New York employers should be proactive in preparing for potential changes.