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S1722Senate2019-2020 SessionSame asA10331

Ban Gag Clauses in Contracts

Official title

“Prohibits the use of non-disparagement clauses in consumer contracts”

Status
In Senate Committee
Consumer Protection
Impact
5/10
Moderate
Passage
0%

Bill progress

Step 2 of 7

In committee · Consumer Protection

What's happening

This bill prohibits non-disparagement clauses in consumer contracts, making them unenforceable and imposing penalties for violations.

Why it matters

  1. Empowers consumers to freely share honest opinions. By prohibiting non-disparagement clauses, the bill ensures that consumers cannot be contractually silenced from posting negative reviews or complaints about products and services, which helps others make better-informed purchasing decisions.

  2. Deters businesses from retaliatory or intimidating tactics. It explicitly bans not only the use of these clauses, but also threats or attempts to enforce them, aiming to prevent businesses from penalizing or intimidating consumers for expressing their views.

  3. Establishes meaningful penalties and consumer remedies. Violators face escalating civil penalties, and harmed consumers gain the right to sue for up to triple damages plus attorney’s fees, potentially making businesses think twice before attempting to stifle consumer speech.

  4. Clarifies scope and exceptions. While protecting consumer speech, the bill also ensures that online platforms can still remove content that is legally removable (such as defamatory or unlawful statements), balancing free expression with responsible moderation.

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Who cares

Headline styles

Ban Gag Clauses in Contracts

Plain English, a few words. Used as the page title.

Sponsors

Primary sponsor
James Skoufis

Senator · Senate District 39

Chair, Investigations And Government Operations

1 Co-sponsor

History

  1. Referred to consumer protection
  2. Referred to consumer protection

Companion bill

The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.

A10331Assembly

Ban Gag Clauses in Contracts

In Assembly Committee · Consumer Affairs And Protection · Sponsor Michael DenDekker

Impact 6 · Moderate0% to pass

Full text

2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗

STATE OF NEW YORK

1722

2019-2020 Regular Sessions

IN SENATE

January 16, 2019

Introduced by Sen. SKOUFIS -- read twice and ordered printed, and when printed to be committed to the Committee on Consumer Protection

AN ACT to amend the general business law, in relation to the prohibition of the use of non-disparagement clauses in consumer contracts

The People of the State of New York, represented in Senate and Assembly, do enact as follows:

Section 1. The general business law is amended by adding a new section 399-k to read as follows:

§ 399-k. Non-disparagement clauses in consumer contracts or services prohibited. 1. Definitions.

a. The term "consumer" shall mean a natural person residing in this state.

b. The term "consumer goods" shall mean goods, wares, paid merchandise or services purchased or paid for by a consumer, the intended use or benefit of which is intended for the personal, family or household purposes of such consumer.

c. The term "consumer services" shall mean services provided to consumers including, but not limited to, legal services, medical services or cleaning services.

d. The term "non-disparagement clause" shall mean a provision waiving the consumer's right to make any statement regarding a seller or lessor or its employees or agents, or concerning the goods or services.

2. Prohibition. a. A contract or proposed contract for the sale or lease of consumer goods or services may not include a non-disparagement clause. The inclusion of such clause in a contract or proposed contract for the sale or lease of consumer goods or services shall not serve to impair the enforceability of any other provision of such contract.

b. It shall be unlawful to threaten or to seek to enforce a non-disparagement clause made unlawful under this section, or to otherwise penalize a consumer for making any statement protected under this section. The inclusion of such clause in a written contract for the sale

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD07331-01-9

S. 1722 2

or purchase of consumer goods shall not serve to impair the enforceability of any other provision of such contract.

c. Any waiver of the provisions of this section is contrary to public policy, and is void and unenforceable.

3. Penalty. a. Any person who violates this section shall be subject to a civil penalty not to exceed five hundred dollars for the first violation, and one thousand dollars for the second and for each subsequent violation, to be assessed and collected in a civil action brought by the attorney general.

b. Any person who seeks to enforce a non-disparagement clause made unlawful under this section or otherwise penalize a consumer for making any statement protected under this section shall be subject to a civil penalty not to exceed five thousand dollars to be assessed and collected in a civil action by the attorney general.

c. Any consumer damaged by a violation of this section may bring an action for recovery of damages. Judgment may be entered in an amount not to exceed three times the actual damages plus reasonable attorney's fees. The penalty provided by this section is not an exclusive remedy, and does not affect any other relief or remedy provided by law. This section shall not be construed to prohibit or limit a person or business that hosts online consumer reviews or comments from removing a statement that is otherwise lawful to remove.

§ 2. This act shall take effect on the ninetieth day after it shall have become a law.

Reflowed for reading: line numbers and page breaks removed. Cite the official text.

Sponsor's memo

Title of bill

An act to amend the general business law, in relation to the prohibition of the use of non-disparagement clauses in consumer contracts

Purpose or general idea of bill

Prohibits companies from using non-disparagement clauses in contracts as to protect consumers who make any statements regarding a seller or lessor or concerning the goods and services

Summary of provisions

Section 1: Prohibits a contract for the sale or lease of consumer goods or services may not include a non-disparagement clause. Creates civil penalties for any person who violates this section.

Section 2: Effective Date

Justification

Given the potential impact of negative reviews for businesses, some have tried to stop them wherever possible. This has prompted legislation in six different state legislatures, with two of the bills already signed into law. Some businesses have used deceptive practices and inserted non-disparagement clauses into online service agreements or fine print of a contract making the consumer liable for statements or actions that could potentially harm the business. Posting a negative online review on a consumer review site (e.g. Amazon, Consumer Reports, Trip Advisor, Yelp) could result in a libel lawsuit against the consumer.

Prior legislative history

Assembly:

06/21/17 - Passed Assembly

01/03/18 - Returned to Assembly

01/03/18 - Ordered to third reading cal. 403

03/20/18 - Passed Assembly

Senate:

June, 2017 - Died in Senate

01/03/18 - Referred to Consumer Protection

03/20/18 - Delivered to Senate

03/20/18 - Referred to Consumer Protection

Fiscal implications

None

Effective date

This act shall take effect on the ninetieth day after it shall have become a law.

Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.