Newly Enacted Federal “Speak Out Act” Limits Use of Some Sexual Harassment NDAs
President Biden has signed into law the federal “Speak Out Act” limiting the enforceability of pre–dispute non-disclosure and non-disparagement clauses covering sexual assault and sexual harassment disputes. The Act takes effect immediately.
The Act places restrictions on the enforceability of pre-dispute:
“non-disclosure clauses,” meaning “a provision in a contract or agreement that requires the parties to the contract or agreement not to disclose or discuss conduct, the existence of a settlement involving conduct, or information covered by the terms and conditions of the contract or agreement.”
“non-disparagement clauses,” defined as “a provision in a contract or agreement that requires 1 or more parties to the contract or agreement not to make a negative statement about another party that relates to the contract, agreement, claim, or case.”
Such clauses entered into before a sexual assault or sexual harassment dispute arises are rendered unenforceable. The Act defines covered “sexual assault disputes” as disputes “involving a nonconsensual sexual act or sexual contact, as such terms are defined in section 2246 of title 18, United States Code, or similar applicable Tribal or State law, including when the victim lacks capacity to consent.” Covered “sexual harassment disputes” are defined as disputes “relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.”
A few notes about the Act’s scope and implications:
Critically, the Act may have limited implications for many employers for one key reason – the Act only applies to non-disclosure and non-disparagement clauses in pre-dispute agreements, meaning that any non-disclosure/non-disparagement clauses in agreements entered into by employers/employees concerning sexual assault or sexual harassment issues after a dispute has arisen are not impacted by the Act. Because of this, the Act’s protections would not apply to non-disclosure/non-disparagement clauses in separation or settlement agreements executed after sexual harassment or sexual assault allegations are made, but may be subject, of course, to any applicable state or local laws.
The Act explicitly excludes from coverage any efforts by employers to protect trade secrets and proprietary information via non-disclosure or non-disparagement provisions.
While the Act does apply to non-disclosure/non-disparagement clauses in agreements entered into before December 7, 2022 (the Effective Date), it would not impact clauses entered into before a dispute arose, but where that dispute was active before the Act’s December 7th effective date.
Given the above, employers utilizing non-disclosure/non-disparagement agreements at the outset of employment or during the employment lifecycle should consider creating proper carve-outs for sexual assault and sexual harassment issues given the new Act.
Employers should also be aware of other recent developments in this area. The Speak Out Act also follows the enactment of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, which took effect earlier this year (our post on the law can be found here). That federal law prohibits employers from compelling arbitration of sexual harassment or sexual assault claims and provides employees the option to pursue those claims in other forums. Employers should also remain aware that, despite the seemingly narrow implications of this new federal law, several states – including California, Illinois, New Jersey, and New York – have enacted laws in recent years that grant employees broader protections when it comes to certain sexual harassment and discrimination claims, enhancing employees’ abilities to speak out about alleged misconduct.