Sexual Harassment Claims Put Non-Disclosure and Arbitration Agreements Under Scrutiny, Resulting in a Flurry of Legislative Action
In the current climate where sexual assault and harassment allegations against Hollywood elite, Congressmen and news anchors have triggered a wave of “me too” allegations, several tools commonly used by employers to shield themselves from liability have come under attack, including non-disclosure agreements (NDAs) and arbitration agreements. Many employers require employees to sign NDAs as a condition of employment in order to prevent the dissemination and misuse of companies’ confidential and proprietary information, but some critics claim that NDAs lead employees to believe they cannot speak out about, or internally report, harassment. Mandatory arbitration agreements are also used by many employers to require employees to submit employment-related disputes to private, binding arbitration – that is, confidential out-of-court resolution of claims far from the media’s attention. But lawmakers are now calling for measures to limit the use of both devices, which, they contend, protect harassers and silence their victims.
On the federal level, several Democratic lawmakers (including Rep. Cheri Bustos (D-Ill.), Sen. Kirsten Gillibrand (D-N.Y.), and Sen. Kamala Harris (D.-Calif.)), joined by Republican co-sponsors, Sen. Lindsey Graham (R.-S.C.) and Reps. Walter Jones (R.-N.C.) and Elise Stefanik (R.-N.Y.), introduced a bill on December 6, 2017, referred to as the “Ending Forced Arbitration of Sexual Harassment Act” which, if enacted, would prevent employers from enforcing mandatory arbitration agreements in cases where employees allege workplace sexual harassment or gender discrimination under Title VII.
State lawmakers are also pursuing legislation aimed at preventing the concealment of sexual misconduct in the workplace. Brad Hoylman (New York State Senator) and Nily Rozic (New York State Assemblywoman), both Democrats, have proposed legislation in their respective chambers that would, if enacted, void any clause in a formal written employment contract that could be construed to require employees to keep confidential claims of harassment or discrimination, including those submitted to arbitration. Ms. Rozic said the recent attention to sexual misconduct allegations against famous figures like Harvey Weinstein has made people more open to talking about sexual misconduct. “There are men in every industry in positions of power who use that against ambitious women starting out in their careers,” she said. “The new legislation aims to chip away at the workplace norms that leave employees at a disadvantage.” A similar measure will be introduced in New Jersey, according to the office of State Senator Loretta Weinberg, who is the state’s Democratic majority leader. New Jersey State Assembly Republican Leader Jon Bramnick has pledged to work with Weinberg to draft the legislation.
Arizona State Rep. Maria Syms (R-Paradise Valley) has proposed Arizona House Bill 2020, which includes a provision prohibiting anyone from entering a confidentiality agreement that restricts the disclosure of factual information related to allegations of sexual assault or harassment, and would make it unlawful even to propose such an agreement where the allegations are aimed at an elected official. Rep. Syms says the bill is intended to close the “sexual predator loophole” that allows perpetrators to buy their victims’ silence.
It is too soon to predict whether these efforts at enacting new legislation will succeed, particularly in light of the impact they would have on parties’ legitimate freedom to contract and employers’ willingness in the future to resolve claims early. These measures also beg the question why sex-related claims alone should be carved out from NDAs or arbitration when there are also compelling policy reasons for ensuring public review of claims of race, national origin, religion, disability, and age-related claims, among others. While these measures move forward, employers are presently advised to review their existing NDAs and mandatory arbitration policies with counsel, as well as to review their harassment reporting policies and investigation procedures.