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Sexual Harassment Complaint

Regulatory Update: New Law Ends Sexual Harassment NDAs

Jan. 5, 2023
Employers with these contract terms should take steps to end them.

Last December, President Biden signed into law the Speak Out Act (SOA), which prohibits employers from using nondisclosure agreements (NDA) and those addressing nondisparagement to block the victims of sexual harassment and assault from making their stories public—and all employers need to pay attention to its impact..

“I just signed the Speak Out Act, a bill that’ll enable survivors to speak out about workplace sexual assault and harassment and increase access to justice,” Biden declared on Twitter.

“Nondisparagement clauses” in sexual assault or harassment disputes consist of any contractual provision that requires any party not to make a negative statement about another party that relates to the contract, agreement, claim, or case. It is not unusual for employers to regularly include both of these clauses in employment agreements. Employers should remain aware that some state or local laws may restrict such provisions, such as those that have been enacted in California, New Jersey and Washington.

Although this measure might turn out be the last major piece of federal legislation enacted—at least for now—in regard to sexual harassment in the workplace, it is bound to have an immediate effect on all employer organizations. The issue it addresses—NDAs –has been a major source of anger and concern since the first days of the #MeToo movement, when it became evident that these contract terms had been used widely to hide the culpability of individuals and their employers.

After it was learned that these agreements had been used to cover up major cases of abuse and the extent of the sexual harassment problem in the United States, several states like California and New York enacted their own laws banning NDAs. The language of the SOA clearly states that it does not supersede any state law governing nondisclosure and nondisparagement that is stronger and more protective. Employers should find out if their applicable state law is more protective before including such clauses in any contracts.

The law, which passed both houses of Congress with overwhelming bipartisan support, went into effect as soon as it was signed into law by Biden on Dec. 7. It applies only to pre-dispute NDAs, such as those included in employment contracts. Employers are still allowed to use these provisions as part of settlement agreements regarding disputes involving sexual harassment

What Is Excluded

The act carves out several subject-matter exclusions, explicitly stating that it does not apply to employers’ efforts to protect trade secrets and proprietary information, point out attorneys Robert T. Dumbacher and Keenan Judge of the Hunton Andrews Kurth law firm.

The new act follows the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, passed by Congress and signed into law by the President last March. This law holds that those bringing sexual assault and sexual harassment claims who had previously entered into predispute arbitration agreements or predispute class- or collective-action waivers can unilaterally choose to reject those agreements and waivers.

Attorneys Elizabeth A. Lalik, Lauren M. Bridenbaugh and Jim Paretti of the Littler Mendelson law firm believe this is a good time for employers to review their policies and practices for handling of sexual harassment incidents that fall under all applicable statutes, state and federal. They urge employers to review their employment agreements, confidentiality agreements, arbitration agreements, and employee handbooks and policies to make sure they are in compliance with the SOA and the Forced Arbitration law, as well as applicable state and local laws.

In addition, employers should review the templates for these documents, especially in regard to form separation agreements and releases, to ensure that confidentiality and non-disparagement laws are not worded in such a way as to suggest that they prohibit the disclosure of future sexual harassment or sexual assault claims or disputes that have not yet arisen, the Littler attorneys add.

“While employers may not be penalized for including non-disparagement or non-disclosure provisions in these documents, they may find that they are not enforceable if they are found to be overbroad and not carefully tailored to the Speak Out Act’s limitations,” explain Lalik, Bridenbaugh and Paretti.

Of course, the best way to avoid any issues related to confidentiality is to prevent workplace harassment or assault in the first place, Fisher Phillips law firm partners Melissa Camire and George A. Reeves, III, remind employers. But if incidents do happen, the SOA states that “it is essential that victims and survivors have the freedom to report and publicly disclose their abuse.”

They stress, “There is no doubt that attention is now pointed directly at these kinds of situations, and your business would be wise to stay on the right side of the law in light of this new development.”

All employers should maintain strong and clearly articulated anti-sexual harassment policies in place. Those principles should be part of training and be regularly reinforced periodically as well. Another level of defense is the adherence to smart complaint-handling procedures that can address such issues quickly and fairly when they arise.

Camire and Reeves also advise employers to review all pre-hire and standard employment agreements to ensure that none of them serve as gags on the types of disclosure intended to be protected by this law. To the extent that you make use of a workforce made up of independent contractors, they advise that you check those agreements to make sure they are compliant as well.

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