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By: Whitney Lott
Associate Editor, American Journal of Trial Advocacy
Introduction
While the #MeToo movement has forced national reflection, a new enemy of safety in the workplace has come to light: the nondisclosure agreement. Nondisclosure agreements, once an anomaly of the tech industry, are now taking center stage in the national consciousness with its connection to the #Metoo movement. Employers of predators must now take stock if they are partially to blame for the culture of silence surrounding abuse in their companies due to the proliferation of these nondisclosure agreements. The use of nondisclosure provisions or confidentiality provisions in settlement agreements has forced victims of sexual misconduct, including the victims of Harvey Weinstein, Bill O’Reilly and even Larry Nassar, to remain silent on matters concerning the sexual abuse or harassment perpetrated on them.[1] The use of these provisions is the long-standing practice for businesses that are now being reevaluated. These reevaluations are due not only because of the harm caused to the victims of the misconduct, but also because of the vulnerability of the unaware public. These provisions, while being legally upheld in the past, are facing legal jeopardy by new state statutes which are now finding such provisions void and unenforceable.
What are nondisclosure agreements?
A nondisclosure agreement, sometimes called a confidentiality agreement, is an agreement where an employee agrees to not reveal any confidential or proprietary information during the term of her employment and after the termination of her employment.[2] These agreements are legally binding contracts between an employer and employee.[3] Nondisclosure agreements differ from nondisclosure provisions that exist as a part of a settlement arrangement with a company. Nondisclosure or confidentiality provisions are a longstanding and vital part of settlement agreements as well. One of the major benefits of a company considering settlement is preventing the claims from being released and causing damage to the company. This is especially true of settlements with victims of sexual harassment claims. Due to the rise of the #MeToo movement and public awareness of the perveance of sexual harassment, businesses have come under fire for the use of nondisclosure agreements. These agreements are used to silence victims and potentially increase the vulnerability of other employees. Nondisclosure agreements are vital to many companies for the legitimate purpose of protecting trade secrets and proprietary information; however, the use of nondisclosure agreements to protect the company from bad press has enhanced the culture of silence in the face of abuse in many of these companies.[4]
What is happening?
National awareness of these nondisclosure agreements has caught the attention of the federal and state legislatures, along with many state governors. During the past year states, such as Tennessee, Washington, Vermont, and Maryland, have taken the lead in banning confidentiality clauses as conditions of employment contracts.[5] For example, Governor Larry Hogan signed “Disclosing Sexual Harassment in the Workplace Act of 2018” into law in May of 2018.[6] This law prevents employees from waiving future claims related to sexual harassment or retaliation claims for sexual harassment claims.[7] Maryland has gone further in requiring companies of over fifty employees to disclose how many sexual harassment claims have been settled in the last ten years and the number of claims that included a nondisclosure agreement.[8] If more states move in this direction, then the main benefit of nondisclosure agreements, preventing bad publicity, would be eliminated. Further, Arizona, New York, and California have attacked nondisclosure agreements directly in cases of sexual misconduct.
Washington now restricts preemptive nondisclosure agreements required by employers that restrict the disclosure of sexual harassment.[9] The Washington law does contain an exception that the nondisclosure provision will still be valid in settlement agreements.[10] This differs from the California law passed later in 2018. Washington Senate Bill 5996 makes all nondisclosure agreements – even those made before the law – void and unenforceable.[11] Following Washington’s lead, on September 30, 2018, Governor Brown of California signed a bill into law which prohibits the use of nondisclosure provisions within settlement agreements in cases involving sexual assault, sexual harassment, and sex discrimination by making them void as a matter of law and public policy.[12]
The Federal Outlook
The federal government has always joined the hunt for an answer on how to encourage the disclosure of sexual harassment claims. The U.S. Senate introduced the Ending the Monopoly of Power Over Workplace Harassment through Education and Reporting Act (“EMPOWER Act”) which prohibits nondisclosure agreements over sexual harassment as a term of employment.[13] The bill would also require that companies reveal in their SEC filings how many sexual harassment settlements occurred along with the amounts of those settlements.[14] However, the EMPOWER legislation saw little movement, and the session of Congress ended without its passage.[15] However, the use of these nondisclosure agreements has caught the attention of the Equal Employment Opportunity Commission (“EEOC”). EEOC Commissioner Chai Fledblum issued a warning to businesses to tread lightly with these agreements; he stated “It is important for employers to know that we are looking at these agreements.”[16] The EEOC is not meant to protect the interests of private parties exclusively, but it has another role of enhancing the public interest of preventing employment discrimination.[17] Courts have ruled that any agreement that causes the interference in communication between the EEOC and an employee “sows the seeds of harm to the public interest.”[18] The culture of silence built up around nondisclosure agreements is forcing the EEOC to begin to look into the agreements to ensure that the accusers are not prohibited from filing complaints to the EEOC or preventing the EEOC from properly investigating accusations of harassment. The agreements would be unlawful if they prevented employees from aiding the EEOC in its investigations into employment cases.
Some businesses are not waiting for the government entities to foreclose on the use of nondisclosure agreements but are willing to forego the use of these provisions. For example, Microsoft no longer requires employees who make claims of sexual harassment to sign forced arbitration agreements.[19] According to Brad Smith, the President of Microsoft, “The silencing of people’s voices has clearly had an impact in perpetuating sexual harassment.”[20] Ultimately, the pressure on these companies to stop the use of nondisclosure agreements and provisions will only increase from both the legislative branch and the general public.
Conclusion
The environment of silence that once protected sexual misconduct abusers within companies and captured national attention is now being attacked by state legislatures. These legislatures are eliminating the availability of nondisclosure agreements and provisions used in cases involving sexual harassment and abuse. Further, the EEOC has sent signals to companies that these provisions and agreements will not be permitted in preventing the accusers and witnesses of sexual abuse from speaking to the EEOC investigators during employment cases.
[1] Jessica Levinson, Non-disclosure agreements can enable abusers. Should we get rid of NDAs for sexual harassment?, NBC News Think, (Jan. 24, 2018), https://www.nbcnews.com/think/opinion/non-disclosure-agreements-can-enable-abusers-should-we-get-rid-ncna840371.
[2] Basic Legal Transactions, Business Transactions § 25:2, Westlaw (database updated Nov. 2010).
[3] See Nondisclosure Agreement, Black’s Law Dictionary (10th ed. 2014).
[4]Ann Fromholz & Jeanette Laba, #metoo Challenges Confidentiality and Nondisclosure Agreements, 41 L.A. Law. 12, 12 (2018).
[5] See Zoe Greenberg, What Has Actually Changed in a Year, N.Y. Times, (Jan. 9, 2019), https://www.nytimes.com/interactive/2018/10/06/opinion/sunday/What-Has-Actually-Changed-in-a-Year-me-too.html.
[6] Larry R. Seegull & Jill S. Distler, Maryland’s Sexual-Harassment Disclosure Law Takes Effect Soon, Soc’y for Hum. Res. Mgmt. (Sept. 18, 2018), https://www.shrm.org/resourcesandtools/legal-and-compliance/state-and-local-updates/pages/maryland-sexual-harassment-law-takes-effect-soon-.aspx.
[7] Id.
[8] Id.
[9] Catherine Morisset, Washington Bars Sexual Harassment Nondisclosure Agreements, Fisher Phillips (Mar. 22, 2018),https://www.fisherphillips.com/resources-alerts-washington-bars-sexual-harassment-nondisclosure-agreements.
[10] Id.
[11] Id.
[12] Cal. Civ. Proc. Code § 1001 (West 2019).
[13] Ending the Monopoly of Power Over Workplace Harassment through Education and Reporting Act, S. 2994, 115th Cong. (2018).
[14] Id.
[15] Id.
[16] Ann Fromholz & Jeanette Laba, #metoo Challenges Confidentiality and Nondisclosure Agreements, 41 L.A. Law. 12, 12 (2018) (quoting Daniel Wiessner, EEOC Monitor: Harassment settlements in agency’s sights, Reuters (Dec. 12, 2017), https://www.reuters.com.).
[17] Id.
[18] E.E.O.C. v. Astra U.S.A., Inc., 94 F.3d 738, 744 (1st Cir. 1996); See id. at 744-45 (“[W]eighing the significant public interest in encouraging communication with the EEOC against the minimal adverse impact that opening the channels of communication would have on settlement, we agree wholeheartedly with the lower court that non-assistance covenants which prohibit communication with the EEOC are void as against public policy.”).
[19] Nick Wingfield & Jessica Silver-Greenberg, Microsoft Moves to End Secrecy in Sexual Harassment Claims, N.Y. Times (Dec. 19, 2018), https://www.nytimes.com/2017/12/19/technology/microsoft-sexual-harassment-arbitration.html.
[20] Id.
American Journal of Trial Advocacy 