Sexual Harassment and Non Disclosure Agreements
|
Non disclosure agreements or NDAs are common in employment contracts. In the ordinary course of business, these agreements are designed to protect a company's confidential information or trade secrets.
NDAs have come into sharper focus lately in wake of the metoo movement. Where NDAs are used in the context of resolution of sexual harassment complaints, it raises different practical and legal issues. Non Disclosure Provisions in Settlement AgreementsIn most legal disputes, it is common for a settlement agreement to contain a confidentiality provision barring the parties from disclosing the settlement terms. Occasionally, the parties will agree to keep the dispute itself confidential.
This latter kind of NDA has gotten particular scrutiny in sexual harassment cases. The most common fact pattern is a woman who reports sexual harassment in the workplace. The company investigates and offers a sum of money to compensate the victim for the harassment. As part of the deal, she agrees not to discuss either the amount paid or the underlying allegations. Why are these confidentiality agreements more problematic than any other kind of private settlement? The concern about silencing victims through signed NDAs is that patterns of unlawful behavior may continue unchecked. In the case of sexual harassment and assault, this is often very serious behavior that harms many people. Some of the high profile offenders facing accusations recently had multiple allegations going back many years. If their original accusers had not signed confidentiality agreements, their behavior may have come to light and been stopped much sooner. |
Need Help With a Sexual Harassment Problem?OR
|
Enforcement of an NDA
Like any contract, a non disclosure agreement can be enforced through a civil action in court. An employer may be reluctant to do so, however. A lawsuit is a matter of public record, and by suing to enforce an NDA the employer would essentially be making the information available to the world.
What many do instead is build in "self-help" enforcement mechanisms in the agreement. This could include paying the settlement amount over time. In that case, if the plaintiff discloses information subject to the NDA, the company can simply stop paying.
The agreement itself may also contain an arbitration provision requiring the parties to go to private arbitration if there is a dispute. These proceedings are not a matter of public record.
Finally, these agreements may contain a "liquidated damages" clause. This is a provision that sets a specific amount that will be owed to the company if the NDA is breached. Combined with an arbitration provision that keeps the dispute out of the public eye, this can be a significant disincentive to disclosure.
What many do instead is build in "self-help" enforcement mechanisms in the agreement. This could include paying the settlement amount over time. In that case, if the plaintiff discloses information subject to the NDA, the company can simply stop paying.
The agreement itself may also contain an arbitration provision requiring the parties to go to private arbitration if there is a dispute. These proceedings are not a matter of public record.
Finally, these agreements may contain a "liquidated damages" clause. This is a provision that sets a specific amount that will be owed to the company if the NDA is breached. Combined with an arbitration provision that keeps the dispute out of the public eye, this can be a significant disincentive to disclosure.
Evaluating Your Settlement Agreement
The first thing to consider about any settlement agreement is whether the amount offered is fair and reasonable compensation for the harm you have suffered. This can be difficult to assess in harassment cases, where the harm is often intangible.
You also have to consider the risks associated with full blown litigation. You will have to prove behavior that most likely occurred in private. There is always a chance that the judge or jury will believe the defendant's version of events and not yours. When you think about the settlement amount, consider the possibility that you get nothing at the end of a long and painful process.
If you believe after weighing all of the risks and benefits that the settlement amount is fair, then you need to consider the non disclosure provisions. Things to consider include:
You also have to consider the risks associated with full blown litigation. You will have to prove behavior that most likely occurred in private. There is always a chance that the judge or jury will believe the defendant's version of events and not yours. When you think about the settlement amount, consider the possibility that you get nothing at the end of a long and painful process.
If you believe after weighing all of the risks and benefits that the settlement amount is fair, then you need to consider the non disclosure provisions. Things to consider include:
- Understanding what you are agreeing not to disclose. If you are agreeing not to disclose the terms of the settlement, that will not preclude you from discussing the underlying facts. If the provision is written more broadly, you need to make sure you are comfortable not telling your story going forward.
- Look for a non disparagement clause. Even if your NDA does not bar you from talking about the facts, a non disparagement clause may still prevent you from saying negative things about the defendant. In a sexual harassment case, talking about the facts is almost by definition a negative statement. In this sense a non disparagement provision can operate just like an NDA.
- Consider asking for a mutual non disparagement clause. Many times companies are reluctant to bind the entire company to non disparagement, but are willing to commit to certain individuals agreeing not to disparage you. Often in these situations the number of people involved in the situation are limited, and it is possible to identify those you have real concerns about.
- Read the penalties for violating the agreement. It may be just that the company can discontinue payments. There also may be a provision either setting an amount you would have to pay or allowing the company to claw back payments made to you.
- Understand the dispute resolution provision. If the agreement has an arbitration provision, the company is more likely to try to enforce the agreement. This is because arbitration is not a matter of public record.
Recent and Potential Changes in the Law
The new federal tax law of 2018 made a significant change to employers' ability to deduct settlement payments and legal expenses. These expenses are no longer deductible if the employer requires an NDA as part of a settlement agreement.
Several states have introduced legislation seeking to bar or limit NDAs in settlement of sexual harassment cases. Six states have enacted legislation, and a similar law is currently under consideration in Massachusetts.
The policy reasons for these changes are clear and understandable- preventing ongoing sexual harassment and assault in the workplace. There may, however, be unintended consequences for the individual victims.
For example, if a company cannot write off its settlement payments, it may be less inclined to offer a reasonable settlement to the victim. Similarly, if a company cannot get what it really wants in a settlement- finality and confidentiality- it may be harder for a victim to get compensation without a lengthy litigation process.
On the other hand, employers may be less forceful about insisting on an NDA if there are tax advantages to them under the new federal tax laws.
If you are considering resolving a sexual harassment claim by settlement, you should also speak with your lawyer about any recent changes to federal or state law that may affect your rights under an NDA.
Several states have introduced legislation seeking to bar or limit NDAs in settlement of sexual harassment cases. Six states have enacted legislation, and a similar law is currently under consideration in Massachusetts.
The policy reasons for these changes are clear and understandable- preventing ongoing sexual harassment and assault in the workplace. There may, however, be unintended consequences for the individual victims.
For example, if a company cannot write off its settlement payments, it may be less inclined to offer a reasonable settlement to the victim. Similarly, if a company cannot get what it really wants in a settlement- finality and confidentiality- it may be harder for a victim to get compensation without a lengthy litigation process.
On the other hand, employers may be less forceful about insisting on an NDA if there are tax advantages to them under the new federal tax laws.
If you are considering resolving a sexual harassment claim by settlement, you should also speak with your lawyer about any recent changes to federal or state law that may affect your rights under an NDA.
How We Can Help
If you feel that you are the target of sexual behavior, misconduct or harassment, we can help. We will help you assess the situation, understand your rights and obligations, and make a plan to solve the problem. You can use the button below to schedule a call back from a member of our team, or give us a call at 781-784-2322.
