HR Legalist

Confidentiality and Sexual Harassment Claims – Will New Laws Limit Settlement Agreement Language?

In the recent wave of sexual harassment cases against public figures, it has come to light that women were paid large sums of money to keep their harassment allegations private, thus allowing their harassers to continue their inappropriate behavior.  Prominent recent examples of harassers protected by confidentiality clauses include Harvey Weinstein, Bill O’Reilly, and Bill Cosby.  This has caused some commentators to question whether confidentiality provisions should be enforceable in sexual harassment cases.  Legislators in the states of Pennsylvania, New Jersey, and New York have introduced or are discussing the possibility of introducing legislation that would prevent the enforcement of such provisions.

It has long been common practice for settlement agreements in employment-related cases, including claims of discrimination and harassment, to include confidentiality and non-disparagement provisions.  These provisions come in several different varieties.  Typically the parties agree not to disclose the settlement terms, and the employee agrees not to make disparaging statements about the employer.  Sometimes, the employer will also agree to provide a neutral reference, a recommendation letter, or agree that the company (or certain key individuals at the company) will refrain from disparaging the employee.

These provisions serve several important purposes that should not be overlooked.  One of the prime motivators for an employer to settle a claim is to prevent negative publicity and avoid the eventual possibility of a public trial and verdict.  Employers want to be seen as good corporate citizens and not have their image tarnished by occasional errant managers or employees.  Confidential settlements also prevent attorneys who represent employees from establishing a “going rate” for settlements against a particular employer.  Therefore, eliminating confidentiality altogether for harassment cases could deter employers from settling cases.  Because taking a case to trial is time-consuming, expensive, and risky, this could in turn lead to the plaintiffs’ bar taking fewer sexual harassment cases, to the ultimate detriment of victims.

In some more sensitive situations, including sexual harassment claims, employers may ask the claimant to keep the underlying facts giving rise to the claim confidential as a condition of the settlement.  This type of clause is of less practical value after a claim has already been filed in court, since the allegations are already a matter of public record and can be obtained by other employees or their attorneys.  In addition, public policy limits the extent to which confidentiality provisions can prevent a perpetrator’s pattern of sexual harassment from being exposed. A confidentiality provision cannot prevent another alleged victim from subpoenaing the testimony of a prior harassment claimant who has already settled out and using such testimony to show that harassment is prevalent, and that the employer had prior notice that it was occurring. Similarly, a confidential settlement agreement will not prevent a victim from cooperating with law enforcement in the investigation of criminal conduct by the harasser.  Finally, broad confidentiality clauses that prevent employees from discussing workplace issues could run afoul of the National Labor Relations Act.

At present, it is unclear exactly what types of confidentiality provisions will be barred under the potential new legislation.  New Jersey and Pennsylvania have not yet released a proposed bill, and the New York draft bill includes broad language that would void contract language which has the “purpose or effect of concealing the details relating to a claim of discrimination, non-payment of wages or benefits, retaliation, harassment or violation of public policy in employment.”  HR Legalist will continue to follow this issue and report on any significant developments.  Unless and until any legislation passes that curtails or limits the enforceability of confidentiality and non-disparagement agreements in settlement agreements, employers can and should consider including these provisions where appropriate.

As previously reported by HR Legalist, workplace sexual harassment has long been illegal; however, heightened public sensitivity towards this issue may lead to more claims of workplace harassment, making it more important than ever for employers to take proactive steps to provide a harassment-free work environment.  Employers who wish to reduce their risk of liability for harassment and other employment-related claims should work with experienced employment counsel to develop comprehensive, individually-tailored solutions to prevent and respond to sexual and other illegal workplace harassment.

The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.