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States Propose Bills Curbing Non-Disclosure and Mandatory Arbitration In Employment Contracts and Settlement Agreements Related To Sexual Misconduct and Discrimination

Published by on February 15, 2018

A number of state lawmakers are initiating legislation that will prohibit non-disclosure and mandatory arbitration agreements in sexual harassment and sex discrimination cases.

In response to the heightened awareness of sexual harassment in the workplace and the #MeToo movement, lawmakers, both on the federal and state level, are proposing certain workplace reforms of which employers should be aware. A target area is the enforceability of non-disclosure agreements and mandatory arbitration clauses in discrimination settlement packages and employment contracts.

On the federal level, on December 6, 2017, a bi-partisan group of co-sponsors introduced a bill called the “Ending Forced Arbitration of Sexual Harassment Act.” The purpose of the act is to prevent employers from enforcing mandatory arbitration agreements in sexual harassment or Title VII gender discrimination cases.

A number of states are also proposing legislation aimed at prohibiting non-disclosure of information related to sexual harassment and discrimination. For example, in New York, Governor Cuomo has announced that he has a proposal to restrict the use of confidentiality agreements in the resolution of sexual assault or harassment claims, unless expressly authorized by the claimant. Additionally, New York State Senator Brad Hoylman and New York State Assemblywoman Nily Rozic have proposed legislation in the New York State Senate (S6382) and Assembly (A8765), respectively, aimed at voiding clauses in formal written employment contracts that have the purpose of effect of concealing details relating to claims of discrimination, non-payment of wages or benefits, retaliation, harassment, or violations of public policy, including in claims submitted to arbitration. The bills would also create liability if the employer attempts to enforce the confidentiality clause or retaliates against an employee for not agreeing to the clause.

Lawmakers in New Jersey introduced similar legislation, sponsored by State Senator Loretta Weinberg. S121 would void employment contracts that waive any procedural or substantive right or remedy relating to claims of discrimination, retaliation, or harassment as a violation of public policy. This means that no right or remedy under the New Jersey Law Against Discrimination may be waived. Moreover, any employment contract or agreement which has the purpose or effect of concealing details relating to claims of discrimination, retaliation, or harassment would be unenforceable.

California has a proposed measure, SB 820, which would prohibit the enforceability of settlement agreements that prohibit the disclosure of factual information in civil actions that state a cause of action for sexual assault, sexual harassment, workplace harassment based on sex, or retaliation for reporting sexual harassment or sex discrimination in the workplace. This bill was referred to the Judiciary Committee on January 16, 2018.

In Pennsylvania, the State Senate has introduced SB 999, which would void contracts executed after the effective date that prohibit, or attempt to prohibit, disclosure of the name of anyone accused of sexual misconduct, suppress or attempt to suppress information relevant to a sexual harassment investigation, impair or attempt to impair the ability of individuals to report claims of sexual misconduct, attempt to waive a substantive or procedural right relating to a claim of sexual misconduct, or require someone to expunge relevant information regarding sexual misconduct from documents, unless due investigation determines the claim to be false.

Arizona state lawmakers proposed a similar bill, HB 2020, that would make confidentiality agreements void and non-enforceable if they required confidentiality regarding factual information related to sexual harassment, or allegations of or attempted sexual assault or sexual harassment. This bill also specifically proscribes entering into confidentiality agreements that restrict the disclosure of factual information related to allegations or attempted sexual assault or sexual harassment by elected officials.

Welter Insight

Employers should take heed that a number of states, in additional to the federal government, are proposing these restrictions on settlement agreements and employment contracts that include non-disclosure or mandatory arbitration clauses. In addition to the states mentioned above, more states are likely to follow suit. In some states, such as New Jersey, the prohibition will apply to agreements regarding rights and remedies related to all forms of discrimination and retaliation, not just sexual harassment or sex discrimination. Since the scope and details of each state’s bill varies, employers should understand the limitations that will apply in each state in which they have employees. Employers should track these state law developments closely and draft their settlement and employment agreements accordingly.

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