By Briana Dawkins, Michael Roundy, and Mary Jo Kennedy
Effective Dec. 7, 2022, a new federal law, the Speak Out Act, limits the enforceability of pre-dispute non-disclosure and non-disparagement agreements relating to sexual-harassment or sexual-assault disputes in the workplace. Such agreements that were entered into before an actual dispute arises are now unenforceable.
The Speak Out Act defines a pre-dispute agreement as one that is entered into between an employer and an employee before a sexual-harassment or assault dispute ‘arises’ — that is, before an allegation of sexual assault and/or harassment is made. Often, employers require employees to sign non-disclosure and non-disparagement agreements upon commencement of employment in order to protect confidential or otherwise private employer information. Under the Speak Out Act, these clauses can no longer be enforced with respect to any sexual-harassment or sexual-assault claim that may arise in the future.
A non-disclosure clause is defined in the act as “a provision in a contract or agreement that requires the parties to a contract and/or agreement not to disclose or discuss conduct, the existence of a settlement involving conduct, or information covered by the terms and conditions of the contract or agreement.” A non-disparagement clause is “a provision in a contract or agreement that requires one or more parties to the contract or agreement not to make a negative statement about another party that relates to the contract, agreement, claim, or case.”
A sexual-harassment dispute involves “conduct that is alleged to constitute sexual harassment under the applicable federal, tribal, or state law.” A sexual-assault dispute involves a “non-consensual sexual act or sexual contact, as such terms are defined in [federal criminal law] or similar applicable tribal or state law, including when the victim lacks capacity to consent.”
The act’s protections apply not only to complaints of sexual harassment or sexual assault towards an employee, but also to complaints about sexual harassment and assault involving other individuals. The act’s provisions do not prohibit an employee and an employer from entering a non-disclosure or non-disparagement agreement after a complaint of sexual harassment or assault has arisen. Thus, the act does not prohibit such clauses, for example, in agreements settling sexual-harassment or sexual-assault claims after they are asserted. However, employers should exercise caution, as such clauses in settlement agreements may have significant tax implications for employers under the 2017 Tax Cuts and Jobs Act.
“The act’s protections apply not only to complaints of sexual harassment or sexual assault towards an employee, but also to complaints about sexual harassment and assault involving other individuals.”
The congressional rationale expressed through the language of the act is clear. Many women who experience sexual harassment in the workplace are forced to leave their jobs or their industries, or to pass up opportunities of advancement. According to the congressional findings identified in the act, one in three women face sexual harassment or assault in the workplace, approximately 90% of whom never file a formal complaint.
The congressional findings also state that non-disclosure and non-disparagement agreements between employers and current and former employees, prospective employees, and independent contractors can perpetuate illegal conduct by silencing survivors of illegal sexual harassment and assault. Therefore, Congress finds that prohibiting such non-disclosure and non-disparagement clauses will empower survivors to speak out, hold perpetuators accountable, improve transparency around illegal conduct, and make workplaces safer and more productive for everyone.
The Speak Out Act complements the enactment earlier this year of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFASASHA). That act, which applies to employers subject to the Federal Arbitration Act, prohibits mandatory arbitration agreements between employers and employees for sexual-harassment and sexual-assault disputes. It also applies retroactively to arbitration agreements between employers and employees that have already been entered into containing such mandatory arbitration provisions.
Following the enactment of the Speak Out Act and the earlier EFASASHA, employers are encouraged to be proactive about compliance and should review their template releases and agreements to ensure that pre-dispute non-disclosure and non-disparagement agreements do not violate these laws.
It bears noting that the Speak Out Act does not invalidate non-disclosure and non-disparagement agreements relating to claims which do not involved sexual harassment or sexual assault. Thus, employers may consider including ‘carve-out’ language for pre-dispute non-disclosure and non-disparagement agreements to make clear that the pre-dispute agreements do not apply to later-arising sexual-harassment or sexual-assault claims.
Employers should review their arbitration agreements and any language pertaining to future mandatory arbitration agreements to ensure sexual-harassment and assault claims are carved out from those provisions as well. Such agreements may be revised to include clear language indicating that, with regard to claims of sexual harassment or sexual assault, employee signatories will have a choice — they are not required to submit to arbitrations and may bring their claims in court. Employers may also wish to consider updating sexual-harassment policies in their employment handbooks to include similar clarifications.
In reviewing such employment agreements, confidentiality agreements, arbitration agreements, and employee handbook policies as they relate to sexual harassment and sexual assault for compliance with the Speak Out Act and the EFASASHA, it is recommended that employers seek legal advice and guidance from an experienced employment-law attorney.
Briana Dawkins, Michael Roundy, and Mary Jo Kennedy are attorneys in Bulkley Richardson’s Employment Law practice.