With the rise of the #MeToo movement, companies have been forced to re-examine how they litigate and settle allegations of sexual harassment in the workplace. Specifically, companies are facing increasing criticism if they compel claims of sexual harassment to private arbitration or force employees who allege sexual harassment to sign settlement agreements with confidentiality clauses, effectively shielding both the company and the alleged sexual harasser from public scrutiny.
In an attempt to adapt to this new landscape, several companies have recently made changes to their employment policies that could have far reaching consequences. For example, in recent months, several technology companies announced that they would no longer force their employees to resolve sexual harassment claims in private arbitration. Indeed, on November 8, 2018, Google announced plans to change the enforcement of its arbitration clause policies as they relate to claims of sexual harassment. Several large companies followed suit shortly thereafter. Moreover, Microsoft, Uber, and several other companies all made similar policy changes within the last year. Indeed, Apple has stated it has never forced a claim for sexual harassment to arbitration.
Additionally, as discussed previously here and here, both federal and state agencies have taken aim at the confidentiality clauses contained in the settlement agreements of sexual harassment claims. In December 2018, President Donald Trump signed into law a new tax bill which contained, among many other changes, a new section of the Internal Revenue Code, Section 162(q) (also referred to as the “Harvey Weinstein” Provision). This provision prohibits employers (and potentially employees) from deducting both the settlement or payment related to sexual harassment or sexual abuse claims and the attorney’s fees related thereto, if such settlement or payment is subject to a nondisclosure agreement. The result is that employers are now faced with a dilemma – forego the confidentiality clause in an agreement and retain the tax deduction, potentially exposing the company and the perpetrator to public criticism, or enforce the confidentiality clause and pay the tax.
Further, New York recently enacted, as part of its 2018-2019 budget bill, a law which prohibits employers from including in any agreement that resolves a sexual harassment claim, “a term or condition that would prevent the disclosure of the underlying facts and circumstances to the claim or action” – namely, a confidentiality clause – unless the inclusion of such a clause is the employee’s choice. Finally, as discussed previously, California Governor Jerry Brown signed into law a bill that prohibits a provision in settlement agreements that prevents the disclosure of information pertaining to sexual harassment and sex discrimination.
The decisions by Google, Uber and other pioneers of the technology community to change their arbitration policies with regards to sexual harassment claims, when viewed through the lens of the changing statutory landscape, are not unexpected. Rather, these companies are making policy changes that seem almost inevitable at a time when they can still reap some public praise for their actions. Indeed, if this trend continues, it is likely that employers will be unable to keep employee claims of sexual harassment confidential without some sort of legal and/or financial consequence. Further, it is unclear if this trend will lead to similar consequences with regards to other employee claims of discriminatory or harassing treatment (for example, claims based on race, age or disability).
Given these recent developments, it is vital that companies consult with their employment counsel to update their policies regarding confidentiality, arbitration and sexual harassment claims and to make some difficult choices.