#MeToo—New York Poised to Ban Non-Disclosure and Arbitration of Sexual Harassment Claims

On March 30, 2018, the New York State Assembly completed passage of the 2018-19 state budget.  Undoubtedly spurred by the #MeToo movement, the final budget measure, which is expected to be signed into law by Governor Andrew Cuomo, includes a bill (S. 7507–C/ A. 9507–C), containing several measures aimed at creating safer workplaces free of sexual harassment and abuse. 

Perhaps the most important part of the bill is a provision, that will become effective 90 days after the bill is signed, that prohibits non-disclosure conditions in agreements to settle claims involving sexual harassment unless the condition of confidentiality is the complainant’s preference. Specifically, the bill prohibits any term or condition that would prevent the disclosure “of the underlying facts and circumstances to the claim or action.” Similar to the Older Workers Benefit Protection Act’s consideration and revocation periods for settlement of age discrimination claims, the bill provides that the complainant shall be provided twenty-one (21) days to consider any non-disclosure condition and seven (7) days to revoke his or her agreement to the condition. This provision raises many unanswered questions including whether it is appropriate for employers to even propose non-disclosure terms in matters in which sexual harassment is alleged, whether the prohibition extends to non-disclosure of non-sexual harassment allegations raised with sexual harassment allegations, whether the prohibition extends to non-disclosure of any payments or other consideration provided as part of the settlement, and whether a complainant’s revocation revokes the entire agreement between the parties or simply the non-disclosure provision. The plain language of the bill does not answer these questions clearly. Thus, the courts and the New York State Division of Human Rights will be instrumental in shaping the interpretation of the law.

The bill also contains a provision prohibiting mandatory arbitration of sexual harassment claims brought under Article 75 of New York’s Civil Practice Law and Rules (“CPLR”). This provision is likely to have little effect on most private, and many public, sector employers. The Federal Arbitration Act (“FAA”) applies to arbitrations involving interstate commerce. In today’s economy, employment arbitrations typically involve interstate commerce. Thus, it is expected that the FAA will preempt state law in most instances.  And where, as here, the “state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.”  AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 341 (2011). Arbitration of sexual harassment claims will, however, be prohibited where the parties have specifically contracted for the application of the New York arbitration law, CPLR Article 75, rather than the FAA. This provision will become effective 90 days after the bill becomes law.

Importantly, the bill also expands the categories of individuals who may seek relief for sexual harassment. The bill provides that an employer may be liable for sexual harassment of non-employees, including contractors, vendors and consultants when the employer knew or should have known that such non-employee was subjected to sexual harassment in the workplace and the employer failed to take immediate and appropriate corrective action. While the New York City Human Rights Law prohibits discrimination against intendent contractors, potential liability for non-employees may be a new concept for New York employers outside of the City limits.  This portion of the law will become effective immediately.

In addition, the bill also charges the Division of Human Rights with creating a model sexual harassment prevention policy and interactive training program and provides that all employers must adopt the model policy and training program or a policy and training program that equals or exceeds the minimum standards in the model policy and training program. The sexual harassment policy must be provided to all employees in writing and the training program must be given to all employees on an annual basis. These requirements become effective 180 days after the bill becomes law.

The bill also requires, beginning January 1, 2019, that state contractors bidding on projects submit a certification, under penalty of perjury, that they have implemented policies and trainings on sexual harassment. Finally, the bill provides that elected officials and state employees must reimburse the state their share of any judgments paid to plaintiffs in sexual harassment matters.

Employers should begin examining their form settlement and arbitration agreements to make sure they are in compliance with the new law. Further, to the extent not already done in the wake of the #MeToo movement, employers should also examine their sexual harassment policies and procedures to make sure they are up to date and in accord with new legislation.