Introduction
Since Anita Hill’s testimony in the early 1990s, sexual harassment has become a familiar term. At the federal level, Title VII prohibits harassment, discrimination, and retaliation on the basis of sex and gender, among other things. On the state level, the New York State Human Rights Law (“NYSHRL”) expands on the categories of protected classes covered by Title VII but is interpreted by the courts in largely the same manner as Title VII. Under California’s Fair Employment and Housing Act (“FEHA”), harassment is defined to include verbal harassment (such as derogatory comments), physical harassment (including physical interference with movement), visual harassment (such as derogatory cartoon or drawings), and sexual favors. FEHA prohibits sexual harassment because of a person’s sex, gender, gender identity, gender expression, sexual orientation, transgender status, pregnancy, and childbirth, breastfeeding, and related medical conditions. Harassment based on the perception of any of these characteristics is also prohibited, and sexually harassing conduct need not be motivated by sexual desire to be considered unlawful.
Some local laws, like the New York City Human Rights Law (“NYCHRL”), are significantly broader – protecting even more classes of individuals from harassment, discrimination and retaliation, and protecting against more types of behavior. For example, under the NYCHRL, harassment need not be “severe or pervasive” to constitute a violation of the law (as under Title VII and the NYSHRL), and instead, must simply constitute more than “petty slights and trivial inconveniences.”
Damages available to victims under the various laws vary, with uncapped punitive and compensatory damages that can be recovered by prevailing to plaintiffs under NYCHRL. The reaction to the flood of claims of sexual harassment that has come to be known as the #Metoo movement has been widespread, and legislators have begun to enact and propose new laws that apply only to claims of sexual harassment.
Tax Law Changes in the Treatment of Sexual Harassment Claims
One change providing for special treatment of sex harassment claims has already become law as a result of the changes to federal tax law pushed through by the Trump administration at the end of 2017 in the federal Tax Cuts and Jobs Act. Section 162(q) of the federal tax code was amended to eliminate a business expense deduction for settlements of sexual harassment and sexual abuse claims subject to confidentiality restrictions. Specifically, “settlement or payment related to sexual harassment or sexual abuse” and “attorney’s fees related to such a settlement or payment,” are no longer a deductible business expense “if such settlement or payment is subject to a nondisclosure agreement.” The law is effective for amounts paid or incurred after December 22, 2017. Unfortunately, the legislative history provides no guidance on this change and the IRS has not yet issued guidance on the scope of a “settlement or payment related to sexual harassment or sexual abuse.” For example, it is not clear whether standard non-disparagement language in a settlement agreement will be deemed to be a “non-disclosure agreement.”
Proposed Restrictions on Confidentiality Provisions in Settlement Agreements
Additional legislation that would treat sex harassment claims differently than other forms of discrimination claims are also under consideration.
A bipartisan federal bill introduced by Representative Maloney (D-NY) in the House of Representatives in December 2017, the “Ending Secrecy About Workplace Harassment Act,” would require annual reporting by employers of the number of settlements with employees regarding claims of discrimination on the basis of sex, including verbal and physical sexual harassment, and for other purposes. The findings of the bill discuss the substantial financial harm victims of sexual harassment in the workplace suffer, “as they often try to avoid the harassing behavior by taking leave without pay or leaving the workplace entirely, resulting in a loss of wages.”
In California, State Senator Connie Leyva (D-Chino) introduced Senate Bill 820 entitled the STAND (Stand Together Against Non-Disclosure) Act, to prohibit confidentiality provisions in settlement agreements in cases involving sexual assault, sexual harassment, and sex discrimination, for both public and private employers. “Secret settlements in sexual assault and related cases can jeopardize the public — including other potential victims — and allow perpetrators to escape justice just because they have the money to pay the cost of the settlements,” Sen. Leyva said in October. “This bill will ensure that sexual predators can be held accountable for their actions and ideally prevent them from victimizing others.” Since 2016, California has prohibited the use of confidentiality provisions if the underlying facts could be prosecuted as a felony sexual offense.
In New Jersey, State Senate Majority Leader Loretta Weinberg (D-Bergen) has proposed a bill banning provisions in employment contracts that waive rights or remedies, and bars agreements that conceal details relating to discrimination claims. The bill, as proposed, would not only bar employers from using non-disclosure agreements in the sexual harassment context, but also applies to any situation in which the employee was a victim of a violation of the New Jersey Law Against Discrimination. The bill would clarify the law to establish explicitly that a non-disclosure agreement in this type of scenario is against New Jersey public policy and, as a result, is unenforceable.
In New York, a proposed State Assembly bill provides that sexual harassment settlements that include non-disclosure or confidentiality “of the acts constituting the sexual harassment” shall be unenforceable. Further, settlements of sexual harassment claims, “shall be deemed to be an admission of the act of sexual harassment.”
In Pennsylvania, State Senator Judy Schwank (D-Berks) proposed legislation that would prohibit non-disclosure agreements in the settlement of civil claims for sexual assault or harassment, and prohibit provisions of agreements that block reports of such claims to an “appropriate person” or requires the destruction or expungement of related evidence.
In Vermont, a bill was just proposed (on January 25, 2018) that would prohibit employment agreements from preventing an employee from disclosing sexual harassment. The bill also encourages employers and labor organizations to conduct annual training for all employees related to sexual harassment.
In Washington, State Senator Karen Keiser proposed legislation encouraging the disclosure and discussion of sexual harassment and sexual assault in the workplace. This bill would prohibit employers from forcing workers to sign away their rights to discuss workplace sexual harassment. It would also render any nondisclosure agreements signed as a condition of employment void and unenforceable if the nondisclosure agreement had the purpose or effect of preventing an employee from disclosing sexual harassment or sexual assault occurring in the workplace.
Proposed Restrictions on Use of Arbitration to Resolve Disputes Involving Claims of Sexual Harassment
A bipartisan federal bill introduced by Senator Gillibrand (D-NY) in the Senate in December 2017, the “Ending Forced Arbitration of Sexual Harassment Act,” would make it illegal for businesses to enforce mandatory arbitration agreements for sexual harassment and sex discrimination claims.
The New Jersey proposed bill mentioned above, banning provisions in employment contracts that waive rights or remedies and barring agreements that conceal details relating to discrimination claims, also “waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment shall be deemed against public policy and unenforceable.” This paragraph of the bill raises the distinct possibility that an employer may not be able to enforce a mandatory arbitration agreement.
The New York proposed bill mentioned above, also prohibits mandatory arbitration clauses in contracts. Existing mandatory arbitration clauses shall be unenforceable. The proposed bill states that it shall go into effect the first of January, the year after it is ratified, so it could be effective as soon as January 1, 2019.
A bipartisan South Carolina House proposal would give alleged victims of sexual harassment the option of making their claims public in a court of law by preventing employers from enforcing arbitration when it concerns claims of sexual harassment. Employees would still have the option of arbitrating their claims, but employers would no longer be able to require arbitration of sexual harassment claims.
California Assemblywoman Lorena Gonzalez Fletcher (D-San Diego) recently announced plans to introduce legislation that would prohibit arbitration agreements that require employees to arbitrate sexual harassment claims.
The Vermont bill mentioned above, also voids mandatory arbitration of sexual harassment claims and provides that any agreements to settle a claim of sexual harassment, “shall not prohibit, prevent, or otherwise restrict” an employee from lodging a complaint of sexual harassment with any state or federal agency. If ratified, the bill will be effective July 1, 2018.
Other Legislative Responses
Some states already require sexual harassment training (such as California and Connecticut), and more states are seeing proposed legislation mandating such training. For example, Maine and Virginia have proposed mandating sexual harassment training for all employers with 15 or more employees. There is also proposed legislation in Illinois that would develop a sexual harassment toll-free hotline and a website for anonymously reporting workplace sexual harassment.
Conclusion
No doubt the legislative reaction to the flood of sexual harassment claims will continue. Employers need to revisit and revise their sex harassment policies to not only ensure compliance with this changing legal landscape, but to react to the current debate over whether the use of confidentiality agreements and arbitration does have an impact on sex harassment in the workplace.