The #MeToo Movement has turned a spotlight on confidential settlement agreements and how they might prevent victims from speaking out. As dispute resolution professionals, however, we are not accustomed to thinking about the problem in these terms. Our primary focus usually is on what the parties want and how we can help them meet those needs in a mutually agreeable way.
But the controversy over confidentiality agreements is not one that we can ignore. And it is likely to come up in our everyday practice.
Although media coverage has largely referred to “non-disclosure” provisions as a single thing, the phrase refers to several different contractual provisions that might restrict a party’s ability to speak. Understanding the ways in which those different provisions work can put dispute resolution professionals in a better position to help parties navigate the available options.
A number of states have passed (or are considering passing) legislation that will affect the enforceability of various non-disclosure provisions, primarily in the context of workplace harassment. These provisions will probably alter the way employment contracts and settlement agreements are drafted.
Am I allowed to talk? Standard employment policies and forms
One question you might encounter as a neutral, advisor, or even friend is whether employment contracts and policies prohibit workers from discussing or publicizing – say, by posting on social media about – harassment they experienced in the workplace. The correct answer is “it depends.” There is not a lot of settled law on this point.
Private employers commonly require employees to sign confidentiality agreements at the start of their employment to protect the company’s trade secrets and business information. Typically, these contracts have a provision that defines the phrase “confidential information,” usually followed by examples of the types of business information the contract is designed to protect. Depending on the wording at issue, the definition of “confidential information” may include disclosures about unlawful conduct in the workplace.
Employers also tend to have social media policies that place restrictions on how and what employees post in their own time, warning them, for example, not to disclose the company’s intellectual property. These policies are usually vaguely worded and often contain an exception for disclosures “protected by law.”
Even if these contracts seem to prohibit disclosures of misconduct or unlawful activity, there is some support for the idea that disclosures relating to workplace harassment are protected under Title VII of the Civil Rights Act of 1964. That means that an employer cannot retaliate against an employee for complaining about workplace harassment. However, there is also a body of case law saying that if the employee is excessively disruptive or unreasonable in the way he or she complains, that protection can disappear.
In other words, there are good legal reasons to believe it is permissible for employees to publicly disclose workplace harassment, but they should be thoughtful about how they do it.
Settlement agreements – so many different provisions
Because employees are generally permitted to speak out about workplace harassment, employers have in the past relied on secrecy provisions in settlement agreements to preclude public statements once the settlement is signed.
Speech-restricting provisions come in many forms, including:
Non-Disclosure Provision. This is the standard provision most people think of when they hear “NDA.” Through this provision, one or both parties agree that they will not disclose certain types of information. For example, a provision might restrict parties from discussing settlement negotiations, the settlement amount, or the underlying claims.
Non-Disparagement Provision. A non-disparagement provision relates to negative statements one party might make about the other. A narrow non-disparagement provision would restrict parties only from engaging in defamation, libel, or slander. (Agreeing to this is making a pretty limited promise, however, because parties are legally responsible or liable for defamation, libel, and slander regardless of whether they promise to refrain from doing so in a contract.)
A broad non-disparagement provision restricts a party from making statements that would injure the reputation of the other party. Unlike a prohibition on defamation – where truth is an absolute defense – a broad non-disparagement provision could restrict a party from making even truthful statements about the other if that would adversely affect the other’s reputation.
Non-Cooperation Provision. Through a non-cooperation provision, a party agrees that he or she will not assist others in pursuing litigation against the other party.
These provisions are quite common, though they have received little attention during the #MeToo Movement. In an article in Oregon Law Review, scholar Jon Bauer of the University of Connecticut Law School argued that these provisions are unethical because they are “prejudicial to the administration of justice.” New York University School of Law’s Stephen Gillers has even argued that attorneys commit obstruction of justice when they request such provisions.
Affirmative Statements. Settlement agreements sometimes contain provisions that require parties to engage in affirmative speech, such as provide a positive reference or a letter of recommendation. In extreme cases these provisions can also potentially have the effect of restricting speech or obscuring misconduct. (One of the settlements reached by Hollywood producer Harvey Weinstein and his lawyers purportedly included a provision requiring the victim to say “positive things” if she were contacted by the press. Another of his settlements apparently included a signed statement from the victim saying that her experience in the workplace was satisfactory. The statement seemingly served as insurance for Weinstein to undermine the victim if she ever spoke publicly.)
State Legislative Initiatives
In the wake of the #MeToo Movement, 16 states have introduced bills to address the enforceability of non-disclosure provisions relating to harassment. A few states have passed more than one statute, intended to target different types of contracts or underlying wrongdoing. These bills vary in scope, so it’s important to read the specific provisions of any statutes in your state.
Broadly speaking, the statutes tend to render agreements unenforceable if they prevent the disclosure of information about sexual harassment or sexual assault. Sometimes the statute includes an exception allowing the victim to request confidentiality or allowing parties to enter into a confidential settlement before a case is filed in court. The statute might also include an exception allowing parties to keep the monetary value of the settlement secret.
These statutes most directly affect non-disclosure provisions in settlement agreements. However, they also reach non-disparagement agreements. Suppose for example, a victim wants to speak out about harassment but has signed a non-disparagement agreement providing that she will not damage the company’s reputation. The non-disparagement clause might discourage her from speaking out. Consequently, it would run afoul of new state laws against agreements that “prevent” the disclosure of information relating to harassment.
While much of the public debate around these laws contemplates agreements between victims and employers, the legislation will also affect an employer’s ability to make secrecy-related promises to employees accused of harassment. It is common for employers to enter into settlement agreements with employees accused of harassment, either because the employee has alleged claims of his own against the company (e.g. breach of contract, defamation) or because the employer has negotiated a settlement agreement as part of an exit package.
An employer that promises not to make any statements that might damage the reputation of an employee accused of harassment may run afoul of these new statutes. That’s because a non-disparagement provision could have the effect of preventing the employer from disclosing information about harassment in the future.
The path forward
In the #MeToo era, confidentiality provisions that previously smoothed the path to settlement might now be off the table. Or they might still be permissible, provided you include clear exceptions to the general language.
But even if your state does not prohibit confidentiality provisions, it’s worth making sure parties have thought through the implications of these provisions before they sign. That’s because the agreements themselves may draw scrutiny for employers in the future. Or an employee may later change his or her mind about keeping a settlement secret.
If we know what non-disclosure agreements involve and pay careful attention to how these agreements and new state laws affect parties’ interests, we can accomplish what mediators always aim to do: help our clients understand and choose the options that serve them best.
Here are some questions that are worth asking parties who are considering a non-disclosure clause:
To the employer:
- What underlying concerns does this provision address or raise?
- If the underlying concern is not related to harassment, is there a narrower way to draft the language to reflect that particular concern?
- If the employee decided to speak out regardless of the contract, would you actually want to enforce this provision?
- If this contract is made public, will you be comfortable defending the terms of the contract in the court of public opinion?
- Can you envision a scenario in the future in which you might feel obligated to speak publicly on these issues? Does this contract limit your ability to do so?
To the employee:
- What underlying concerns does this provision address or raise?
- What do you think is the likelihood the company will want to speak publicly about this, even without a provision in the contract?
- Can you envision a scenario in the future in which you might want to speak publicly on these issues? Does this contract limit your ability to do so?
- Are there aspects of your situation that you would want to disclose? Are there other aspects that you would want to keep secret?
- Do you want to retain the ability to disclose this information to any friends, family, or professionals?
- Does this contract prevent you from talking about your situation to friends, family, or professionals?
- How certain are you that you will not change your mind about any of the above answers in the future?