The #MeToo movement has shined a spotlight on the issue of sexual harassment in the workplace. Many people are now asking how the Harvey Weinsteins and Matt Lauers of the world were able to keep their behavior from becoming public knowledge for so long. This, in turn, has brought renewed attention to the use of nondisclosure agreements as part of settling allegations of sexual misconduct.
Critics argue that these agreements protect perpetrators from civil and/or criminal liability and allow the sexual harassment to continue; and it is easy to understand why those accused of acting inappropriately would not want any allegations to become widely known. Arguably, however, these agreements also offer a benefit to a victim. An accused party could be incentivized by a nondisclosure agreement to settle a matter more quickly—thus ensuring the victim an early monetary recovery while avoiding having his/her allegations painfully scrutinized. Absent confidentiality protections, some accused parties—even culpable ones—may press on with litigation solely to protect their reputation.
It is too early to know what, if any, lasting effects the #MeToo movement will have, but there are signs that the scrutiny on nondisclosure agreements is not going to simply dissipate without a change to the status quo. Bills that would ban the use of nondisclosure agreements when settling sexual-harassment claims have been proposed in Massachusetts, California, New York, Pennsylvania, and New Jersey. Moreover, advocates in other states believe that already-enacted sunshine laws prohibit the agreements. Additionally, the new tax bill, enacted on December 22, 2017, prohibits deductions for settlements or payments related to sexual harassment or abuse if there is a nondisclosure agreement and attorney fees involved. This limitation applies to any amounts paid or incurred after the bill's enactment date. Labor and employment attorneys will want to watch how these bills and lawsuits develop because they could have a profound effect on how sexual-harassment allegations in the workplace are handled.
David Gevertz is a shareholder with Baker Donelson in Atlanta, Georgia.