New Federal Law Limits Employers’ Ability to Muzzle Sexual Harassment Claims.
President Biden also has signed into law the “Speak Out Act,” prohibiting employers from enforcing pre-dispute non-disclosure and non-disparagement clauses regarding sexual assault and sexual harassment.
Congress states in the new law (available here) that non-disclosure and non-disparagement provisions “can perpetuate illegal conduct by silencing those who are survivors of illegal sexual harassment and assault or illegal retaliation” and “shielding perpetrators and enabling them to continue their abuse.” The Speak Out Act is designed to combat sexual harassment and assault by ensuring that “victims and survivors have the freedom to report and publicly disclose their abuse.”
Despite the lofty aspirations, the law as written is narrow in its application. The prohibitions are limited to pre-dispute agreements (such as offer letters, employment agreements, and employee handbooks that must be signed). Once a dispute arises (for example, an employee complains of sexual harassment), the employer may require non-disclosure and non-disparagement provisions as part of a settlement agreement. This loophole perpetuates a central problem cited in the law and by #MeToo proponents – that employers and harassers silence their victims as part of a settlement agreement and release, leaving the alleged harassers free to move on to others, with no public record of a prior offense. On the other hand, by allowing the non-disclosure and non-disparagement provisions as part of a settlement agreement, victims can settle and put behind them situations they might not want to publicize and that might not otherwise be amenable to resolution.
Employers should be aware that several states, including New Jersey, have similar laws that provide greater protections to employees. To avoid violating these laws, employers should review their standing agreements and policies to determine whether any existing pre-dispute terms now violate the law.