Congress Passes Bill Limiting the Use of Nondisclosure and Non-disparagement Clauses for Employees Alleging Sexual Assault or Harassment
Earlier this year, we reported that President Biden signed the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act” into law. The new law limits the enforcement of arbitration agreements with respect to sexual assault and sexual harassment cases if such agreements were entered into before the sexual assault/harassment dispute arose.
In a similar vein, on November 16, 2022, in a show of bipartisan support, Congress passed the “Speak Out Act”, which limits “the judicial enforceability of pre-dispute nondisclosure and non-disparagement contract clauses relating to disputes involving sexual assault and sexual harassment.” The full text of the proposed act is available here. The bill broadly defines the term “nondisclosure clause” as a “provision in a contract or agreement that requires the parties to the contract or agreement not to disclose or discuss conduct, the existence of a settlement involving conduct, or information covered by the terms and conditions of the contract or agreement.” The term “non-disparagement clause” is defined as a “provision in a contract or agreement that requires one or more parties to the contract or agreement not to make a negative statement about another party that relates to the contract, agreement, claim, or case.”
Although President Biden has not yet signed the bill into law, he is expected to do so soon. Prior to the House of Representatives’ passage of the bill in November, the White House released a statement supporting it. Once the bill becomes law, it will essentially prohibit employers from taking legal action to enforce nondisclosure and nondisparagement clauses in employment agreements if an employee previously signed an agreement containing such a clause and then wishes to speak out about sexual assault or sexual harassment claims that later arose in the workplace. According to the bill, this “will empower survivors to come forward, hold perpetrators accountable for abuse, improve transparency around illegal conduct, enable the pursuit of justice, and make workplaces safer and more productive for everyone.”
Importantly, the legislation only applies to nondisclosure and non-disparagement clauses in agreements that were entered into before any dispute arose with respect to an employee’s sexual assault or sexual harassment claims. This means, for example, that if an employee makes claims of sexual assault and/or harassment and then signs a settlement agreement containing a nondisclosure clause with his or her employer to resolve such claims, this nondisclosure clause would still be enforceable. In addition, the bill specifically states that it will not affect an employer’s ability to enter into agreements (i.e., NDAs) to protect its trade secrets or proprietary information. Finally, employers should note that the legislation is intended to apply to agreements with independent contractors as well.
Given the Speak Out Act’s limitations as to the agreements to which it applies, its impact on most employers will likely be negligible. Nevertheless, employers should consider ensuring that all new and existing employment and independent contractor agreements do not contain the type of broad nondisclosure/confidentiality or non-disparagement provisions covered by the bill. As always, we also recommend taking steps to prevent workplace harassment or assault. Please contact us if you have questions or need assistance.
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