?Employers may need to adjust their practices and policies to comply with the Speak Out Act, which invalidates nondisclosure agreements (NDAs) and nondisparagement agreements designed to keep employees from discussing instances of sexual harassment and sexual assault.
President Joe Biden signed the law on Dec. 7, 2022, and it took effect immediately.
It’s common for employers to require employees to sign nondisclosure and nondisparagement clauses during hiring, in severance agreements and in legal settlements. During the last several years, the #MeToo movement revealed that NDAs were often used to hide repeated sexual harassment and assault by executives or other high-profile employees, preventing victims from talking about the misconduct publicly. The new law is designed to stop companies from covering up misconduct. It applies only to nondisclosure and nondisparagement agreements signed before a dispute arises, not after.
With the new law, there’s greater risk to employers in brand damage and career risk for executives, said Stephen Paskoff, CEO of the workplace training company ELI in Atlanta and a former employment law litigator. That’s why it’s important to “focus on getting people to prevent the underlying issues that necessitate arbitration and NDAs. Settlements that pay people off won’t be as potent as they were in the past.”
Companies are increasingly including clauses in CEO contracts that allow for termination without severance pay in cases of sexual harassment, discrimination and violations of company policies, according to a 2021 study from the University of Florida’s Levin College of Law. This contractual language strengthens the ability of companies to hold leaders accountable for bad behavior.
In March 2022, Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, which bans pre-dispute arbitration agreements covering sexual assault or sexual harassment disputes. Several states, including California, Illinois, Maine, New Jersey, New York, Oregon and Washington, recently passed laws banning the use of NDAs in cases of sexual harassment or sex discrimination.
Practical Steps for Employers
Employers should check their existing NDAs “to ensure what carve-outs are in place,” said Mishell Parreno Taylor, an attorney with Akerman in Houston. Consider adding language stating that the NDA “only applies to the extent allowed by the law” and doesn’t apply in cases of sexual harassment and sexual assault.
Legally speaking, online harassment is just as serious as in-person harassment. Make sure workers understand that instant messages, texts and e-mails “can be a vehicle for inappropriate conduct,” Taylor said. “[People] are just more casual with that form of communication.”
One of the goals in using NDAs is to prevent employees from revealing trade secrets. The Speak Out Act “does not limit an employer’s ability to protect trade secrets and proprietary information,” Taylor said. “I think that’s very important.”
Effective Training
Anti-harassment training should be linked to corporate values and ensure that workers feel comfortable reporting misconduct, Paskoff said. It should emphasize why preventing harassment benefits the company and individuals.
Given the reputational and public relations risks, anti-harassment training “may need to be updated to go beyond [legal] compliance. I’ve seen a lot of businesses go that route,” Taylor said.
Training should emphasize the reporting mechanisms employees can use, not just the employer’s legal requirements. Talk about the various channels for employees to make complaints, as well as what co-workers should do if they witness harassment, Taylor recommended.
A single training session may not be enough. “Too often training is once and done, and that’s it,” Paskoff said. “Getting people to change habits requires repetition, reinforcement, leadership commitment to this,” as well as consequences that hold people accountable for misconduct.
Keep your training and the enforcement of anti-harassment policies consistent. You don’t want to send a message that there’s a double standard—one for senior executives and another for everyone else—Paskoff said.
Values Discussion
Not tolerating harassment and abuse can be framed as part of business objectives and corporate values, rather than just a legal compliance matter.
“The issue of abusive behavior across multiple areas should be looked at as harms to the success of the organization; to its business performance; its commitment to diversity, equity and inclusion; and commitment to getting the best talent and engagement and productivity from that talent,” Paskoff said. “This is a business issue that needs to be integrated into conversations like that. It should be something that’s talked about without all the legal terms. Do it in the language of the job.”
How employers handle harassment complaints can impact recruiting and retention for better or for worse.
“As you deal with talent management, some of that is looking at what policies and practices you’re putting out there for your talent and how that’s being received,” Taylor said. “How do we meet the next generation of employees and what they are looking for? I think there are certain expectations and realities that come with this new workforce. They are more in tune to [questions like]: What does the workplace culture look like? Does the company value respect in the workplace?”
The response to harassment complaints can show whether the company upholds its purported values with actions. “The behaviors that cause serious NDAs and serious exposures are assaults on their [corporate] values,” Paskoff said. “They need to look at this as a more serious issue and limit the harm. They need to do it as a core business issue—business necessity—not business nicety or peripheral.”
