#MeToo: States Move to Limit Use of Non-Disclosure Agreements

Currently, six states, New York, Arizona, Maryland, Tennessee, Vermont and Washington, have passed bills that severely limit or prohibit the use of non-disclosure agreements in settlements of sexual harassment claims. Similar bills are pending in California, New Jersey and Pennsylvania.

By far the most sweeping of the bills under consideration is S 121. That bill has been passed by the New Jersey Senate and awaits a second reading in the Assembly. 

S 121 would bar the waiver of any substantive or procedural right relating to a claim of discrimination, retaliation or harassment as against public policy. The bill also prohibits, as against public policy, the use of non-disclosure agreements for the purpose of concealing the details relating to a claim of discrimination, retaliation or harassment. New Jersey’s proposed law differs significantly from the laws passed or under consideration in other states in that it applies not only to claims of sexual harassment, but also to any claim recognized under the New Jersey Law Against Discrimination. Perhaps the most notable feature of the S 121 is that it applies to any employment agreement, except collective bargaining agreements, and so is not limited to consensual settlement agreements of claims under the New Jersey Law Against Discrimination. 

Time will tell whether the surge of state legislative action provoked by #MeToo and #TimesUp will have a measurable impact on the way employers and employees deal with claims of discrimination, retaliation and harassment. But a little remarked-upon provision in the tax bill approved in 2018 by the US Senate and House of Representatives may well prove to be more significant. That provision bars US companies from deducting the costs, including attorneys’ fees, of settling harassment claims as a business expense if the settlement agreement contains a non-disclosure provision. 

Contact Praxis for more information about how these bills will affect your employment policies and how you handle settlement agreements.