Could National Trends in Sexual Harassment Agreements Affect Local Businesses & Employees?

December 6, 2017

Since the New York Times published a bombshell report detailing sexual harassment by Hollywood producer and filmmaker Harvey Weinstein, the fallout has been continuous will allegations pouring out almost daily about patterns and instances of harassment by prominent entertainment and political figures.  

The question as an employer is, how do scandals in Hollywood and D.C. affect my business and my employees? The answer lies in the public opinion of the men and women who will make up juries, but the impact does not stop at the courtroom door. Rather, the current social and political climate is already having widespread effects on the settlement of sexual harassment cases.

Two developments in recent sexual harassment settlements are worth noting: the nondisclosure provision and corporate governance provisions. Each of these provisions could have significant effects on the public perception of a company and on its corporate culture and structure.

Nondisclosure Provision: A common feature of many sexual harassment settlement agreements is a provision under which the aggrieved party agrees not to pursue litigation or disclose information regarding the monetary settlement of the claim. This was reportedly a feature common to Harvey Weinstein’s sexual harassment settlements. In fact, details of his history of sexual harassment only came to light after Zelda Perkins, a former assistant to Weinstein, broke her nondisclosure agreement and came forward to speak publicly about her allegations against Weinstein. Similar provisions were also reportedly included in settlements with Fox News Founder Roger Ailes and former Fox News host Bill O’Reilly. 

The allegations against Weinstein and others have sparked a debate about whether sexual harassment settlements should include nondisclosure agreements.   In fact, one California state representative has announced plans to introduce a bill banning nondisclosure agreements and other confidentiality provisions in monetary settlements for sexual assault and harassment.  (http://sd20.senate.ca.gov/news/2017-10-19-senator-leyva-ban-secret-settlements-sexual-assault-and-harassment-cases).  Additionally, many states have transparency or “sunshine in litigation” laws that prohibit courts from enforcing confidentiality provisions in settlement agreements regarding issues that constitute a public hazard or laws that prohibit settlement agreements that conceal public hazards more generally.  In the current climate, aggrieved parties may be less willing to agree to settlements that include nondisclosure and confidentiality provisions.  Further, aggrieved parties may challenge such provisions as concealing public hazards in violation of state laws.  In either case, the risk of damaging negative publicity and reputational fallout are particularly significant at this point in time.  Thus, discussion of nondisclosure and confidentiality provisions in any settlement should be approached with thought and with care.

Corporate Governance Provision: Another feature of recent sexual harassment settlements, beyond their massive payouts, is a provision regarding corporate governance and compliance. Fox News recently reached a $90 million-dollar settlement in a derivative suit brought by its shareholders, alleging that the company’s management had fostered a culture of sexual and racial harassment which had caused repetitional and financial harm to the company. The settlement included provisions regarding corporate governance and compliance, including a provision requiring the company to establish a “Fox News Workplace Professionalism and Inclusion Council,” made up of experts in matters of workplace inclusion. While most employers will not face the type of large shareholder derivate suit brought against Fox News, the provisions of its settlement mirror a similar trend as the confidentiality provisions discussed above—that is, that aggrieved parties want more than monetary compensation. Rather, in the current climate, aggrieved parties are more likely to seek settlement terms that reflect some notion of “justice” or result in some change to the organization, rather than merely agreeing to a financial award. 

The bottom line is that the current social and political climate may not only affect the way aggrieved parties evaluate their sexual harassment claims from a financial standpoint, but may also affect the terms of any settlement that they pursue.  As always, the best way to address allegations of sexual harassment in the workplace is to have regular training and established processes for addressing such allegations.

The information provided above is created by the attorney in the Labor and Employment Practice Groupat Friday, Eldredge & Clark, LLP. This is not a substitute for legal advice and should be considered for general guidance only. For more information or if you have further questions, please contact one of ourLabor and Employment Attorneys.