Discrimination

Discrimination Articles

By Scott E. Schaffer, Esq. 15 Sep, 2022

Effective October 1, 2022, employers with one (1) or more employees will be covered under the Connecticut Fair Employment Practices Act (CFEPA). The former threshold was three (3) employees. In addition, classes protected under the Act will now include “victims of domestic violence.”

            “Victims of domestic violence” will be entitled to all forms of relief available to other covered classes, and in addition shall be eligible for reasonable leaves of absence, subject to the “undue hardship defense,” when needed to seek treatment for injuries caused by domestic violence, including treatment for a child who is a victim of domestic violence, provided the employee is not the perpetrator of the violence; obtain services including safety planning from a domestic violence agency or rape crisis center; obtain psychological counseling related to an incident of domestic violence, including for a child who is a victim of such violence; take other action to increase safety from future incidents of domestic violence, including temporary or permanent relocation; or to obtain legal services, assist in the prosecution of the offence, or otherwise participate in legal proceedings related to the domestic violence. This leave is in addition to the 12 days of annual leave available for “family violence” provided by Conn. Gen. Stat. § 31-51ss.

Employers may request documentation substantiating the need for leave, which may include a police report, a court order, other evidence from the court or prosecuting attorney that the employee appeared in court, documentation from a medical professional, domestic violence counselor or other health care provider that the employee or their child was receiving services, counseling or treatment. Further, employers shall treat any physical or mental disabilities resulting from domestic violence in the same manner as they would any other disability.

Employers with three (3) or more employees will be required to post information concerning domestic violence and resources available to victims. The Connecticut Commission on Human Rights and Opportunities (CHRO) has a poster available to meet this requirement. CHRO Domestic Violence Resource Poster.

While these changes take place October 1, 2022, employers are reminded of other changes to the law that have taken place since October 1, 2019.

For instance, employers with three (3) or more employees must (A) post in a prominent and accessible location information concerning the illegality of sexual harassment and remedies available to victims of sexual harassment, (B) provide, not later than three (3) months after the employee's start date with the employer, a copy of the information concerning the illegality of sexual harassment and remedies available to victims of sexual harassment and (C) provide two hours of training and education to all employees within six months after the date of his or her hire.

            The easiest way to meet (B) above is to email the employee using a subject line “Sexual Harassment Policy” and attaching a link to the CHRO’s poster concerning the illegality of sexual harassment and the remedies available to victims of sexual harassment.  The poster is available here: https://portal.ct.gov/media/CHRO/SexualHarassmentPreventionPosterpdf.pdf

Section (C) can be met by having employees review the CHRO’s sexual harassment training program and then print out a completion form for placement in their personnel file. A link to the training program is provided here: CHRO Sexual Harassment Prevention Training (Page 1 of 13) (office.com) .  

Employers with less than three (3) employees shall provide such training to all supervisory employees within six (6) months of their hire or assumption of a supervisory position.

Employees working for employers with one or more employees who have completed the CHRO training program within the two (2) year period prior to being hired or promoted need not repeat the training.

All employers must periodically provide supplemental training that updates all supervisory and nonsupervisory employees on sexual harassment compliance not less than every ten years.

Aside from the training requirement, employers must obtain written consent from a sexual harassment complainant when taking immediate corrective action in response to the complaint. For instance, such consent must be obtained before relocating a complaining employee, or prior to changing their shift or work schedule, or making any other substantive modification to their terms or conditions of employment. Where consent is not obtained, the employer must show the corrective action was “reasonable” and “not harmful.”

In addition to the sexual harassment changes, employers may no longer include questions on an initial employment application that would disclose an applicants age. Prohibited questions include any requiring the disclosure of a date of birth, age, or dates of attendance or graduation from any educational institution, unless the disclosure is a bona fide occupational qualification or is needed to comply with any state or federal law.

Employees have 300 days (was 180) to file a complaint with the CHRO. Employers found in violation of CFEPA’s discrimination provisions are liable for make whole and compensatory (emotional distress) damages, any court ordered punitive damages, and reimbursement of an employee’s attorneys’ fees and costs.

Violations of the sexual harassment training requirements can result in fines of $750 and separately be considered a discriminatory practice.

For more information contact scott@schaffer-law.com or 860-216-1965.


By Scott E. Schaffer, Esq. 09 Jul, 2021

Effective October 1, 2021, breastfeeding employees will be eligible for some expanded comforts. Current law requires an employer with one or more employees to provide a room, or other location, in close proximity to the work area, other than a toilet stall, for an employee to express milk in private. The new law provides that unless doing so creates an undue hardship on the employer, the room provided to the employee shall be free from intrusion and shielded from the pubic while the employee expresses breast milk, and include, or be situated near, a refrigerator, or employee provided portable cold storage device in which the employee can store her breast milk, and include access to an electrical outlet.

To claim undue hardship, an employer will need to show significant difficulty or expense when considered in relation to the size of the business, its financial resources, and the nature and structure of its operation.

By Scott E. Schaffer, Esq. 09 Jul, 2021

Effective October 1, 2021, Connecticut employers will be required to inform applicants of the wage range of the job applied for upon the applicant’s request, or prior to, or at the time the applicant is made an offer of compensation, whichever is earlier. In addition, employers must provide similar information to current employees regarding the employee’s position upon hire, a change in position within the company, or the employee’s first request for the information. A copy of the law can be found here.

“Wage” is defined as compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission, or other basis. “Wage range” means the range of wages an employer anticipates relying on when setting wages for a position, and may include reference to any applicable pay scale, previously determined range of wages for the position, actual range of wages for those employees currently holding comparable positions, or the employer’s budgeted amount for the position.

The current law banning employers from prohibiting employees from disclosing their wages, or inquiring about the wages of another employee, remains in place. Also, the current law that prevents an employer from inquiring about a prospective employee’s wage and salary history, or the value of the applicant’s compensation structure, continues in effect.    

Job applicants and employees may bring a civil action within 2 years of any alleged violation. Damages include compensatory and punitive damages, along with attorney’s fees.           

Aside from the disclosure of wage ranges, the new law widens the test for gender based pay discrimination by substituting the standard of “equal pay for equal work,” with “equal pay for comparable work.”  

Under the new rule, if an employee can show gender based unequal pay for comparable work, when considering the skill, effort, responsibility, and working conditions of the two jobs, the burden shifts to the employer who must show the difference is based on a seniority system, merit system, a system that measures earnings by quantity or quality of production, or a differential system based on a bona fide factor other than sex, including but not limited to education, training, credentials, skill, geographic location, or experience. Any factor relied on by the employer cannot be based on or derived from a sex-based differential in compensation, and must be job related and consistent with business necessity. The employer’s defense shall not prevail where the employee demonstrates that an alternative employment practice exists that would serve the same business purpose, without producing the pay differential, and that the employer refused to adopt the alternative practice.

Employees may file a complaint with the labor commissioner, and barring investigation, can then file a court action.

By Scott E. Schaffer, Esq. 25 Mar, 2021

Connecticut recently passed the Creating a Respectful and Open World for Natural Hair ( CROWN ) Act. The Act makes it illegal for employers to discriminate based on a hairstyle related to a person’s race. Under the Act, “race” is defined as “inclusive of ethnic traits historically associated with race, including, but not limited to hair texture and protective hairstyles. “Protective hairstyles” include, but are not limited to wigs, headwraps, and hairstyles such as individual braids, cornrows, locs, twists, Bantu knots, afros and afro puffs.

In comments made at the time Governor Lamont signed the bill, he explained that the Act was passed so that employees and applicants are not judged based on their hairstyle, but are instead considered based on their work product, commitment, dedication and work ethic.

Employers should review their dress and grooming codes to make sure they do not violate the new law, which became effective 3/4/21.

By Scott E. Schaffer, Esq. 25 Nov, 2020

The U.S. Supreme Court recently ruled that religious school employees are broadly covered under the “ministerial exception” grounded in the First Amendment. Our Lady of Guadalupe School v Morrissey-Berru.

At issue was whether the First Amendment permits courts to intervene in employment disputes involving teachers at religious schools who are entrusted with the responsibility of instructing their students in the faith.  Relying on prior cases, the Court noted the First Amendment protects the right of religious institutions “to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine.”  In previously applying this principle, the Court held in Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, (2012), that the First Amendment barred a court from entertaining an ADA employment discrimination claim brought by an elementary school teacher against the religious school where she taught. In doing so, the Court did not announce “a rigid formula” for determining whether an employee falls within the “ministerial exception,” but identified criteria that leaned toward inclusion, such as an employee’s title, educational training, responsibility to teach religion, and participation in students’ religious activities.

In the instant cases, one teacher filed an ADA claim after being terminated following a request for a leave due to cancer, while the other filed an ADEA claim after being terminated and replaced by a younger teacher. The employer claimed both were fired due to performance.

In reviewing the job duties of both teachers, the Court found each taught all elementary school subjects and religion, attended faculty prayer services, modeled and promoted Catholic faith and morals, participated in liturgical activities, prepared students for participation in the Mass, communion and confession, and prayed with students. While the two teachers were not given the title of “minister” and had less religious training than the teacher in Hosanna-Tabor , the Court found their jobs fell within the ministerial exception. The Court explained that religious education and the formation of students is the very reason for the existence of most private religious schools. Therefore, the selection and supervision of those teachers lie at the core of their mission. Judicial review of the way in which religious schools discharge those responsibilities would undermine the independence of religious institutions in a way that the First Amendment does not tolerate.

The Court went on to explain that the teachers in the instant case fell firmly within the ministerial exception because abundant record evidence showed they both performed vital religious duties.  Educating and forming students in the Catholic faith lay at the core of the mission of the schools where they taught, and their employment agreements and faculty handbooks specified in no uncertain terms that they were expected to help the schools carry out this mission, and that their work would be evaluated to ensure that they were fulfilling that responsibility.  As elementary school teachers responsible for providing instruction in all subjects, including religion, they were the members of the school staff who were entrusted most directly with the responsibility of educating their students in the faith. And not only were they obligated to provide instruction about the Catholic faith, but they were also expected to guide their students, by word and deed, toward the goal of living their lives in accordance with the faith. They prayed with their students, attended Mass with the students, and prepared the children for their participation in other religious activities. While their positions did perfectly mirror the one held by the teacher in Hosannah-Tabor , their core responsibilities as teachers of religion were essentially the same.  It went on to note that the failure to include “minister” in the employee’s title did not automatically take them outside the exception, nor did their lack of formal religious training, or close adherence to textbooks when teaching. More importantly, their employers thought they had a sufficient understanding of Catholicism to teach their students, and were appropriately involved in their students’ spiritual lives.

As the Court concluded, when a school with a religious mission entrusts a teacher with the responsibility of educating and forming students in the faith, judicial intervention into disputes between the school and the teacher threatens the school’s independence in a way that the First Amendment does not allow.

The ruling in this case does not change other aspects of the ADA and Title VII that allow religious employers to employ members of a particular faith, to the exclusion of others, even in non-ministerial roles, but prohibit them from taking discriminatory action against non-ministerial employees for reasons other than religion.

One area left somewhat unsettled is whether a religious organization can discriminate against non-ministerial employees on the basis of sexual orientation or gender identity. Conn. Gen. Stat. § 46a-81p expressly permits such discrimination, however, the recent Supreme Court case of Bostick v. Clayton County held that Title VII prohibits sexual orientation and gender identify discrimination as a form of sex discrimination. A recent U.S. District Court case in Indiana, citing Bostick , held that Title VII’s exemption allowing religious organizations to prefer employees of a particular religion does not apply to sexual orientation claims, as such claims are sex based, not religion based. Starkey v. Roman Catholic Archdiocese of Indianapolis. It will be interesting to see if other federal courts take the same position, or find that views on sexual orientation and gender identity are encompassed within the realm of religion, and thus can be used by a religious employer to terminate a non-ministerial, LBGTQ employee under Title VII’s religious exemption.

By Scott E. Schaffer, Esq. 16 Jun, 2020

The U.S. Supreme Court recently ruled that Title VII of the Civil Rights Act of 1964 prohibits discrimination against gay and transgender employees. Bostock v. Clayton County. Although the Connecticut Fair Employment Practices Act (CFEPA) already provided this protection, gay and transgender employees claiming workplace discrimination can now bring complaints under federal law as well.

In Bostock, the Court considered three separate cases in order to address a Circuit Court split. In one case the Eleventh Circuit concluded that Title VII does not prohibit discrimination against gay and transgender employees while the Second and Sixth Circuits came to the opposite conclusion. In two of the cases (Eleventh and Second Circuits), gay men brought suit when they were fired due to their sexual orientation. The third case (Sixth Circuit) involved a transgender woman who was fired after announcing she would embrace her female gender identity at work. In all three cases the employer admitted it fired the employees due to their sexual orientation or gender identity/expression, but argued doing so did not violate Title VII.

The question before the Court was whether Title VII’s prohibition against sex discrimination included employer actions taken because of an employee’s sexual orientation, or gender identity and expression. In finding such actions violate the law, the Court stated that “an employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex. In doing so, sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.”

The Court explained it is impossible to discriminate against a person for being homosexual or transgender without discriminating against that individual based on sex. It then offered an example. An employer has two employees who are attracted to men. Both employees are identical in all material respects except one is male and the other is female. If the employer fires the male for no reason other than the fact that he is attracted to men, the employer discriminates against him for traits it permits with female employees.

In arriving at its decision, the Court applied the “but for” standard to evaluate the employers’ actions. The standard is met when a particular outcome would not have happened “but for” the purported cause. The “but for” test directs the court to change one thing at a time and see if the outcome changes. If it does, a “but for” cause is found. The Court further elaborated that “when it comes to Title VII, the adoption of the traditional ‘but for’ causation standard means a defendant cannot avoid liability just by citing some other factor that contributed to its challenged employment decision. So long as the plaintiff’s sex was one ‘but for’ cause of that decision, that is enough to trigger the law.”

The Court then contrasted the “motivating factor” standard introduced through the 1991 amendments to the Civil Rights Act of 1964. “Under this more forgiving standard, liability can sometimes follow even if sex wasn’t the ‘but for’ cause of the employer’s challenged decision.” In motivating factor cases, also known as mixed motive cases, if the employer can show it would have taken the same action for reasons other than a protected characteristic (sex), it will still be liable, but the damages available to the plaintiff are severely limited to declaratory and injunctive relief, plus attorneys’ fees, but not the traditional make whole and compensatory damages available if the ‘but for’ standard is met.   In the instant case, however, dependence on the “motivating factor” standard was unnecessary because plaintiffs proved “but for” causation.

The Court’s application of the “but for” standard to award the full range of available remedies is different from the test used under CFEPA, which applies the “motivating factor” test. A plaintiff bringing a sex discrimination case under CFEPA need only prove that sex was a “motivating factor,” and if successful is eligible for the types of relief available to a plaintiff meeting the “but for” standard in a Title VII case. This makes a claim for full damages easier to prove under Connecticut law, that under a companion federal claim.

Employers should continue to ensure that employees are treated equally regardless of their sexual orientation or gender identity/expression, as failing to do so now creates a violation of both state and federal law.      

By Scott E. Schaffer, Esq. 20 Jun, 2019

On June 3, 2019, the U.S. Supreme Court ruled that employers must raise a timely defense in order to challenge administrative charge filing deficiencies under Title VII, as such filing flaws are not jurisdictional in nature. Fort Bend County Texas v. Lois M. Davis.

Title VII of the Civil Rights Act of 1964 requires a complainant to file a charge with the EEOC prior to commencing an action in court. Once a charge is pending 180 days, a complainant may obtain a right to sue letter from the EEOC and file a civil action within 90 days of receipt.

 In this case, Davis, an information technology specialist, filed a charge with the EEOC against Fort Bend County claiming sexual harassment and retaliation. While the charge was pending, Fort Bend fired her for a failure to report to work on a Sunday. Davis alleged she was unable to work due to religious obligations. Davis then amended her EEOC intake questionnaire by adding “religion” and “discharge” to the discrimination claim, but never formally amended the charging document. Following receipt of the right to sue letter from the EEOC, she filed a civil action in federal court claiming both sexual harassment/retaliation, and religious discrimination/discharge. After years of litigation, only the religion based claims remained in the case. Fort Bend then asserted, for the first time, that the religion based claims should be dismissed due to the court’s lack of subject matter jurisdiction. The employer’s argument centered on Davis’ failure to add the religion based claims to her formal EEOC filings, and that such failure removed Davis’ religious based claims from the court’s jurisdiction.

The District Court agreed with the employer, however, the Fifth Circuit reversed. It ruled that a challenge to an alleged deficient administrative filing must be raised in a timely manner as a defense, as such filing failure is not jurisdictional in nature.  The significance is that subject matter jurisdiction challenges can be raised at any time, while defenses must be brought in a timely fashion, or are waived.

The U. S. Supreme Court upheld the Fifth Circuit decision by finding that Title VII’s administrative charge filing requirement, prior to bringing a civil action, is not jurisdictional, but is instead a defense that must be raised in a timely fashion, and if not so raised, is waived. The Court went on to describe other examples of mandatory claim processing rules that are not jurisdictional in nature, but are subject to challenge through timely defenses. These include rules that employers must employ at least 15 employees to be covered by Title VII, or that a charge be filed within 180/300 days of the discriminatory act.

The Court’s ruling illustrates that it is important to determine if a potential challenge is jurisdictional or procedural in nature, and where it is not jurisdictional, a timely defense must be filed, or it will be waived. Here, the employer lost the opportunity to have the case dismissed when it failed to file a defense at the appropriate time.

By Scott E. Schaffer, Esq. 16 May, 2019

The Connecticut Appellate Court recently held that a school paraprofessional’s request for extended intermittent leave was unreasonable as a matter of law under the Connecticut Fair Employment Practices Act (CFEPA). Barbabosa v. Board of Education. More specifically, the Court found that regular attendance is an essential job function, and that an employee’s request for part-time work did not constitute a reasonable accommodation because the proposal would eliminate the essential job requirement of regular attendance.

In Barbabosa, the employee was hired in 2007 and worked for several years as a classroom paraprofessional for the Town of Manchester. During her entire length of employment, she had numerous absences and tardies. Some were covered by the FMLA, while others were excused as sick leave under the collective bargaining agreement. The majority were categorized as unapproved, or nonpaid leave. When present at work, she performed satisfactorily, however, each performance review highlighted concerns regarding her failure to consistently be at work. Eventually, in 2014, she was suspended for 30 days due to excessive absenteeism.

Barbabosa then filed a CEFPA complaint with the CHRO alleging disability discrimination, and failure to provide a reasonable accommodation in the form of extended intermittent leave. Following a release of jurisdiction by the CHRO, she filed suit in the Connecticut Superior Court. The employer argued the case should be dismissed as a matter of law because plaintiff could not perform the essential functions of her job due to her absences. Further, granting an accommodation that would permit more time off in the form of intermittent leave would reduce her ability to perform her essential functions, whereas the purpose of a reasonable accommodation is to allow all essential functions to be performed.

The trial court granted defendant summary judgment, and plaintiff appealed. The Appellate Court affirmed the trial court’s decision. It found that for an employee to be qualified, he or she must be able to perform the essential functions of the job, with or without reasonable accommodation. It noted that numerous federal courts have recognized that attendance at work is a necessary job function, and that employees who are unable to come to work on a regular basis are unable to satisfy any of the functions of the job, much less the essential ones. It then cited several court decisions that reiterated that attendance is an essential function, and that the law does not require employers to tolerate chronic absenteeism, even when the absence is caused by an employee’s disability. Further, permitting part-time work when a job is full-time, would eliminate the requirement of regular attendance, which is essential to the position of teacher.

In sum, the Court stated that where regular full-time attendance is an essential job function, requests under CFEPA for intermittent leave, resulting in part-time employment, is unreasonable.  It reiterated that the goal of any reasonable accommodation is to allow the employee to actually perform the essential functions of their job, which in this case included the need to be at work on a full-time basis.

While employers must grant time off as required by the FMLA, collective bargaining agreements, and their own policies, any additional time off requested as a reasonable accommodation under the ADA or CFEPA need not automatically be granted. Instead, when employees request additional intermittent time off, employers may now have an easier time refusing the request where it can show that attendance at work is an essential function. Employers should continue to analyze each situation individually, and determine whether a request is reasonable, or would result in an undue hardship on the employer.

Also, in a slightly different vein, employers should continue to review whether an extension of full time leave beyond any required leave should be granted under the ADA or CFEPA. Where the additional leave is for a reasonable period, and the employee has a definitive return to work date by which they will be able to resume all essential functions, with or without reasonable accommodation, the employer should carefully consider extending the leave for a reasonable, finite period.

As decisions involving the intersection of leave laws, discrimination laws, collective bargaining agreements, and company policies are some of the most daunting in employment law, employers should consult with counsel when analyzing these issues.  

By Scott E. Schaffer, Esq. 05 Mar, 2019

In a case of first impression, the Connecticut Superior Court found that claims of perceived pregnancy are covered under the Connecticut Fair Employment Practices Act (CFEPA). In Sieranski v TJC, Esq. , (CT Super. Ct., July 10, 2018), the plaintiff claimed she was fired after telling her supervisor she thought she was pregnant, even though it later turned out she wasn’t.

Plaintiff was hired as a paralegal shortly after giving birth to a child. Her boss, an attorney, periodically asked her if she planned to have additional children, and if so, when. About five months after starting at the firm, plaintiff told her boss that she was feeling nauseous and that she was 99.9% sure she was pregnant again. Four days later she was terminated because she was “not a good fit.”

Plaintiff filed an action claiming wrongful termination in violation of public policy, and pregnancy and gender discrimination under CFEPA. Defendant moved to strike all three counts. In particular, defendant claimed that because plaintiff was in fact not pregnant, nor affected by pregnancy or any related medical condition, she was not covered by CFEPA’s pregnancy discrimination provision. Plaintiff countered that the law recognizes claims of perceived pregnancy discrimination, and that employees fired based on a perception of pregnancy should be covered under CFEPA.        

After finding no basis for the wrongful termination claim, the court addressed the pregnancy and gender discrimination claims. It reviewed CFEPA’s language and found that the law’s prohibition of sex discrimination expressly included claims of discrimination related to pregnancy. It stated the issue as “whether Connecticut recognizes a cause of action for discrimination based upon an employer’s perception that the employee is pregnant.” 

Lacking any appellate guidance, the court admitted the statute does not expressly recognize the claim. However, it analogized the current case to the Connecticut Supreme Court’s decision in Desrosiers v. Diageo NA, Inc. , which found claims of perceived disability covered under CFEPA, even though the statute failed to expressly state such a cause of action. In Desrosiers , the Supreme Court stated that allowing a company to terminate someone based on a perceived disability, even if an actual disability did not exist, was inconsistent with the legislative intent and would lead to absurd results. To illustrate the bizarre results it was concerned with, it compared an employee fired because of a chronic medical condition with one fired because he was perceived to have the same chronic condition. In the first instance the employee would be protected by the Act while in the second no such protection would exist, even though the same discriminatory motive existed in both cases.

Applying the Desrosiers thinking to perceived pregnancy discrimination, the court in the instant case found that discriminatory actions based on perceived pregnancy are prohibited under the CFEPA. Any other conclusion would lead to the same bizarre results addressed by the Desrosiers court. It concluded its opinion by stating that CFEPA prohibits employers from discriminating against individuals whom they regard as pregnant.

Interestingly, the court, went on to strike the gender discrimination claim. It did so by finding that plaintiff did not provide any evidence that similarly situated males were treated differently than plaintiff. While the court was technically correct, as males would never be perceived as pregnant and thus be subject to potentially different treatment, the ruling may also indicate that the court wanted to avoid issuing a decision that would open the door to perceived gender claims, especially in today’s gender fluid environment. Instead it focused on the narrower issue of perceived pregnancy.

Employers should note that while this case involved perceived pregnancy there is a growing movement to recognize all kinds of discrimination based on perception. This includes perceived color, national origin, and race claims. While the EEOC has endorsed such coverage under Title VII, neither the U.S. Supreme Court or any federal appellate court has addressed such claims. Lower federal district courts have ruled both ways on perceived race claims, with the majority to date finding them not covered.

This area is sure to evolve over time and employers should continue to monitor cases that may provide greater clarification in the future.

By Scott E. Schaffer, Esq. 28 Sep, 2018

Under the recently passed Tax Cuts and Jobs Act, IRS Code § 162(q), employers may no longer deduct “(i) any settlement or payment related to sexual harassment or sexual abuse, if the settlement or payment is subject to a nondisclosure agreement; or (ii) attorneys’ fees related to the settlement or payment.”

While the provision was designed to penalize employers interested in covering up settlements related to sexual harassment, and permit victims to discuss their claims publicly, an unintended consequence has arisen whereby victims may no longer be able to personally deduct the legal fees paid to their attorney, if the settlement agreement contains a non-disclosure provision.

As such, plaintiffs will have additional incentive to not agree to non-disclosure provisions as part of any sexual harassment related settlement, or will alternatively ask for more money to cover the taxes on such payments in return for a confidentiality provision. This will likely increase the cost and difficulty in settling claims, even if an employer is willing to forego the deductibility of settlement payments in order to maintain confidentiality.

Also, where there are multiple claims settled under a confidentiality agreement, the parties may need to determine how much of the payment, including attorneys’ fees, is attributable to the sexual harassment claim versus others so that only that portion is non-deductible.

Left unclear is the impact on pre-litigation severance agreements where employees waive all rights to bring claims, typically including sexual harassment claims. Such agreements may need to carve out sexual harassment from any confidentially provision.

Many commentators have suggested that the IRS should provide clarification on the scope of the new law, but until then employers and employees must proceed with caution and weigh the consequences of including non-disclosure provisions in agreements covering sexual harassment claims.

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