Rights of Sexual Harassment/Assault Victims Continue to Expand

     In the past, employers generally had the right to require employees to sign pre-dispute arbitration agreements, which prohibited them from filing workplace related claims in court. Also, such agreements could restrict their right to bring joint or collective actions. In essence, employees could be required to arbitrate their claims individually, even if the employer’s actions affected multiple claimants. In addition, any settlement, whether in a court or arbitration proceeding often included a non-disclosure, non-disparagement provision preventing the plaintiff from speaking out about their claims, or the terms of the settlement.

      This framework changed significantly for victims of sexual harassment and sexual assault in 2017 through the #MeToo Movement following revelations of Harvey Weinstein’s long history of misconduct toward women dependent on him for career advancement.

      Initially, the federal government made it more costly for employers to hide the terms of any sexual harassment/sexual assault settlement by eliminating the right to a tax deduction for settlement payments and attorney’s fees where the settlement agreement contained a non-disclosure provision. More specifically, the IRS Code was amended so that “for amounts paid or incurred after December 22, 2017, new section 162(q) provides that no deduction is allowed under section 162 for any settlement or payment related to sexual harassment or sexual abuse if it is subject to a nondisclosure agreement. In addition, attorney’s fees related to such a settlement or payment are not allowed as a deduction.”

      Then in March 2022, President Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act that outlawed pre-dispute mandatory arbitration agreements for sexual harassment and/or sexual assault claims. This gave victims the right to file in court as opposed to being required to have their claims heard in arbitration. Employees retained the right to go to arbitration, if agreed to by the employer. Court proceedings offer greater public access to the claims and outcomes than private arbitration.

      The Act also banned any pre-dispute agreement that prohibited an employee from participating in a joint, class, or collective action in a judicial, arbitration, administrative or other forum in cases alleging sexual harassment or assault brought under any Federal or State law

      Further, any issue arising over the interpretation of the rights granted by the Act are determined under Federal Law by a court, and not an arbitrator, regardless of what the underlying agreement between the parties may say.

      More recently, President Biden signed the Speak Out Act on December 7, 2022. It bans pre-dispute non-disclosure and non-disparagement agreements that prevent claimants from speaking out about alleged sexual harassment and assault in the workplace.

      In the Findings supporting the Speak Out Act, Congress articulated its reasons for passing the new law. It found that 81% of women and 43% of men experience some form of sexual harassment or assault during their lifetime. Among women facing sexual harassment, 87%-94% never file a formal complaint. In order to combat harassment, the ability to speak out offers a powerful tool to encourage survivors to come forward, hold perpetrators accountable, and make the workplace safer.

      Taken together, these three laws prevent pre-dispute non-disclosure agreements, pre-dispute mandatory arbitration agreements, and pre-dispute joint/collective action restrictions in matters related to sexual harassment and sexual assault. They also remove the tax deductibility of any costs and legal fees incurred where a settlement agreement involving sexual harassment/assault contains a non-disclosure provision.

      Given the high cost and negative publicity associated with sex related misconduct, it is incumbent on employers to have strict policies in place, provide on-going training, take complaints seriously, and deal with violators quickly and severely.