Amid Continuing Sexual Misconduct Scandals, Legislators Target NDAs and Confidentiality Agreements

As allegations of sexual misconduct continue to surface almost daily against high-profile individuals, some legislators have responded by proposing legislation curtailing the use of non-disclosure (NDA) and confidentiality agreements. Critics have opined that such agreements (particularly as used by Harvey Weinstein) have enabled victimizers to conceal and continue long-running patterns of sexual misconduct, in that they prevented discussion of the accusations among both the victims and others, such as co-workers, who knew of the victimization.

In October, California State Senator Connie Leyva announced that she would introduce “legislation to ban secret settlements (confidentiality provisions in settlement agreements) in sexual assault, sexual harassment and sex discrimination cases” when the California Senate reconvenes in early January 2018. On November 15, Pennsylvania State Senator Judy Schwank stated in a press conference that she would introduce a bill that prospectively bans contractual provisions “prohibit[ing] a person from revealing the identity of a person who committed sexual misconduct” and voids any such provisions entered into under duress or incapacity, or by a minor, prior to the law’s enactment.

Neither Sen. Leyva nor Sen. Schwank has yet introduced draft legislative text, and so the exact implications of the proposed legislation are unclear. On the one hand, a complete ban (as apparently contemplated by Sen. Leyva) on confidentiality provisions, which are commonly considered by employers to be a material term of any settlement agreement, likely will lead to less voluntary resolutions of claims as employers choose instead to litigate. Perhaps for this reason, famed plaintiff’s attorney Gloria Allred has spoken against a ban, noting that victims themselves, given an informed choice, may prefer a negotiated resolution over litigation and potentially view confidentiality provisions as safeguarding their own privacy interests.

On the other hand, Sen. Schwank’s public statements hint at a more limited measure that may not significantly change current law, under which individuals cannot be prohibited in various circumstances from “revealing the identity of a person who committed sexual misconduct.” For example, a private confidentiality agreement is unenforceable if it attempts to prohibit disclosure of misconduct to governmental authorities (such as to the police to report a crime, to the EEOC to report unlawful practices, or to a court pursuant to a subpoena or court order). Moreover, duress, lack of capacity and minority are already-existing defenses to the validity and enforcement of any agreement.

We will continue to monitor the legislation as it is introduced and debated. In the meantime, employers are well-advised to evaluate their use of NDAs and confidentiality agreements to determine the extent to which the proposed legislation (which seems likely to pass, in some form) will require changes to current practice.