Employers should be aware of and immediately take measures to comply with the Speak Out Act, which took effect on December 7, 2022. The Act prohibits nondisclosure agreements (NDAs) and nondisparagement agreements designed to prevent current and former employees from discussing sexual harassment and assault.
Employers routinely require employees to sign NDAs and nondisparagement agreements in employment contracts, severance agreements, and legal settlements. In recent years, it has become clear that employers habitually have used NDAs to hide repeated incidences of sexual harassment and assault by high-profile employees to stop victims from publicly speaking about their experiences. The Speak Out Act prevents employers from using NDAs and nondisparagement agreements to cover up misconduct.
Eliminating these agreements increases the risk of bad publicity for companies and career damage for executives. As a result, companies have more impetus to address the underlying issues that lead to sexual harassment and assault in the workplace. For example, companies increasingly are including provisions in CEO contracts that provide for termination without severance pay in cases involving sexual harassment, discrimination, and similar issues.
The Act only strengthens existing laws meant to prevent cover-ups of sexual harassment and assault in the workplace. In March 2022, President Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, which banned pre-dispute arbitration agreements concerning sexual assault or harassment disputes. Several states also have passed laws banning the use of NDAs in cases of sexual assault and harassment in the workplace.
One takeaway for employers is that they need to check their existing NDAs to ensure they have carved out exceptions for disputes concerning sexual assault and harassment. Employers also should make clear that sexual harassment can occur online as easily as it can occur in person. Nonetheless, employers should remember that a primary function of NDAs is to protect trade secrets and proprietary information. The Act does not prevent using NDAs for that purpose.
Employers also should ensure that they provide effective and repeated anti-harassment training and ample opportunities to report misconduct. Training should go beyond legal compliance and emphasize the benefits of avoiding harassment for the company and employees. Anti-harassment should become part of a company’s values, not just another subject of legal compliance. How companies handle harassment complaints can impact future employee recruiting and retention.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
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