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April 1, 2022

The Use of NDAs in Workplace Sexual Misconduct Cases: The Good, the Bad and the Ugly

By Jody Newman

Having spent decades representing victims in sex discrimination, sexual harassment, and sexual assault cases, I came to see the prevalence of non-disclosure agreements (NDAs) in settlements as a fact of life – or, more specifically, a fact of obtaining the best results for clients without a public trial. Generally, the prevailing wisdom in the plaintiffs’ bar was that money can buy a victim’s silence to resolve the case favorably.  That view, however, took a public hit with the emergence of the #MeToo movement following the revelation of the serial sexual violence perpetrated by Harvey Weinstein.

It came out that Weinstein used extremely strict NDAs (among other scorched-earth tools ) to silence the women whom he paid off.  One of Weinstein’s victims – his long-term assistant, Zelda Perkins, who in 2017 was the first to break her NDA – has now teamed up with renowned Canadian law professor and social justice advocate Julie Macfarlane, in a global campaign designed to abolish the use of NDAs in discrimination cases as well as other cases involving wrong-doing.  The title of the campaign – Can’t Buy My Silenceis a game-changer. It is based on public policy that NDAs protect the reputation and the careers of perpetrators while harming victims by permanently gagging them and hiding important information from the public. 

How lawyers view NDAs largely depends on which side of the dispute they are on.  Defense attorneys are the ones who include such clauses in settlement agreements and are their most ardent supporters. To be sure, in most settlements, the allegations of misconduct have not been proven in a court of law, and defense lawyers often insist that NDAs are necessary to protect their clients’ reputational interests. Another standard defense argument is that the company will be deluged with “copy-cat” complaints (which, depending on your point of view, may be the other victims of a serial harasser). Defense lawyers also argue that strict non-disclosure is also in the plaintiffs’ best interests, citing preservation of their privacy and their interests in settling rather than facing the risks and indignities of cross-examination at trial. Many plaintiffs’ lawyers feel they have no choice but to accept NDAs to achieve maximum compensation for their clients – or, at most, to try to limit them with carve-outs for permissible disclosures. Such exceptions include disclosure to immediate family members, as well as financial and legal advisors (provided these persons maintain confidentiality). Another less common exception for which I now advocate is a carve-out for therapists and healthcare providers. 

 The Can’t Buy My Silence campaign argues that NDAs have morphed from limited use in commercial cases for the protection of trade secrets and proprietary financial information to a default solution in all cases of wrongdoing—from injury cases to product liability cases to bias cases—for the purpose of hiding abusive practices. This movement goes well beyond post-#MeToo legislation in the U.S. aimed at limiting the enforcement of NDAs primarily in sexual harassment cases.  For instance, the tax code was amended to limit the ability of employers to deduct legal fees in in a sexual harassment case with an NDA and a handful of states and cities have limited the use of NDAs in harassment cases. The most progressive laws have been enacted in California and Washington. Called The Silenced No More Act , these laws prohibit confidentiality clauses in any kind of harassment or discrimination case, not those related to gender bias. By contrast, Can’t Buy My Silence is advocating for global legislation to ban the use of NDAs in all cases except for those involving commercial proprietary information.  

For now, with the overuse of NDAs still common, the issue is best analyzed in the context of what information is subject to confidentiality and at what stage of the dispute. Most often, NDA clauses seek to ban disclosure of the fact of settlement, the amount paid, and the underlying facts.   The three stages of an employment case are typically (1) before the commencement of a charge of discrimination at a federal or state agency, (2) while the case is pending at the agency, and (3) after litigation is filed in court.

The strongest case for a full NDA shielding from public view the fact and amount of the settlement and the underlying facts is at the earliest pre-filing stage of a case. The defense position is that the allegations remain unproven, the plaintiff has the burden of proof, and the incentive for payment is the avoidance of negative publicity. It is also true that some plaintiffs at this stage want to move on with their careers and lives and desire to keep both the complaint and compensation received  private to avoid stigma from the events or to avoid being viewed by potential employers as litigious. In this situation, carve-outs may be the best solution for the plaintiff. 

At the Equal Employment Opportunity Commission (EEOC), the federal agency that enforces most federal discrimination laws, confidentiality is built into their procedures – charges or complaints of discrimination and settlement of discrimination cases are deemed confidential. It would be difficult to make the case that the plaintiff was free to discuss the underlying facts or amount of settlement in a case pending at the EEOC or other state anti-discrimination agencies with similar constraints.

However, once a complaint is filed in court, the facts contained in the complaint are a matter of public record, and all bets of confidentiality as to the facts should be off the table in my view. Still, it is not unusual for defense lawyers to ask for such a NDA clause in court cases on the theory that, though the facts are public record, they do not want the plaintiff speaking publicly about the case. This is the strongest case for resisting an NDA as to facts – had the company wanted to avoid bad publicity, they might have thought about settling before the facts became public.

In their research, Ms. Perkins and Professor Macfarlane have discovered that far too many sexual harassment and sexual assault survivors do not understand what they are agreeing to, including those who are represented by counsel. The survivor feels she cannot speak about her experience to close friends, intimate partners, family members and even therapists. This can slow the healing process and result in survivors being re-traumatized by a life-long cone of silence. At a minimum, plaintiff lawyers should not assume an NDA is necessary, and strive to make it narrow as possible – such as precluding discussion in public forums only – and to fully explain the consequences to clients. Instead of answering “yes” or “no” to the question of whether money can buy silence, a better answer may be “it depends” –  on the stage of the case, the interests and needs of the settling client, the interests and needs of the settling company, the scope of information to be kept confidential, and the reasonable exceptions that should be part of any NDA.

 

Category:
Employment, Updates
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