On November 16, 2022, Congress passed the Speak Out Act, S. 4524, prohibiting the enforcement of certain contract provisions that would “silence” people who claim to have suffered sexual assault or sexual harassment. On December 7, 2022, President Biden signed the bill into law and it takes effect immediately. What does this act mean for employers?
In short, the new law makes it so courts cannot enforce nondisclosure and non-disparagement agreements “relating to disputes involving sexual assault and sexual harassment.” Critically, the limitation only applies to nondisclosure and non-disparagement agreements that were signed before a sexual assault or sexual harassment “dispute” arose.
To illustrate the effect of this law: Typical language in a non-disparagement provision will ask the employee to “agree that you will not at any time make, publish, or communicate any disparaging remarks concerning the Company or its businesses, subsidiaries, or employees.” The new law says that a clause like this cannot be used to later to prohibit a person alleging sexual assault or sexual harassment from talking about their allegations. (It would also prohibit any other contract provision that has the same effect, i.e., prohibiting a person from talking about allegations of sexual assault or sexual harassment.)
Unlike, for example, Colorado’s new restrictions on non-compete agreements, the new law does not criminalize or penalize those who attempt to enforce an unenforceable contract clause. As a best practice, employers should consider including disclaimers and remembering that such clauses will not protect them from negative publicity in the event an employee makes allegations of sexual assault or sexual harassment. While this law does not include other types of harassment; we will be paying close attention to whether lawmakers make moves to broaden these types of employee protections.
The Speak Out Act is not the only legislation this year that affects the rights of employers. On March 3, 2022, President Biden enacted the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021,” H.R. 4445. This law invalidates pre-dispute arbitration agreements that prevent a party from filing a lawsuit in court involving sexual assault or sexual harassment. The law also applies to class action waivers. The Act took effect immediately, meaning that mandatory arbitration of these types of claims is now prohibited (unless they were already ongoing prior to the enactment). As with the Speak Out Act, there are no penalties associated with including these invalid provisions in an agreement, but it remains a best practice to ensure agreements comply with the law.
The effect of these laws on employers will largely be that of a changed landscape for risk evaluation and settlement strategies. Plaintiffs’ lawyers will likely be pleased not to be forced into expensive arbitration where there is no jury. Employers should review anti-harassment policies and practices, and consider increasing training and education of your workforce. An ounce of prevention is worth a pound of cure. Should your company face a claim of sexual harassment or assault, it is crucial to act fast, mitigate damages, investigate, and appropriately address the allegations.