President Joe Biden is being asked to sign legislation passed recently by Congress that would make certain nondisclosure and nondisparagement clauses unenforceable. Specifically, the Speak Out Act (“the Act”), once signed, will make pre-dispute nondisclosure and nondisparagement clauses unenforceable with respect to sexual assault or sexual harassment disputes where the conduct is alleged to have violated state, federal or tribal law. The legislation is not limited to employees but would apply equally to independent contractors, prospective employees and others.
Although the Act states that it is designed to empower victims of sexual harassment and sexual assault to come forward and to hold perpetrators accountable, it has a limited scope. Importantly, the Act will not prohibit enforcement of nondisparagement and nondisclosure clauses where the agreement at issue was entered into after the dispute arose. In other words, where parties have settled a lawsuit or other claim of sexual harassment or sexual assault and included non-disclosure or non-disparagement clauses in the agreement, the Act would not impact those terms.
Instead, the Act prohibits enforcement of nondisclosure and nondisparagement clauses which were part of an agreement entered into before the existence of a sexual harassment or sexual assault dispute. The Act, therefore, takes aim at general nondisparagement and nondisclosure clauses that would prevent someone who signs an agreement containing a nondisclosure and/or nondisparagement clause before the sexual harassment or sexual assault dispute arose. For example, if an employee signs an agreement containing a nondisclosure clause and is later subjected to sexual harassment at work, the employer could not subsequently rely on the clause in court to prohibit the employee from speaking out about the conduct, telling the authorities about it or disclosing a settlement over it.
Note, however, that the Act would not impact the enforcement of a release. Thus, even though a victim of sexual harassment or sexual assault can speak out about what happened, they may still not be able to sue over the misconduct if their agreement contains a release of claims.
The Act would not affect state or local laws that are more restrictive. For example, if a nondisclosure or nondisparagement agreement is broadly prohibited by state law, that greater restriction will control.
The Act contains some ambiguity that will undoubtedly require court involvement. Most notably, the legislation does not define what a “dispute” is and therefore leaves uncertain whether it would impact an agreement signed before a lawsuit is filed, before a demand is made or simply before an allegation is denied. There is no doubt, however, that it impacts general or “catch-all” agreements entered into at the outset of employment (or even in a job application) and before any misconduct occurs.
Practical Takeaways
Moving forward if the act is signed, employers and others seeking to resolve sexual harassment and sexual assault allegations should be aware that the timing of an agreement may impact the enforceability of nondisclosure and nondisparagement clauses with respect to sexual assault and sexual harassment disputes. In addition, employers and others should weigh carefully the language chosen in their agreements entered into before a sexual harassment or sexual assault dispute arises.
For questions or more information, please contact:
- Jonathon Rabin at (248) 457-7835 or jrabin@hallrender.com; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer an individual’s questions that may constitute legal advice.
