Employers: How Recent Sexual Harassment Scandals May Affect Your Workplace

Jan 16, 2018 | Written by: Leslie A. Parikh, Esq. | Share

In response to the highly-publicized sexual misconduct and harassment scandals in the workplace that have dominated the headlines in recent months, legislators have acted to address what has surfaced as a matter of grave concern. 

Employers should be cognizant of the following proposed legislation, which, if passed, will require proactive steps by employers in order to protect employees and employers alike.

• Proposed Ban of Arbitration Agreements in Claims of Sexual Harassment and Discrimination Under Federal Law

On December 6, 2017, Congress, in a bi-partisan effort, introduced the “Ending Forced Arbitration of Sexual Harassment Act.”  Members of Congress advancing the bill proposed the legislation in order to end the private arbitration process, which they stated protects serial harassers by keeping allegations and resolutions quiet.

The bill would make any pre-dispute arbitration agreements unenforceable that relate to claims of sexual harassment and discrimination under federal law.  The bill is written broadly enough that it would also encompass more than sexual harassment claims.  If passed as it is currently written, the arbitration agreements would be unenforceable in any type of gender-based employment claim, whether it be discriminatory discharge, failure to hire, failure to promote, or in wage disputes.  Many states are expected to follow suit with regard to state harassment and discrimination laws.

If the bill is passed, employers should be aware that their current arbitration agreements would have to be revised in order to carve out an exception for gender-related claims.  The concern is, if the arbitration agreements are not re-written, they may be deemed completely unenforceable, which would bar the arbitration process with respect to any and all claims regardless of whether they are gender-related or not. 

Employers must stay up-to-date on the progress of the bill and be prepared to revise existing arbitration agreements, handbooks, or other employment-related documents that address mandatory arbitration as a means of handling disputes in the workplace.

• Ban of Non-Disclosure Agreements in Sexual Harassment and Sexual Assault Cases

After the multiple non-disclosure settlements that were reached between Hollywood producer, Harry Weinstein and the many women who accused him of sexual harassment and sexual assault, legislators around the country are now seeking to propose new legislation banning settlement agreements in harassment cases that contain non-disclosure clauses.  The driving force behind the proposal is to eradicate harassers' and employers’ efforts to cover up acts of harassment and cases of sexual harassment in the workplace.

In fact, New Jersey’s State Senate Majority Leader Lorretta Weinberg recently advanced an effort to ban non-disclosure agreements that cover-up anything related to sexual assault, abuse, or harassment in the workplace.

Given the avalanche of sexual misconduct allegations, at least six (6) states have recently proposed legislation to ban or place limits on workplace non-disclosure agreements alleging sexual harassment and assault. 

New Jersey’s bill focuses on non-disclosure agreements regarding sexual assault and harassment claims, but would also apply to any claim of discrimination or harassment defined in New Jersey’s Law Against Discrimination (NJLAD).

The obvious upside to the bill is that a ban on non-disclosure agreements will strengthen a zero-tolerance policy against harassment in the workplace.  Concerns have been raised, however, that survivors and victims of harassment may not want to come forward if pressured to do so publicly.  We will continue to track the legislation and provide updates with regard to any changes or progress with regard to the bill.

• New Tax Law Quashes Deduction for Some Sexual Harassment Settlements

A little-known provision in the Tax Cuts and Jobs Act limits the ability of employers to deduct settlement payments in sexual harassment claims and the ability of employers and employees to deduct their attorneys’ fees in connection with settlements of sexual harassment claims that contain confidentiality clauses.

The intent of the new law is to discourage employers and other parties from requiring employees and other victims of sexual harassment or sexual abuse to sign non-disclosure agreements.  Additionally, it is hoped that the tax consequence will curb the ability of alleged harassers and employers to hide the harassment and shield the illegal conduct from scrutiny.

Unfortunately, there are also adverse consequences that may flow from the law.  For instance, Section 13307 provides that attorneys’ fees may not be deducted in connection with confidential settlements in sexual harassment claims.  If this provision is also applied to the attorneys’ fees incurred by the employees who were victims of the sexual harassment, this will create a harsh result for them.  Previously, under Federal tax law, employees were able to deduct their attorneys’ contingency fees, which are usually one-third of the overall settlement, to avoid being taxed on that amount.  It is quite possible that this deduction will no longer apply, which will create a harsh reality for victims of sexual harassment in the workplace who obtain settlements, as they now will have to factor in higher tax consequences.

Sexual Harassment Training

At this point in our culture, there is absolutely no room whatsoever for sexual harassment in the workplace.  Employers must be proactive and guard against any types of harassment taking place.  To safeguard against harassment claims resulting from harassment in the workplace, employers must conduct regular training to protect and provide victims of harassment with the tools necessary to expose the harassment to upper-level management and to deter the actual harassers from engaging in the unlawful conduct in the first place.  Employers must also regularly review their employee policies and handbooks and in this current climate, must stay abreast of the proposed changes in the law.