United States: From Settlement Disclosures To Retaliation: A Summary Of Sexual Harassment Legislation In 2018

After a tumultuous 2017, federal, state, and local governments have spent the start of 2018 reconsidering their approach toward sexual harassment in the workplace. While the federal government has focused on settlement and arbitration agreements, state governments have attempted a variety of techniques to address sexual harassment. States are considering legislation ranging from additional sexual harassment training, to protecting employees from retaliation when they are the victims of sexual harassment. This article discusses the new laws that seek to combat sexual harassment, as well as those legislative efforts that remain pending.

Federal Legislation on Sexual Harassment

Federal legislation regarding sexual harassment has focused primarily on three areas: settlement disclosures, predispute arbitration agreements, and tax deduction denial. While many of these bills are not expected to advance, they will likely serve as talking points during the upcoming mid-term elections, as eradicating sexual harassment remains a key issue.

Settlement Disclosure

In the U.S. House of Representatives, Rep. Carolyn Maloney (D-NY) introduced the "Ending Secrecy About Workplace Sexual Harassment Act" (H.R. 4729). The bill would target employers obligated to submit the annual Employer Information Report EEO-1. The proposal would require those employers to indicate on the EEO-1 report the number of settlements the employer signed with an employee to resolve claims pertaining to discrimination based on sex, including verbal and physical sexual harassment. H.R 4729 casts a wide net when defining "settlements." Under the bill, a settlement would include any agreement where something of value is exchanged to prevent an individual from pursuing their claim of harassment. The measure would require the Equal Employment Opportunity Commission (EEOC) to annually report information collected about settlements via EEO-1 filings to Congress.

Companion bills pending in the House and Senate seek to require disclosure of settlements related to an array of harassment. The "Sunlight in Workplace Harassment Act" (H.R. 5028, S. 2454) seeks to amend the Securities Exchange Act of 1934 to require the disclosure of payments for settlements regarding harassment on form 10-K. Under the bill, employers would have to disclose the total number of settlements entered into by the employer, a subsidiary, contractor, subcontractor, or a corporate executive of the employer, the total dollar amount paid under those settlements, the number of settlements related to harassment the employer is resolving, and the average time required for the employer to resolve a complaint relating to any form of sexual abuse or "covered harassment." The proposal defines "covered harassment" as discrimination based on sex, race, religion, age, disability, genetic information, sexual orientation, or gender identity.

Predispute Arbitration Agreements

Another target for federal legislation is predispute arbitration agreements. These agreements are usually signed when a new employee is hired, and requires the employee to submit to arbitration of either all or certain disputes. The "Ending Forced Arbitration of Sexual Harassment Act of 2017" (H.R. 4570, 4734, S. 2203) is Congress's attempt at addressing mandatory arbitration of harassment claims. The act would make predispute agreements that require arbitration of a sex discrimination dispute invalid and unenforceable. The bill would make one notable exception, however, for arbitration provisions in collective bargaining agreements between an employer and a labor organization, or between labor organizations. Although this measure initially received a fair degree of bipartisan support, its expansive nature likely gave some lawmakers pause, slowing its momentum.

Tax Consequences of Harassment

The Tax Cuts and Jobs Act (TCJA) enacted December 12, 2017, contains a provision addressing sexual harassment and tax deductions for business expenses. The new section 13307—Denial of Deduction for Settlements Subject to Nondisclosure Agreements Paid in Connection With Sexual Harassment or Sexual Abuse—amends section 162 of the tax code, which generally allows businesses to deduct certain ordinary and necessary expenses paid or incurred during the year as part of running the business, by prohibiting tax deductions for any payment, including payments pursuant to a settlement agreement, that involve sexual harassment or abuse if the payment is subject to a nondisclosure agreement. Similarly, deductions for attorney's fees are prohibited if they relate to settlements or payments that include nondisclosure agreements that could prevent the disclosure of sexual harassment or assault.

Agency Guidance

While lacking the same force as legislation, the EEOC proposed new enforcement guidance on unlawful harassment in January 2017. The new guidance, if finalized, will supersede previous EEOC guidance documents on harassment, which were published in the 1990s. The guidance outlines the bases covered by federal law (that is, the legally protected characteristics of an employee), the hostile work environment threshold, and liability standards for employers. Notably, the guidance includes sexual orientation alongside sex stereotyping in the covered bases. The proposed guidance also offers recommendations on how employers should approach harassment training, suggesting that the training be provided to all employees, no matter the legal requirement in the employer's state. The guidance document was published for public comment in January 2017; the EEOC is expected to issue final harassment guidance in the months to come.

State and Local Legislation

Proposed legislation on sexual harassment at the state and local level has grown exponentially since the start of 2018. At least two states have enacted new laws since January 1 to address sexual harassment in the workplace. Nearly half of all states have proposed legislation targeting harassment, with many states making multiple proposals to address the problem. The approaches vary, including restrictions on nondisclosure agreements, new sexual harassment training requirements, and greater protections against retaliation for employees.

New Sexual Harassment Training Requirements

Seven states have introduced legislation that would require or encourage employers to train their employees on matters related to sexual harassment. Some bills go further, requiring state agencies to promulgate model harassment policies and training procedures. While multiple states have proposed legislation, only New York has successfully passed a law in 2018 relating to additional anti-harassment training.

New York's recently passed budget bill contains numerous provisions addressing sexual harassment in the workplace. Among those provisions is Section 201-g, which directly regulates employee training. Under the new law, the New York State Executive Department must create a model sexual harassment prevention guidance document and policy. The guidance document and policy must: (1) prohibit sexual harassment, and provide examples of prohibited conduct; (2) describe the federal and state statutory provisions concerning sexual harassment and the remedies available to victims; (3) include a standard complaint form; (4) specify the procedure for timely and confidential investigation of complaints; (5) inform employees of all forums for adjudicating sexual harassment complaints administratively and judicially; (6) state that sexual harassment is employee misconduct and that sanctions will be enforced against perpetrators and supervisory or managerial personnel who knowingly allowed the harassment to occur; and (7) explain that retaliation against those employees who file complaints or assist in any proceeding is unlawful.

With this policy, the Department will develop an interactive model sexual harassment prevention training program, covering similar topics. All New York employers with four or more employees must adopt the guidance, policy, and training program, or create their own guidance, policy, and training program that satisfies the same requirements.

At the local level, the New York City Council has enacted a similar training requirement for employers in the Big Apple. The New York City Commission on Human Rights has been tasked with developing an anti-sexual harassment rights and responsibilities poster that employers in the city will have to display in a conspicuous location.

Two other bills addressing sexual harassment prevention training have been proposed in New York. Most of the provisions of those bills are addressed in the budget bill, with a few notable exceptions. New York Assembly Bill 9797 would require that employers preserve records of sexual harassment, sexual assault, and discrimination for five years, and file an annual report containing the employer's sexual harassment policy and instances of specific misconduct. The employer would have to receive a notice of compliance after filing the annual report before being eligible for state tax credits. While New York is the only state to have passed legislation related to sexual harassment training in 2018, California, Delaware, Massachusetts, Pennsylvania, and Rhode Island all have proposals on the table to address the issue.

California—which already requires that certain employers train supervisors on sexual harassment every two years—has proposed four separate bills related to training. Assembly Bill 1867 would require employers to display posters from the Department of Fair Employment and Housing on sexual harassment and issue information sheets from the Department. AB 1867 would also require that any employer with 50 or more employees provide two hours of interactive training on sexual harassment to all supervisory employees within six months of assuming their supervisory role and every two years thereafter. Additionally, employers would be obligated to retain records of sexual harassment complaints for ten years. Assembly Bill 1300, meanwhile, would mandate that employers with five or more employees provide two hours of sexual harassment and bystander intervention training to all employees in California within six months of their hire, and once every two years thereafter. Senate Bill 1343 would require the same two hours of sexual harassment training for all employees if an employer has more than five employees, but would require these trainings also include harassment based on gender identity, gender expression, and sexual orientation. Under the senate bill, these trainings would have to be delivered to employees before January 1, 2020. Assembly Bill 3081 has a similar training requirement, but would further require employers to provide employees with written information about sexual harassment. What makes Assembly Bill 3081 stand out is the requirement that client employers share all civil liability with labor contractors for certain offenses. A client employer would be liable under the bill for the payment of wages, acquiring workers compensation coverage, and for any sexual harassment, discrimination, or assault of a worker by a labor contractor or another worker.

Delaware, for its part, proposed legislation that would require two hours of sexual harassment training. Delaware House Bill 360 suggests all employers provide two hours of training to supervisors within six months of assuming their supervisory roles, but would only require that training from employers with at least 50 employees. The Delaware bill would also impose a notice requirement, using informational sheets from the Delaware Department of Labor, and make an employer responsible for sexual harassment by a non-employee if it should have known of the harassment and failed to act.

Massachusetts has proposed legislation that stops short of requiring new sexual harassment training. Rather, Massachusetts House Bill 4386 "encourages" employers to provide two hours of classroom sexual harassment training, or another effective interactive training method, to supervisory and managerial employees, and to all new supervisory or managerial employees within six months of their assumption of a supervisory or managerial position. This legislation is similar to current law in Rhode Island, which "encourages" employers to conduct education and training programs for new employees that cover sexual harassment. The recently proposed Rhode Island Senate Bill 2699 would add teeth to that law, however. The Rhode Island bill would make sexual harassment training mandatory for new employees within one month of commencement of employment if the employer has four or more employees. The Rhode Island measure also bans retaliation.

Another state proposing changes to sexual harassment training requirements is Pennsylvania. Under Pennsylvania House Bill 2282, an employer would need to provide interactive training to all employees within 60 days of the effective date of the bill, to new employees within 30 days of hire, and for all employees every two years thereafter. Employers in Pennsylvania would be required under the bill to keep a record of all trainings completed for three years. To assist employers, the state would develop an online interactive curriculum that employers could use to satisfy the requirements of the bill. Unlike other legislation proposed on training, the Pennsylvania bill creates a civil penalty for failure to comply. First-time violations would be subject to a penalty between $500 and $1,000. The penalty for all subsequent violations would be no less than $1,000 and no more than $5,000, per violation.

New Jersey has proposed legislation that makes sexual harassment of nearly anyone connected to a business an unlawful employment practice, and it takes a hands-off approach to the question of training. Rather than specify exactly what type of training would be necessary, New Jersey Assembly Bill 3948 makes it an unlawful employment practice for an employer to not implement policies or take actions that they would reasonably be expected to take to prevent sexual harassment. This broad "reasonable" interpretation would leave New Jersey employers with nearly zero guidance on what sexual harassment policies and trainings to implement.

Restricting Nondisclosure and Confidentiality Agreements

Employers often utilize nondisclosure agreements (NDAs) as a method of protecting sensitive information. For example, NDAs are regularly used in settlement negotiations to keep the settlement private. However, some employers require NDAs that could prevent the disclosure of any information regarding sexual harassment or assault allegations during settlement negotiations. These NDAs and confidentiality agreements are the focus of numerous bills proposed across the country.

Leading the charge to curtail NDAs is Washington State, which enacted two bills designed to encourage disclosure of sexual misconduct in the workplace. The first of these new laws out of Washington, S.B. 5996, prohibits employers from requiring new employees to sign a NDA or any other document that prevents them from disclosing sexual harassment or sexual assault as a condition of employment. The statute carved out an exception for settlement agreements, which may include confidentiality provisions. The second act (S.B. 6068) focuses on NDAs that limit the ability of anyone to produce evidence related to sexual harassment or assault. The statute makes any agreement, including both nondisclosure and arbitration agreements, that would limit, prevent, or punish disclosure of any evidence or witness testimony related to sexual harassment or assault against public policy and unenforceable.

On the opposite coast, New York passed a comprehensive overhaul to the state's approach to sexual harassment. The act addresses arbitration agreements and sexual harassment training alongside its prohibition on nondisclosure agreements. The recently adopted law (S.B. 7507) prohibits NDAs in settlements, judgments, or any other document whose factual foundation involves sexual harassment. This comprehensive bill also: (1) requires contractors with the state to provide sexual harassment training to all of their employees; (2) prohibits mandatory arbitration clauses that relate to a claim of sexual harassment; (3) obligates employees found personally liable for intentional wrongdoing related to sexual harassment to reimburse the state for any payment made to a plaintiff; (4) requires the creation of a model sexual harassment prevention guidance and policy document; and (5) makes employers liable to non-employees sexually harassed in their workplaces in certain circumstances.

Tennessee also enacted a relatively simple proposal on nondisclosure agreements. The new law (H.B. 2613) restricts private and public employers from executing a nondisclosure agreement that relates to sexual harassment as a condition of employment. The new law also prevents employers from renewing any current nondisclosure agreements that would cover sexual harassment.

While Tennessee, New York, and Washington State were the only jurisdictions to pass legislation related to nondisclosure and confidentiality agreements in this context, other states have proposed similar bills. Alaska, California, New Jersey, Pennsylvania, Tennessee, and Vermont have all introduced measures to prevent employers from using nondisclosure or confidentiality agreements to suppress disclosure of any topic related to an instance of sexual harassment or sexual assault. The Vermont House Bill also makes it unlawful to require any employee to sign an agreement waiving any right or remedy available to the employee regarding a claim of sexual harassment.

Employer Disclosure of Settlements

At the state level, California, Missouri, Rhode Island, and New York each proposed legislation to prohibit provisions of settlement agreements that would prevent the disclosure of information related to sexual harassment. Two pieces of legislation in New York, Senate Bill 8740 and Assembly Bill 9085, would create a reporting system designed to assess the workplace environment. Both bills would require the disclosure of any sexual harassment or discrimination claims, settlements, and cases, but A.B. 9085 would also task employers in New York with establishing a company climate survey to be filled out by employees. The climate survey would ask employees how they perceive the workplace in relation to pay equity, sexual harassment, and discrimination based on a wide number of factors. The proposal would require the commissioner to develop a grading system to evaluate the workplace environment of employers in New York, and generate a publicly accessible website containing the content of the company climate reports and the employer's grade.

Limiting Arbitration Agreements

Another method used by lawmakers to address sexual harassment is to limit reliance on arbitration agreements. Legislation regarding arbitration agreements in sexual harassment cases has taken one of two approaches. The first approach is to invalidate provisions of an arbitration agreement that would conceal the details of a sexual harassment or assault claim. The second tactic seeks to void predispute arbitration agreements entirely, in relation to sexual harassment claims.

The state legislature of Missouri is taking the first approach. The Missouri House introduced a bill that functions similarly to the federal bills regarding NDAs in sexual harassment claims. The Missouri bill voids any arbitration agreement that would make the proceeding or results of the arbitration confidential with respect to claims of sexual harassment, sexual assault, human trafficking, or a felony or misdemeanor sexual offense.

The second approach, meanwhile, is being entertained in South Carolina, New York, and Louisiana. The South Carolina legislature introduced a bill identical to the federal Ending Forced Arbitration of Sexual Harassment Act, even down to its title. The South Carolina bill would render predispute arbitration agreements that require arbitration of a sex discrimination dispute invalid and unenforceable.

Louisiana introduced a similar measure. The Louisiana bill (H.B. 578) outright prohibits any predispute arbitration agreements between employers and employees. A recently passed New York law, discussed earlier, also addresses arbitration agreements. The New York statute precludes mandatory arbitration clauses for resolution of any allegation or claim of sexual harassment. Much like the federal proposal, the New York law makes an exception for collective bargaining agreements.

Prohibiting Retaliation Against Sexual Harassment Victims

Retaliation is generally unlawful, of course, but California and Minnesota have taken up legislation to enhance protections for victims of sexual harassment. The Minnesota bill (H.B. 4228) would prevent an employee accused of sexual harassment from obtaining information about the complainant, if the responsible authority determines that access to such data would cause a threat to the victim's personal safety or subject the victim to further harassment. Nonetheless, if a disciplinary proceeding is initiated against the employee, data regarding a victim or witness would be disclosed to employee as necessary to prepare for the proceeding. The Minnesota bill would also allow victims to learn whether their allegations were substantiated by the employer, and what kind of corrective action was taken if any. The victim typically could not release any data obtained this way to anyone other than a court, law enforcement, prosecutor, civil rights enforcement authority, or an attorney representing the victim.

California has proposed a bill would bolster existing laws that shield employees from retaliation. As of now, California law prohibits discrimination or retaliation against victims of domestic violence, sexual assault, or stalking for taking time off work to obtain specified relief. Both pending bills would expand this protection to victims of sexual harassment. Assembly Bill 2366 would extend to state and local public employers and the legislature, which are not covered under existing law.

Creating or Expanding a Cause of Action for Sexual Harassment

Two states— Missouri and New York—have proposed legislation creating or expanding a cause of action for victims of sexual harassment. The Missouri bill (H.B. 1709) would authorize a tort claim for victims of workplace harassment who suffer a physical or psychological injury or illness. For the cause of action to apply, the victim and offender must have the same workplace and the harassment must have occurred there. The last element of the Missouri bill concerns the offender's conduct. To trigger the cause of action, the offenders' conduct must:

  • be intentional and reckless;
  • knowingly include communications to the victim made in a frightening or intimidating manner;
  • knowingly use coarse language offensive to one of average sensibility;
  • put the victim in reasonable apprehension of offensive physical contact or harm;
  • knowingly make repeated unwanted communication to the victim beyond what is required to accomplish the work task requiring the offender and victim to communicate; and
  • result in any other action, without good cause, with the purpose to frighten, intimidate, or cause emotional distress to the victim; cause the victim to be frightened, intimidated or emotionally distressed; and the victim's response to the action is one of a person of average sensibilities considering the age of the victim.

Proposed legislation in the New York Assembly would increase the statute of limitations on claims of sexual harassment. Previously, New York law set the statute of limitations on claims of harassment at one year. Under the bill, claims specifically related to sexual harassment could be brought up to three years after the victim files a complaint with the employer, or three years after the victim is no longer employed by that employer if the victim filed no complaint, whichever is later. The New York Senate has introduced legislation that would also increase the statute of limitations for filing a sexual harassment complaint from one to three years. At the local level, the New York City Council has enacted a set of new ordinances to add sexual harassment to the types of discrimination the New York City Commission on Human Rights can take action against and to extend the statute of limitations from one year to three years in the case of gender-based harassment within the city.

Prohibiting Waiver or Release of a Claim

Many states have also targeted waiver provisions in the legislative push against sexual harassment. The only states that passed legislation on the topic so far are Washington State and Maryland. Washington Senate Bill 6313 makes any provision in an employment contract against public policy, void and unenforceable if it requires an employee to waive their right to pursue a claim under Washington's antidiscrimination laws or relevant federal statutes. The law also negates any provision in an employment contract that would waive an employee's right to publicly file a complaint or require the employee to keep the dispute resolution processes confidential.

The new Maryland law (H.B. 1596) is titled the Disclosing Sexual Harassment in the Workplace Act of 2018 (DSHWA). The Act makes any provision in an employment contract void if it waives any future right or remedy to a claim of sexual harassment or retaliation for reporting sexual harassment. Also prohibited under DSHWA are adverse actions against an employee that refuses to enter into an agreement that contains a prohibited waiver. Adverse action includes discharge, demotion, suspension, and other retaliatory actions that result in a change to their terms or conditions of employment to dissuade an employee from reporting a violation of DSHWA. The Act also creates a reporting requirement, under which employers with 50 or more employees must create a survey containing the number of settlements made related to an allegation of sexual harassment, the number of times the employer has had to pay a settlement related to the employee who committed that sexual harassment, and the number of settlements in relation to sexual harassment that included a confidentiality provision.

Massachusetts, New Jersey, and New York have proposed similar legislation that would prohibit or nullify any provision in an individual employment contract or policy that waives rights or remedies to a claim of sexual harassment, discrimination, or retaliation. The Massachusetts legislature is considering nearly identical proposals that add non-payment of wages to the host of claims that cannot be waived in contracts. Proposed legislation from New York combines the unique portions of both the Maryland and Massachusetts bills, by prohibiting waiver provisions for non-payment of wages, prohibiting any retaliatory action against an employee who refuses to sign such waiver, and creating a cause of action for tort remedies against any employer that violates the proposed legislation.

New Jersey proposed two pieces of legislation addressing this issue. The first bill (S.B. 1526) would void a provision in a severance pay agreement that would release any claim or bar a future claim against the employer for gender discrimination or harassment. The second proposal (S.B. 2485) takes a broader approach, and makes it an unlawful employment practice to require an employee to waive any rights granted under New Jersey law, to waive any claims arising prior to the existence of an actual dispute, or to harass, discharge, expel, or discriminate against any employee who opposes an unlawful employment practice.

Empowering the State Attorney General to Pursue Harassers

A final approach seen to date is exemplified by Massachusetts House Bill 4323, which focuses on enforcement procedures around sexual harassment. The bill would empower the state attorney general's office to investigate any person or entity engaged in discrimination or sexual harassment. When the attorney general has reason to believe that a person is engaged in harassment or discrimination, and that it is in the public interest to pursue the person, then the attorney general may bring an action against such individual or entity. The attorney general would be allowed under the legislation to seek a temporary restraining order or an injunction to stop the practice or behavior that is the source of the discrimination or harassment. Under this bill, the attorney general would be allowed to accept an assurance of discontinuance of the unlawful conduct to drop any lawsuit he or she has filed.

Conclusion

The state legislative process is very fluid, and the status of these bills is in constant flux. Some proposals discussed above may yet advance, while others are destined to stall. Nonetheless, legislative efforts to combat sexual harassment in the workplace show no signs of abating. Although many state legislatures have already adjourned for the year, this issue will likely be revisited in the 2019 legislative sessions at the federal, state and local levels. We will continue to monitor these developments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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