United States: #MeToo Brings New Challenges To Retailers

In October 2017, The New York Times and The New Yorker published accusations of sexual harassment and abuse against Hollywood producer Harvey Weinstein. That watershed moment sparked what's been called a "national reckoning" over sexual harassment, driven heavily by the #MeToo movement going viral. In the year that has passed since then, this movement has only grown larger and louder. Other viral campaigns like #TimesUp and #BelieveWomen have pervaded the public consciousness. No industry has escaped untouched, including retail.

Business leaders and HR professionals are anecdotally reporting an increase in internal complaints about sexual harassment in the workplace. On the anniversary of the Weinstein scandal, the US Equal Opportunity Commission released early numbers confirming that trend: while overall discrimination complaints were down, the percentage of charges alleging sexual harassment increased by 12 percent, representing the first increase in the last 10 years. The EEOC itself brought 41 lawsuits in FY2018 alleging sexual harassment—a 50 percent increase over the previous year. Several of these were against retailers, big and small.

For retail companies that are publicly traded, there is another litigation risk bubbling from the sexual harassment reckoning: investor lawsuits brought by shareholders to hold companies accountable for sexual misconduct in the executive ranks. Two such high-profile suits have been brought against Wynn Resorts and CBS after their respective CEOs were accused of sexual misconduct and stock prices plummeted.

In addition to these increased risks, retailers must also ensure compliance with the ever-changing landscape of legislative responses to #MeToo.

Sexual Harassment Settlements

A number of laws enacted in the wake of #MeToo will affect how retailers may settle claims of sexual harassment.

At the federal level, the so-called "Weinstein Tax" was passed as a last-minute addition to the Tax Cuts & Jobs Act of 2017. A new section was added to the Internal Revenue Code to make settlements of sexual harassment and abuse claims subject to confidentiality agreements nondeductible. Due to ambiguous language in the provision and a dearth of guidance from the IRS, exactly how the IRS will treat these settlements is yet to be determined. Retailers should consider whether to allocate settlement payouts among claims, assign the settlement of sexual harassment or abuse claims nonmonetary consideration, or exclude altogether sexual harassment or abuse claims from nondisclosure provisions.

New state laws also prohibit or restrict the use of confidentiality or non-disclosure clauses in settlements of sexual harassment claims. Six states have passed such laws—Arizona, California, New York, Tennessee, Vermont and Washington—and at least three other states (Massachusetts, New Jersey and Pennsylvania) and the District of Columbia have proposed similar legislation. Retailers in Maryland should also be aware of a unique law that passed recently, requiring companies to report information about sexual harassment settlements for use in a survey.

Arbitration of Sexual Harassment Claims

Many of the laws proposed in response to #MeToo prohibit mandatory arbitration of sexual harassment claims. Maryland, New York, Vermont and Washington have all enacted such laws. Similar arbitration bans are pending in Congress and at least three other states (Massachusetts, New Jersey and South Carolina).

Anti-Sexual Harassment Policies and Training

Before #MeToo, it was rare for a state or local law to require anti-sexual harassment training or written policies by private employers. But after #MeToo, a wave of such laws has passed. California, one of the only states to have these requirements for private employers before #MeToo, expanded the reach of its training and policy requirement to even smaller employers. For retailers operating in New York and New York City, both have passed sweeping anti-sexual harassment laws that are not coterminous and require various combinations of training, policies and postings. In addition, Massachusetts, Pennsylvania, Vermont and Washington have also all proposed or passed laws that will require retailers to maintain written policies or conduct anti-sexual harassment training.

The #MeToo movement is a wake-up call to all retailers. Companies should take this opportunity to evaluate their policies regarding sexual harassment, train their employees and management on how to respond, consult with counsel regarding settlement and arbitration of these claims and promote a workplace culture that respects all employees.

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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