In Massachusetts, legislation pending in the wake of the #MeToo movement has consistently stalled, and it is unclear why.  However, if legislation similar to past efforts is pressed in the coming year, employers must take caution.

February 19, 2022 marked the 1-year anniversary of the introduction of Senate Bills S-1020 and S-1021, legislation pending in the Massachusetts Senate that would have made the following illegal in settlement agreements:

• Preventing disclosure of information related to:
  • A claim of a sex offense in employment
  • A claim sexual harassment in employment
  • Claims of discrimination, including but not limited to discrimination based on sex, gender identity, or sexual orientation in employment
  • Claims retaliation in employment.
• With to sexual harassment specifically, if the settlement agreement precludes the disclosure of factual information pertaining to a claim of sexual harassment, it is void as against public policy.
• A court could not, “by stipulation or otherwise” restrict the disclosure of this information; however, the claimant/victim could chose on the claimant/victim’s own written request to shield his/her own identity in the settlement agreement, and facts that could lead to the discovery of his or her identity.
• If the settlement agreement states that consideration paid to settle would be invalidated, or would need to be paid back if the nondisclosure agreement is violated, those provisions themselves would be void.

In addition, the proposed law would have been expressly retroactive.  That is, even if a settlement agreement entered into before the law is passed contains nondisclosure obligations that would violate a claimant/victim’s rights under the law, it would be void.  And, a “person” who enforces or attempts to enforce a provision that would be void as a matter of law and against public policy shall be liable for the claimant/victim’s reasonable attorneys’ fees.   The use of the word “person” signals an extremely broad stroke, suggesting that any “person,” including a corporation, individual, representative or agent, would be liable under this provision.

In sum, the proposed law was found many ways to invalidate commonly what was commonly referenced as “gag order” in settlement agreements, even those to which the parties would stipulate and courts might otherwise approve.

Sexual harassment and other forms of discrimination are claims commonly premised upon both insensitivity and an abuse of power.  While the #MeToo movement has created a shift culturally, the Massachusetts legislature has yet to enact any laws prohibiting these “gag orders” in sexual harassment cases.  It has been years since powerful men such as Hollywood’s Harvey Weinstein and other public figures were alleged to have committed sexual harassment, with horrifying displays of power driving, shielding and even perpetuating their behavior.  New York’s Governor Cuomo was at the height of his power when accusations of sexual harassment enveloped his administration and prompted his resignation.  No doubt, this power dynamic yields silence and tacit compliance, and which itself perpetuates ongoing bad behavior.  For the victim, the cost is massive.  The problems of job loss and/or turmoil at work are only part of the problem.

California and New York have successfully passed legislation addressing “gag orders” in the context of sexual harassment settlements in their states.  For its part, California has passed four laws.  In 2018, California enacted S.B. 820, or the STAND Act, which voided all confidentiality provisions in settlement agreements which prevent public disclosure of workplace harassment or sex discrimination, failure to prevent harassment, or retaliation for settlement agreements entered into on January 1, 2019, or after. California also passed S.B. 1300, which prohibits employers from requiring an employee sign anything denying his or her right to disclose information about unlawful acts in the workplace, including sexual harassment. Additionally, California passed AB 3109, making any provision waiving a party’s right to testify regarding alleged sexual harassment void if the contract or settlement agreement was entered on or after January 1, 2019. In October 2021, California passed SB 331, which went into effect on January 1, 2022, and expands these protections to other forms of harassment or discrimination, and also extends the prohibition of nondisclosure clauses to separation agreements.

In New York, not just for sexual harassment, but for any discrimination claim, an employer does not have the authority to include or to agree to include terms that would prevent the plaintiff from disclosing facts and circumstances of the claim unless the plaintiff prefers confidentiality. N.Y. General Obligations Law § 5-336 and N.Y. Civil Practice Law § 5003-b. An employer also must present a term or condition of confidentiality to the claimant in plain English, which the complainant must have 21 days to consider. Even if the complainant agrees and signs the agreement, the complainant still has 7 days to revoke. New York has also imposed additional restrictions on nondisclosure or confidentiality provisions, for example, if a term or condition prohibits or restricts the complainant from filing or disclosing facts necessary to receive the public benefits he or she is entitled to (i.e. unemployment insurance or Medicaid), or “initiating, testifying, assisting, complying with a subpoena from, or participating in any manner with” any local, state, or federal agency investigation. N.Y. General Obligations Law § 5-336. Additionally, all agreements entered into after January 1, 2020 that prohibit disclosure of factual information related to any future discrimination claim is void unless there are exceptions for speaking with law enforcement, the equal employment opportunity commission or EEOC, the state division or human rights, a local commission on human rights, or an attorney retained by the employee.

Even the Federal government has a new law on the books.  The Federal Tax Cuts and Jobs Act of 2017 provides that in sexual harassment claims where settlement involves a non-disclosure agreement, the settlement payments and any attorneys’ fees or litigation expenses may not be treated as tax deductible.

Yet, Massachusetts has been unable to get any legislation over the finish line.  Not just S.1020 and S.1021, but other bills, addressing the same or similar topics, have all stalled and expired.  This includes S. 1019, which expands and strengthens the definition of sexual harassment and related discrimination and makes it illegal for an employer to require an employee to sign a nondisclosure or confidentiality provision as a condition of employment, continuing employment, promotion, compensation, or receipt of benefits, except as necessary to protect intellectual property and trade secrets; and it includes S. 2047, which prohibits a government entity from including nondisclosure agreements in settlement agreements between the entity and any employee.

For the foreseeable future, the usual course of settlement agreements in Massachusetts are safe, and nondisclosure agreements in connection therewith remain valid upon existing law.  However, employers are cautioned.  If identical or similar legislation is presented and passed in Massachusetts that, like S.2020 and S.1021, will be retroactive, confidentiality clauses in existing settlement agreements may void the agreement entirely.

Authored by: Jeffrey Rosin & Lauren Bressman