By Minna J. Kotkin
No Longer Silent:
Rethinking NDAs Post-#MeToo
The #MeToo movement has shed light on the long-accepted practice of silencing—through the use of nondisclosure agreements (NDAs)—those who choose to resolve legitimate claims against harassers and abusers. Until recently, confidentiality was considered a non-negotiable term in the resolution of any discrimination matter, not only for sexual harassment claims but for all actions brought under equal employment statutes. Employers took the view that if a settlement was made public, they would be deluged with frivolous claims brought by disgruntled employees. And the accepted wisdom was that confidentiality benefited claimants as well, since a record of litigation would impede their future employment prospects.

The resulting norm of secret settlements not only protected serial harassers and employers who repeatedly violated antidiscrimination laws, but also led the judiciary and the public to believe that employment discrimination and harassment largely had been rectified in the workplace. Employees and other victims had no leverage in the negotiation of these agreements and were powerless to insist that they be a matter of public record. The force of these agreements is demonstrated by the fact that there are almost no reported cases in which employers have sought to enforce them.

With the #MeToo movement, the harm caused by these presumptions and norms has been revealed. The victims who breached confidentiality agreements not only were applauded, but also faced no enforcement action. There is some evidence that the courts, and certainly employers and the public, are taking allegations of harassment more seriously. State and federal legislators have turned their attention to the problem of confidentiality, resulting in the adoption of new laws in 12 states, and at least a dozen pending bills, including federal legislation.

The resulting norm of secret settlements not only protected serial harassers. Employees and other victims had no leverage in the negotiation of these agreements.
The enacted statutes leave a lot to be desired, however, and all have serious limitations and loopholes. New York’s legislation, for example, permits confidentiality when it is the “plaintiff’s preference.” This makes the protection illusory, since there is nothing to keep an employer from offering a significantly greater monetary settlement in exchange for the plaintiff’s “preference.” Other statutes, like California’s, cover only sexual harassment and sex discrimination, leaving those who suffer race or national origin discrimination, for example, without any recourse from confidentiality. And most statutes allow the amount of the settlement to remain confidential, which makes it impossible to determine whether the claim is settled for “nuisance value,” suggesting that no serious discrimination occurred, or for a substantial sum, indicating serious workplace issues. Finally, many statutes address only employment relationships, leaving independent contractors and contingent workers without any protection, and do not specify whether the confidentiality limitation applies for pre-court filing settlements. We need universal guiding principles that could serve as a template as more jurisdictions address this issue.

With regard to employment contracts, agreements, manuals, and separation agreements, legislatures should require that any nondisclosure provision include language informing employees that the provision does not bar them from reporting unlawful criminal conduct or conduct that violates the antidiscrimination laws.

In addition, all legislative efforts, including proposed statutes, seeking to address settlement confidentiality should follow these guidelines: bar the use of NDAs in relation to all employment discrimination claims that are filed with an agency or a court; bar the use of NDAs in cases of sexual assault or harassment in a nonemployment context; do not permit an escape hatch based on so-called plaintiff’s preference; and do not exempt the amount of the settlement.

It is only through the application of these principles that settlement transparency will actually have a chance of success.

Excerpted from Confidential Settlements in the #MeToo Era, 54 University of San Francisco Law Review (forthcoming 2020)

Minna J. Kotkin is a professor of law at Brooklyn Law School and director of the Employment Law Clinic. She has taught, written, and lectured extensively on issues of employment discrimination, with a particular emphasis on sexual harassment and confidentiality, and on clinical legal education.