Wednesday, January 17, 2018

Sexual Harassment And The Enforcement Of Non-Disclosure Agreements

 
 
Sparked by the #MeToo movement, several legislatures (including Pennsylvania, California, and New York) are considering prohibiting employers from including non-disclosure agreements (NDAs) and confidentiality clauses in the settlement of sexual harassment claims. It’s not hard to see why: to take just one example, the gold-medal-winning gymnast McKayla Maroney could potentially have to pay USA Gymnastics $100,000 if she testifies at the sexual abuse sentencing hearing of her former coach because, in December 2016, she agreed to a settlement that included a non-disclosure agreement. Other examples show how these agreements enable sexual predators: Zelda Perkins, Harvey Weinstein’s assistant, was bound by a non-disclosure clause in a settlement agreement and kept her allegations secret for 19 years.
 
 
 
Putting aside pending legislation, there’s a fundamental legal question underlying this issue: were these non-disclosure agreements ever enforceable in the first place? There’s virtually no case law addressing the question head-on, but, as I explain below, I believe that most courts would be loath to enforce them.
 
 
 
Before we get into the details, none of this is to say the victims could have or should have come forward at an earlier point, or that anyone currently under an NDA or confidentiality clause is free to disregard it. There’s a big difference between thinking about what a court might do and actually going through years of stressful, expensive litigation, particularly on an unsettled issue like this one. These victims had every reason to be concerned about the repercussions of breaking their agreements. If you’re a sexual harassment victim who agreed to a confidential settlement and are wondering if you can speak publicly, call a lawyer.
 
 
 
Now, the law.
 
 
 
Non-disclosure agreements are common in business, and they’re often enforceable even when a non-compete agreement is not. See, e.g., Tom James of Dallas, Inc. v. Cobb, 109 S.W.3d 877, 888 (Tex. App., 2003)(“A non-disclosure agreement may be enforceable even if a covenant not to compete is not”). That said, the vast majority of case law about the enforceability of NDAs is limited to the specific issue of trade secrets. As the Tom James of Dallas case says in full,

A non-disclosure agreement may be enforceable even if a covenant not to compete is not. See Anderson Chem. Co., 66 S.W.3d at 439. An employee also has a common law duty not to use confidential or proprietary information acquired during employment adversely to his employer. See id., at 442. To warrant protection, the information must have a substantial element of secrecy and give the employer a competitive advantage. Rugen, 864 S.W.2d at 552. Secrecy implies the information is not generally known or readily ascertainable. Id. Information otherwise qualifying as a trade secret may lose its “secret” status when disclosed to others with the employer’s blessing. CRC-Evans, 927 S.W.2d at 266.

Id.
 
 
 
You can spend all day in legal databases looking up the enforceability of non-disclosure agreements and find nothing but cases discussing them in the context of trade secrets. See, e.g., Stahl Headers, Inc. v. MacDonald, 447 S.E.2d 320, 214 Ga.App. 323 (Ga. App., 1994)(“[T]o be valid, a non-disclosure agreement must satisfy the requirements of reasonableness under Georgia law. …… [T]heir reasonableness turns on factors of time and the nature of the business interest sought to be protected. The two important factors are (1) whether the employer is attempting to protect confidential information relating to the business, such as trade secrets, methods of operation, names of customers, personnel data, and so on–even though the information does not rise to the stature of a trade secret; and (2) whether the restraint is reasonably related to the protection of the information.” Quotations omitted.)
 
 
 
What about NDAs in other contexts? As law professor Daniel Hemel noted at Vox, broad-brush non-disclosure agreements that prevent employees from ever discussing anything about their workplace are generally illegal:

Confidentiality clauses relating to harassment claims come in two basic flavors — and under existing law, the distinction between the two is significant. The first are agreements such as the ones that Weinstein Company apparently had employees routinely sign — broad waivers forbidding employees from making any critical comments that could harm the company’s “business reputation” or “any employee’s personal reputation.”

That kind of confidentiality clause — which prevents an employee or ex-employee from speaking about sexual harassment and other workplace misconduct — is generally considered to violate federal labor law, though lots of employers use them anyway. The National Labor Relations Board has ruled that “a confidentiality rule prohibiting employees from discussing their sexual harassment complaints among themselves” constitutes an unfair labor practice in violation of the Wagner Act. The Board has also held that an employer violates the Wagner Act when it requires employees to sign agreements promising not to “publicly criticize” the firm or its leaders.

The Wagner Act does not apply to domestic workers, independent contractors, or individuals employed as supervisors. Thus, an executive in Weinstein’s organization might lack protection under the act because she supervises lower-rung employees.

It thus seems that many of these garden-variety NDAs are unlikely to hold up in Court, either because they’re unreasonable (under the case law discussed above) or because they violate federal labor law.
 
 
 
But what about a non-disclosure, non-disparagement, or confidentiality clause in a settlement of a claim?
 
 
 
The National Labor Relations Board ruled in 2016 that those sorts of clauses are generally permissible, so federal law isn’t much help. Turning to the case law, there’s ample law about the enforcement of confidentiality clauses in settlement agreements, but those cases don’t involve the plaintiff revealing information about sexual harassment for the benefit of society. One of the more infamous recent cases is Gulliver Sch., Inc. v. Snay, 137 So.3d 1045 (Fla. App. 3rd, 2014), in which the plaintiff, the headmaster of a school, confidentially settled their age discrimination and retaliation claims. Four days later, the headmaster’s daughter posted on Facebook, “Mama and Papa [plaintiff] won the case against [defendant]. [Defendant] is now officially paying for my vacation to Europe this summer. SUCK IT.” The Defendant refused to pay and the plaintiff asked the trial court to enforce the agreement. The trial court held the Facebook post was not a breach of the agreement, but the appellate court reversed and held the settlement agreement had been breached, because the agreement specifically prohibited the plaintiff “either directly or indirectly” disclosing “any information” about the existence of the agreement. Id. at 1048. The plaintiff didn’t raise any public policy arguments, though, and quite frankly it’s hard to see how the Facebook post could potentially implicate any matters of public policy.
 
 
 
Despite looking far and wide, I cannot find a single published court decision in any state or federal court specifically deciding whether or not non-disclosure agreements or confidentiality clauses in settlements are enforceable against victims who disclose the circumstances of their sexual harassment. (If you know of one, please feel free to leave a comment below.) The closest I found was Baltazar v. Forever 21, Inc., 150 Cal.Rptr.3d 845 (Cal. App. 2nd, 2013) which compelled arbitration of a sexual harassment claim and upheld the enforcement of a non-disclosure clause, but the court did so on a very specific basis: “the confidentiality provision is narrow: It applies only to a trade secret or similar information that might be publicly disclosed in connection with an arbitration proceeding.” Id. at p. 859. The details of a victim’s sexual harassment are not, by any definition, a “trade secret.”
 
 
 
The issue of public safety and the disclosure of sexual predators has come up before in the law. More than fifteen years ago, as the scope of the Catholic Church’s child sex abuse scandal came to light, courts began rebelling against the confidentiality of the proceedings. In Connecticut, a judge criticized the “judicial model of cooperation with the Diocese in endlessly delaying litigation, sealing files and coercing victims into non-disclosure settlements” while ordering the unsealing of files from twenty-three cases involving the sexual abuse of minors. In re Application of the New York Times, No. X06CV020170932S, 2002 Conn. Super. LEXIS 1634 (Conn. Super. Ct. May 8, 2002).
 
 
 
Thirty years ago, an Ohio Court of Appeals refused to enforce a non-disclosure agreement that would have prevented a school district from disclosing a teacher’s abuse of children to other school districts. Bowman v. Parma Bd. of Ed., 542 N.E.2d 663 (Ohio Ct. App. 1988). Other courts have looked to Bowman as standing for the proposition that courts can “refuse[] to enforce such provisions when they serve to prevent the disclosure of illegal activity.” Katz v. South Burlington School Dist., 970 A.2d 1226, 1229 (Vt. 2009); see also Perricone v. Perricone, 292 Conn. 187, 220 (Conn. 2009). Thus, the principle for not enforcing NDAs is reasonably well-established, at least when it comes to exposing criminal conduct.
 
 
 
Sexual harassment can include criminal conduct, but not all sexual harassment is criminal—so what about cases involving non-criminal sexual harassment about which potential employees or co-workers might want to know? An intriguing case in Connecticut showed one potential way that courts could analyze the issue. In Giannecchini v. Hospital of St. Raphael, 780 A.2d 1006 (Conn. Super. 2000), a hospital fired a nurse for multiple reasons, including “several serious medication errors.” The nurse and the hospital entered into a settlement in which “any and all references in said file(s) to an involuntary termination of the employment of Giannecchini will be expunged” and, if any inquiries were made about his employment, the hospital would only provide “dates of service, title and position and salary information.” When the nurse applied at a Veterans Affairs hospital, his prior employer revealed the details of his termination. He sued.
 
 
 
The Connecticut court recognized the public policy implications of the agreement:

Put in a nutshell, the public policy concern is this: Paragraphs 2 and 3 of the agreement may be advantageous to the parties to the contract—Giannecchini gets the limited disclosure he wants, and the hospital avoids a potentially messy lawsuit—but the contract affects a third interest unrepresented at the bargaining table. That interest is the interest of the patient. A patient in a hospital is frequently helpless and utterly dependent on the nurses assigned to care for him. Any patient in any hospital would surely hope that the hospital hiring his nurses would receive full information about any medication errors that the nurse had committed in the course of prior health care employment. As far as the patient is concerned, this is potentially a life and death matter. It is no answer to the patient’s legitimate concerns that a contract of silence is mutually advantageous between the nurse and his former employer. A contract of this nature is affirmatively disadvantageous to the patient. If contractual provisions like this are judicially enforceable, some of the most vulnerable citizens in our society—patients in hospitals—will inevitably be exposed to a risk of physical harm.

Id., citing Bowman. Nonetheless, the Court noted:

Public policy, it has famously been said, “is a very unruly horse, and when once you get astride it you never know where it will carry you.” Richardson v. Mellish, 130 E.R. 294, 303 (1824). The parties have persuaded the court that, in Connecticut, the public policy horse in question here has been saddled by the legislature. Two related statutes govern the removal and disclosure of information contained in employee personnel files: General Statutes §§ 31-128e and 31-128f.

Those Connecticut statutes provided employees with broad rights relating to the removal of information from their personnel files and to their consent for any disclosure, and in the end the court found that those statutes trumped the general concerns about patient safety because, under Connecticut law, that “removed” information would no longer be “contained” in his file for purposes of § 31-128f.” (I disagree, but that discussion is for another day.)
 
 
 
The core of that case, as discussed by the rather elegant law review article “Silence at Our Expense: Balancing Safety and Secrecy in Non-Disclosure Agreements,” was a balancing of public policy issues with specific statutory rights. To wit, “Essentially, the question that the Giannecchini court considered, and other courts should consider, is whether non-disclosure agreements can be enforced consistent with public policy, particularly when they implicate public health and safety.”
 
 
 
All of which brings us back to sexual harassment, which violates federal, state, and local laws. See Meritor Savings Bank, Fsb v. Vinson, 477 U.S. 57, 64 (1986)(holding, while interpreting Title VII of the Civil Rights Act of 1964, “Without question, when a supervisor sexually harasses a subordinate because of the subordinate’s sex, that supervisor ‘discriminate[s]’ on the basis of sex.”) Harassers in the workplace pose a threat to the safety and well-being of others, making it an issue of public importance. As a result, as common as confidentiality clauses in sexual harassment cases might be, it’s questionable whether any of them would be enforceable when a victim discloses the circumstances to the public to protect others from their abuser.


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