NON-DISCLOSURE CLAUSES IN SETTLEMENT AGREEMENTS PROHIBITED BY AB 248
In the wake of the #MeToo movement, it became apparent that the actual number of claims for sexual harassment, sex-based discrimination, and sexual offenses was grossly underestimated. The reason being was that many of those claims resolved through settlement were concealed and kept confidential at the behest of the accused. In the context of employment, this was commonly accomplished through the use of confidentiality, non-disclosure, and forced arbitration clauses in employment contracts and settlement agreements. By utilizing such provisions, employers routinely kept these sex-based claims out of the public eye and away from public scrutiny, and often times, allowed the abusers or harassers to continue their behavior.
Several states, however, began to recognize the widespread practice and have made concerted efforts to prevent the concealment of claims for sex discrimination or sexual offenses. California, New Jersey, and New York, among others, have all passed laws that prevent employers from silencing employees by using non-disclosure clauses in settlement agreements. In line with those laws, Nevada recently passed Assembly Bill 248 during the 2019 legislative session.
Under AB 248, employers are precluded from including conditional language in settlement agreements that would prohibit an employee from disclosing certain information relating to a civil or administrative claim if the action related to conduct that otherwise qualifies as: (1) a sexual offense punishable as a felony, regardless of whether there was a criminal investigation, prosecution, or conviction of such conduct, (2) discrimination on the basis of sex, or (3) retaliation against the claimant for reporting discrimination on the basis of sex. Such a provision would be deemed void. The remainder of the agreement would, however, remain intact and enforceable.
Moreover, AB 248 provides that at the request of the claimant, the settlement agreement must contain a provision that prohibits the disclosure of the identity of the claimant and any facts relating to the action that could lead to the disclosure of the identity of the claimant. Of note, the request by the claimant to include the provision must be honored unless a party to the agreement is a government agency or a public officer.
In practice, AB 248 would only apply to civil cases, such as those filed in state or federal court, and administrative cases filed with the Equal Employment Opportunity Commission (EEOC) or Nevada Equal Rights Commission (NERC). The statute, however, would not apply to cases that were resolved prior to the filing of a complaint in a state/federal court or with the EEOC/NERC. Therefore, claims settled prior to filing a formal complaint could potentially remain confidential.
Importantly, this trend is not limited to the state level. Under Donald Trump’s Tax Cuts and Jobs Act, 26 U.S.C. 162 was amended to prohibit businesses from claiming a deduction for: (1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a non-disclosure agreement, or (2) attorney’s fees related to such a settlement or payment. While not outright prohibiting non-disclosure agreements, the amendments under the act sought to discourage their use.
In the midst of these regulatory changes, Nevada employers must be vigilant and exercise caution when resolving claims that involve certain sexual bases offenses. Nevada Association of Employers is an excellent resource and can help ensure that employers maintain compliance with all applicable laws.
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