Seyfarth Synopsis: Seemingly overnight, the #MeToo movement emerged as a worldwide social phenomenon with significant implications for the workplace and class action litigation. By 2019, it became clear that the movement is here to stay, and was not a passing fancy. In this age of connectivity, societal movements have unprecedented speed and reach. Traditional means of spreading information and generating social change have been supplemented – if not outright replaced – by the near-instantaneous ability of an idea or cause to go viral on social media. Nowhere over the past year was this more evident than with the #MeToo movement, as the chorus of victims’ voices and the media spotlight exposed sexual misconduct in the workplace.
Against this backdrop, many predicted that allegations of on-the-job sexual harassment would increase. The EEOC’s release of data on workplace harassment data in October of 2019 confirmed that reality and the widespread impact of the #MeToo movement throughout the country.
At the same time, many states reviewed their laws in the past 24 months in response to the #MeToo movement. Washington and California changed their laws in 2018 to bar employers from use of mandatory non-disclosure agreements for employees asserting sexual harassment and abuse claims. Illinois also enacted comprehensive legislation in 2019 that became effective on January 1, 2020, which mandates workplace anti-harassment training, bans arbitration and non-disclosure agreements that cover harassment and discrimination complaints, and requires disclosure of adverse judgments or rulings where allegations of sexual harassment formed the complaints. Several states – such as New York and New Jersey – also extended statutes of limitations, spurred on by revelations of sexual abuse in the Catholic Church and in #MeToo reports. More than any other state, California has been in the forefront of introducing “#MeToo bills,” including banning mandatory arbitration clauses in contracts, which require workers to waive the right to take an employer to court in the event of a dispute. In sum, these legislative changes lead to an uptick in #MeToo litigation in these states in 2019, and more case filings are expected in 2020.
The increasing number of sexual harassment claims in the corporate world as part of the #MeToo movement also has led to a number of high-profile employment-related claims. These types of settlements gained momentum in 2019, as plaintiffs’ lawyers secured a $215 million class action settlement for victims of sexual abuse who had sued the University of Southern California.
On the heels of those claims are a growing number of shareholder derivative and securities class actions. In 2017, 21st Century Fox reached a $90 million settlement with shareholders over losses related to two harassment scandals. Additional class actions were filed against other organizations in 2019, including a lawsuit that resulted in a $41 million settlement with Wynn Hotels. The derivative lawsuits are brought by plaintiff-shareholders purportedly acting on behalf of the company asserting claims for breaches of fiduciary duty and waste of corporate assets against board members and corporate executives. These complaints generally allege that these executives or board members had actual knowledge of or declined to act on sexual misconduct incidents and that, once aware of the incidents, they failed to take appropriate action or concealed the misconduct from shareholders and other stakeholders in the company. Derivative plaintiffs may also allege the misuse of corporate assets and legal resources for settlements and other payments to alleged harassers.
These derivative actions raise significant issues concerning the legal duties of corporations and their boards to monitor potential sexual misconduct by senior executives and other employees. While a corporate board generally has no duty to monitor a corporate officer’s personal behavior, sexual misconduct by an executive in the workplace may trigger liability if the directors consciously allowed the unlawful conduct to occur or failed to establish a compliance system to facilitate employee reporting of sexual harassment and to ensure that the company appropriately investigates and addresses any such allegations. These types of claims are expected to increase in 2020, as the #MeToo movement continues to expand.