Q: Does the Speak Out Act affect employer nondisclosure and nondisparagement agreements?
A: Nearly five months after Senator Kirsten Gillibrand (D-NY) first introduced the bipartisan Speak Out Act, President Joe Biden signed it into law on December 7, 2022. The Speak Out Act bars judicial enforcement of nondisclosure and nondisparagement clauses concerning sexual assault and sexual harassment allegations if entered into “before the dispute arises.” This ensures that “victims and survivors have the freedom to report and publicly disclose their abuse,” while still allowing employers to use nondisclosure and nondisparagement clauses in resolving a dispute once it has arisen.
The Speak Out Act defines nondisclosure and nondisparagement clauses broadly. Specifically, a nondisclosure clause covers any contract provision that “requires the parties to the contract or agreement not to disclose or discuss conduct, the existence of a settlement involving conduct, or information covered by the terms and conditions of the contract or agreement.” A nondisparagement clause is any contract provision “that requires 1 or more parties to the contract or agreement not to make a negative statement about another party that relates to the contract, agreement, claim, or case.”
For purposes of the Speak Out Act, a “sexual assault dispute” includes any “dispute” involving a nonconsensual sexual act or sexual contact that violates applicable law. A “sexual harassment dispute” occurs once an allegation about conduct constituting sexual harassment under any applicable law is made. It is unclear whether “dispute” includes internal complaints of sexual assault or harassment where the employee has not filed an agency charge or lawsuit.
Under the new law, a severance or settlement agreement would still be enforceable, even if entered into before a “dispute.” However, blanket, preemptive nondisclosure and nondisparagement provisions commonly included in many types of agreements between employers and employees would be unenforceable under the Speak Out Act concerning claims of sexual assault and harassment. These blanket, preemptive nondisclosure and nondisparagement clauses may be found in:
- Confidentiality or restrictive covenant agreements;
- Employment agreements;
- Separation agreements providing for the payment of severance upon termination where no claim of sexual assault or harassment has been asserted;
- Settlement agreements that do not resolve claims of sexual assault or harassment; and
- Confidentiality policies in employee handbooks or policy manuals.
The Speak Out Act follows a series of similar legislative enactments spurred by the “Me Too” movement, which has shed light on workplace sexual harassment and assault. Currently, 16 states, including California, New Jersey, New York, and Virginia, have enacted statutes with various limitations and prohibitions on the use of nondisclosure and nondisparagement clauses in agreements between employers and employees in the context of sexual harassment or sexual assault accusations. Federal law also has evolved on this point. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, signed into law on March 3, 2022, prohibits enforcement of pre-dispute arbitration agreements or class- and collective-action waivers of sexual assault and sexual harassment claims, and gives individuals bringing sexual assault or sexual harassment claims the option of voiding such provisions in existing agreements to bring the appropriate action of their choice.
The Speak Out Act is not retroactive, meaning that, while it covers agreements signed before December 7, 2022, it only applies to claims (presumably, by employers to enforce a prohibited nondisclosure or nondisparagement provision) filed after that date. It also specifically allows employers to continue the use of nondisclosure provisions to protect their trade secrets and other confidential and proprietary information.
The law does not specifically provide for penalties for violation, but there are risks associated with failing to account for the act’s prohibitions. For example, it is unclear whether inclusion of a nondisclosure or nondisparagement prohibition without a carve-out for sexual assault and sexual harassment statements can potentially void the agreement in its entirety, or whether only the clauses themselves would be unenforceable.
As we await further guidance on the Speak Out Act, employers should confer with counsel to review their employment handbooks and agreements, arbitration agreements, confidentiality agreements, separation agreement templates, and other human resources policies and procedures for compliance with the Speak Out Act. Further, because the Speak Out Act does not expressly preempt state law that may be equally or more stringent on the same subject, employers should confer with counsel to ensure that they maintain compliance with overlapping legal requirements in this evolving legal landscape.