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New #MeToo Law Targets NDAs

By: Emily Mawer

Submitted by Firm:
Lathrop GPM LLP - Minnesota
Firm Contacts:
Kathryn M. Nash, Mark S. Mathison, Megan Anderson
Article Type:
Legal Update

Employers should be aware of recent updates regarding two #MeToo-related federal laws: the Speak Out Act and the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act.

The Speak Out Act

President Biden signed the Speak Out Act on December 7, 2022, and the law went into effect immediately.  The Act makes non-disclosure and non-disparagement clauses agreed to prior to a “sexual assault dispute” or “sexual harassment dispute” unenforceable.  In other words, non-disclosure agreements signed as part of an onboarding process for new employees are not enforceable as to subsequent disputes involving allegations of sexual harassment and/or sexual assault.  The Speak Out Act applies to claims filed on or after its enactment on December 7, 2022.   

Under the Speak Out Act, post-dispute non-disclosure and non-disparagement clauses are still enforceable, such as those included as part of a settlement agreement.  Employers should remember, however, that under the Tax Cuts and Jobs Act of 2017, a business cannot deduct the costs incurred to settle employment sexual harassment or abuse claims if a non-disclosure agreement is included in the settlement agreement. 

In light of the new law, employers should review template onboarding documents and employment agreements and remove any non-disclosure or non-disparagement clauses that specifically refer to sexual assault or sexual harassment.  If the clause is broad and does not specifically refer to sexual assault or sexual harassment, it may be kept in the agreement, but employers should be aware that those provisions will not be effective in later sexual assault and sexual harassment disputes.  Employers should also consider whether such broad provisions might be considered an unfair labor practice, preventing employees from engaging in protected, concerted activity.  The Speak Out Act states that non-disclosure agreements for the purpose of protecting trade secrets or proprietary information will continue to be effective, so such provisions do not need to be altered.

The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act

A New Jersey appeals court recently ruled that the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (“EFAA”) does not apply retroactively.  Enacted on March 3, 2022, the EFAA amended the Federal Arbitration Act by declaring that a pre-dispute arbitration agreement is unenforceable at the election of the claimant if the claim relates to a sexual harassment dispute or a sexual assault dispute.  The Act also made a pre-dispute waiver of proceeding in a class or collective action unenforceable at the election of the claimant in a sexual assault or sexual harassment case.  In other words, under the EFAA, the claimant has the power to decide whether the arbitration agreement should be enforced or not, allowing the matter to proceed by private arbitration, if that is how the claimant would prefer to have the matter handled.

In the New Jersey case, Zuluaga v. Altice USA, the plaintiff had signed an arbitration agreement regarding employment-related disputes at the time of her hire in November 2020.  The plaintiff subsequently sued her employer for sexual harassment and constructive discharge under New Jersey state law, but the New Jersey Appellate Division affirmed a lower court ruling compelling arbitration based on the parties’ arbitration agreement.  The appellate court concluded that the EFAA clearly indicates it is not retroactive by stating: “This Act, and the amendments made by this Act, shall apply with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act.”  The Court of Appeals further noted that the plaintiff’s sexual harassment claim arose no later than the date she filed her complaint (October 27, 2021), and accordingly, the EFAA did not apply. 

These continued legal updates from the #MeToo movement are a reminder to employers to adopt and enforce strong anti-harassment policies and engage in frequent and effective sexual harassment training to promote respectful workplaces and prevent workplace harassment.