California Lawmakers Want to Ban Confidential Sexual Harassment Settlements

Employment law attorneys say limiting nondisclosures may result in more jury trials

Lisa Nagele-Piazza, J.D., SHRM-SCP By Lisa Nagele-Piazza, J.D., SHRM-SCP February 14, 2018

​California legislators are considering a number of bills to fight sexual harassment in the workplace. One such bill would ban confidential settlements of certain claims; attorneys told SHRM Online that making settlement agreements open to the public, though, could have an unintended consequence for claimants. It could result in fewer settlements with employers and more litigation.

Sen. Connie M. Leyva, D-Chino, introduced S.B. 820 to protect workers from being victimized and to ban secret settlements in cases of sexual assault, sexual harassment and sex discrimination. "As we have clearly seen over the last few months, secret settlements serve one primary purpose: to keep sexual predators away from the public eye and continuing to torment and hurt innocent victims," Leyva said in a press statement.

Prohibiting confidentiality provisions would keep claimants from being forced to stay silent about sexual assault and harassment if they want to resolve their claims, wrote Kate Gold and Philippe Lebel, attorneys with Drinker Biddle & Reath in Los Angeles, in an e-mail to SHRM Online. "While that goal is obviously valid and important, prohibitions on confidentiality agreements could have some drawbacks that will not necessarily benefit claimants in these types of lawsuits."

Protracted Litigation

"I think we will see a lot more jury trials with this type of law in place," said Michael Studenka, an attorney with Newmeyer & Dillion in Newport Beach, Calif. A confidentiality agreement does a lot of things. In a case that is not clear cut—for example, where there are some favorable and some unfavorable facts for an employer using a confidentiality agreement—the employer might make a business decision to settle the case quickly and avoid attorney fees and a long litigation process, he explained.

Employers may lose one incentive to settle sexual harassment cases if they have no prospect of keeping any allegations against them and their employees confidential, Gold and Lebel said. True, settling can still help them avoid prolonged litigation.

However, "often, the publicly filed complaint does not contain the embarrassing or most sordid details of the conduct that later surfaces [in a trial] once discovery has been conducted." During the discovery process in litigation, opposing sides ask each other questions and request documents and other information that may be used as evidence.   

[SHRM members-only HR Q&A: What are the different types of sexual harassment?]

The proposed law may also decrease the amount of money an employer or an alleged harasser will pay to settle the claim, they said.

Although some victims may want to publicly disclose their grievances, other victims may want to settle quickly and confidentially, avoiding any public exposure of personal matters, Studenka noted.

The proposed law does allow the accuser to opt for a confidential settlement, but if she or he chooses to go public instead, there could be an unanticipated backlash of negative publicity or disclosed facts that the claimant would prefer to keep private, Gold and Lebel said.

Not having a confidentiality agreement can benefit the employer at times; the employer may publicly discuss the allegations, and deny them, give alternative versions of the events or otherwise cast into doubt the veracity of the accuser's account.

What's Next

It appears likely that S.B. 820 will pass in some form, Gold and Lebel said. Nationally, there is a growing public desire for greater regulation and resources to tackle harassment in the workplace, and legislators seem to be feeling the pressure to take action. In addition to California, legislators in several other states, including New Jersey, New York and Pennsylvania, have introduced similar bills designed to limit confidentiality in sexual harassment settlements and to take a tougher stance on harassment. 

"There has definitely been a sea change, and I'm glad to see people talking about the issue and bringing it into the open," Studenka said. "A positive that will come from this is that the victims will know that they have a voice."

HR's Role

The increased awareness about harassment in the workplace could lead to a spike in harassment claims, Gold and Lebel noted. Therefore, employers should evaluate their policies and training practices to ensure that their workforce is well-informed about how to raise concerns. 

"As always, employers should take all inquiries about potential harassment seriously," they said. HR professionals should be trained on how to properly investigate and resolve complaints.  

It is likely too soon for employers to start making changes to their agreements, they added. "However, given the likelihood that S.B. 820 and similar legislation in other states will pass, employers should follow these bills carefully."


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