Sexual harassment and discrimination have been in the forefront of the news since last year’s presidential election.  Recent headlines talk about the serial nature of the alleged sexual harassment perpetrated by Harvey Weinstein, Bill O’Reilly, and many others.  Now it seems that the issue will soon reach the New Jersey Legislature in the form of a bipartisan bill that would prohibit non-disclosure clauses in settlement agreements.

Is this a good idea?  The thought process is that these settlements with non-disclosure clauses allow sexual harassers to privately continue that conduct.  That is seemingly what happened with The Weinstein Company and Weinstein.  The reality is far more complicated.

Why Settle?

Let’s explore why settlements happen in the first place.  Here are a few reasons:

  • Avoid legal costs
  • Avoid the uncertainty adjudication brings
  • Keep the proceedings and outcome (settlement) quiet or confidential
  • Quicker resolution
  • Non-monetary changes to company policy or execution of policy that a court of law cannot provide

Remember, less than 2% of all civil lawsuits filed are resolved via a trial.  Most settle or are dismissed.  Most settlements are business decisions.  As despicable as this sounds, on some level The Weinstein Company Board of Directors weighed the costs of these settlements against the value that Weinstein brought to the company.  In other words, it was an acceptable cost of doing business.

Make no mistake, sexual harassment and sexual discrimination in the workplace are a violation of federal law (Title VII of the Civil Rights Act of 1964) and state law (NJ Law Against Discrimination).  It may also be a criminal act depending on the circumstances and severity of the case.  Private confidentiality and non-disclosure agreements never trump the authorities rights to investigate sexual assault.

Why is this a problem?

If the law prohibits keeping certain types of settlements confidential, there will be less incentive to settle.  This means a protracted and nasty discovery period and possible trial for the accused and the alleged victim.  The defense to these is often aggressive and brutal, making salacious portrayals of the alleged victim (i.e. it was consensual, “she asked for it” and the like).  While public policy should want to stop serial sexual predators, it is doubtful this will.  It is probable that alleged victims will stop reporting this at all.  Further, a non-disclosure clause doesn’t require reporting sexual harassment to any authority.

Thus I question whether such a law will have the intended impact or whether it will make things worse.  I hope the legislature will thoroughly think this through before rushing off in a post-election lame duck session to assuage public concerns.

[Update: the federal government has eliminated the deductibility of sexual harassment settlements with non-disclosure clauses.]