In mid-November 2022, Congress passed what is known as the “Speak Out Act.” President Biden signed the bill into law on December 7, 2022, and the bill became effective immediately. While it covers agreements signed prior to December 7, 2022, it only applies to claims alleging a violation of Federal, Tribal, or State law filed on or after December 7, 2022.
The Speak Out Act prohibits judicial enforcement of pre-dispute non-disclosure or non-disparagement clauses in a sexual assault or sexual harassment dispute that prohibit discussions or disclosures of sexual assault or sexual harassment. However, the Speak Out Act makes clear that it does not prohibit an employer from protecting trade secrets or proprietary information. Although the Act does not specify, this likely means that non-disclosure or non-disparagement clauses are still enforceable to prohibit disclosure of trade secrets or proprietary information unrelated to sexual assault or sexual harassment.
The Act covers more than just agreements between employers and employees, though it is clear the Act targets them, as it states “[s]exual harassment and assault remain pervasive in the workplace and throughout civic society, affecting millions of Americans” and “[i]n order to combat sexual harassment and assault, it is essential that victims and survivors have the freedom to report and publicly disclose their abuse.”
For purposes of the Act:
- “Non-disclosure clause” is a provision in an agreement requiring the parties to the agreement not to disclose or discuss conduct, the existence of a settlement involving conduct, or information covered by the terms and conditions of the agreement.
- “Non-disparagement clause” is a provision in an agreement requiring one or more parties to the agreement not to make a negative statement about another party that relates to the agreement, claim, or case.
Practically speaking, this means a court will not enforce a provision in an agreement that (1) would otherwise prohibit disclosure of conduct constituting sexual assault or harassment and (2) was entered into before the dispute arose. Accordingly, the Act does not include penalties beyond non-enforcement of those provisions.
Some states, such as California, Illinois, Maine, New York, Oregon, and Vermont, already have similar laws restricting the use of non-disclosure and non-disparagement provisions related to sexual misconduct or sexual harassment allegations.
While the Speak Out Act is aimed at pre-dispute clauses in agreements, not settlement of claims in mid-dispute settlement agreements, other existing laws discourage non-disclosure clauses in settlement agreements covering sexual harassment claims. In 2017, the Tax Cuts and Jobs Act was passed, providing that no deduction is allowed by employers for settlements subject to non-disclosure agreements and paid in connection with sexual harassment or sexual abuse claims. The Speak Out Act takes things a step further and prohibits enforcement of non-disparagement and non-disclosure clauses entered into before any dispute may have even existed.
For all employers, it is essential to examine all agreements with employees (including employment agreements, restrictive covenant agreements, and separation agreements) to ensure any non-disparagement and non-disclosure provisions do not run afoul of the new Speak Out Act.
For assistance with preparing or reviewing your agreements, please contact the MMM Employment Team.