In the months since the Harvey Weinstein scandal, there have been countless efforts to raise awareness of workplace sexual harassment. Actresses donned black dresses at the Golden Globe Awards earlier this month to promote #MeToo and the related Time’s Up initiative. Last weekend, the music industry’s elite carried white roses at the Grammy Awards to show solidarity for the movement. These efforts, however, are not limited to celebrities. Many other initiatives have sprung up in response to workplace sexual harassment issues – including those in our federal and state legislatures.
The most notable legislative development to date was tucked into the federal Tax Cuts and Jobs Act, which President Trump signed into law at the end of December. The Act adds a provision to the Internal Revenue Code prohibiting tax deductions for payments or settlements “related to sexual harassment or sexual abuse”, and for attorneys’ fees related to such payments or settlements, if the payment is subject to a non-disclosure agreement. Essentially, it is intended to discourage the use of non-disclosure provisions in settlements of sexual harassment or abuse claims by forcing employers to choose between the tax deduction and confidentiality. It applies to amounts paid or incurred after December 22, 2017.
The good news is that the provision appears to be limited to settlements involving actual allegations of sexual harassment or abuse, rather than to every settlement involving a general release of claims. The bad news is that the provision leaves many questions unanswered, including the key question: What constitutes a payment “related to sexual harassment or abuse”? We anticipate that regulations implementing the Act will address this and other ambiguities in the provision. Until then, however, employers are well-advised to consult with their financial and legal advisors regarding the applicability of this provision to their individual circumstances.
Employers also should be aware of other legislative initiatives targeting the use of non-disclosure agreements. An increasing number of states have introduced legislation to prohibit the use of non-disclosure agreements in sexual harassment claims entirely. In November 2017, Pennsylvania Senator Judy Schwank (D) introduced Senate Bill 999 that would ban non-disclosure provisions in any contract or settlement relating to “sexual misconduct”. Among other things, the bill would prohibit an agreement not to disclose the name of a person suspected of sexual harassment. It remains to be seen whether, or in what form, Senate Bill 999 may be passed into law.
In the meantime, beyond staying abreast of the latest legal developments, you might be asking yourself, What can my company do to raise awareness of – and effectively address – issues of sexual harassment (and other types of discriminatory harassment) in the workplace? Click here to learn more about how you can educate your workforce, update and strengthen your policies and procedures, and effectively investigate reported concerns of harassment in your workplace.
