Employers today face numerous legal and ethical challenges as they adapt to the new “normal” created in the midst of the ongoing COVID-19 pandemic. Yet it was just a few months ago that disgraced former film producer and Hollywood mogul Harvey Weinstein was found guilty of two of the five charges he faced in New York state court. The verdict was without question a significant development in the broader effort to address issues of workplace sexual misconduct across the country. However, it is important that the lessons learned in the aftermath of this and numerous other scandals do not fall by the wayside.
Eliminating the NDA?
The momentum generated by the #MeToo and #TimesUp movements casts a light on the shortcomings of antidiscrimination laws in combating harassment at work. Among the most noteworthy revelations is the central role nondisclosure agreements (NDAs) are thought to play in enabling serial harassers like Weinstein. NDAs—which were once obscure legal agreements discussed among only attorneys and law professors—soon caught the attention of the general public and even became a significant talking point of the 2020 presidential race. Understandably academics and policymakers have proposed either banning NDAs altogether when the underlying allegation involves sexual misconduct or allowing NDAs only when requested by claimants and thus empowering them to reach agreements on favorable terms.
The Problem of “Superstar”/”Rainmaker” Harassers
Yet these oft-cited solutions are an inadequate, arguably disproportionate, response to a significant, but narrower problem. For most employers, the investigation of harassment has always been important from the perspective of workplace morale and liability avoidance, and in our experience, most employers take such allegations seriously, showing little tolerance when, after investigation, presented with credible cases of abuse. This responsibility is further strengthened by Supreme Court precedent that relieves an employer of liability for certain supervisor misconduct if it can demonstrate that it “exercised reasonable care to avoid harassment and to eliminate it when it might occur,” and that “the complaining employee had failed to act with like reasonable care to take advantage of the employer’s safeguards.” This incentive structure works quite well for the majority of cases.
However, the same cannot be said of misconduct committed by “superstar” or “rainmaker” employees and others who generate significant revenue flows or hold high executive positions in the companies they dominate. Existing case law holds that employers are strictly liable for harassment committed by “officials who may be treated as the organization’s proxy.” In other words, an employee may be at a “sufficiently high level in the management hierarchy of the company for his actions to be imputed automatically to the employer.” No amount of guidance, support, or investigation can shield the employer from liability for harassment committed by such an official.
Beyond legal penalties, allegations against superstar employees can also threaten a corporation’s financial viability. The mere allegation of harassment, even if later deemed unfounded, can sometimes have serious consequences in terms of bad publicity and lost profits. Rather than face these risks, the expedient action is to offer the claimant a settlement agreement that ensures each party’s confidentiality (i.e., an NDA). Where allegations lack concrete physical evidence and instead rely solely on the competing testimonies of the claimant and alleged harasser, this may be the prudent and sensible action; and it can be the best resolution for the claimants themselves.
The problem, however, is one of recidivism, when multiple allegations are raised against the same employee over time. As a one-off matter, it is preferable to quickly settle a claim where the investigation leads to inconclusive results rather than risk further reputational damage and/or lose a star employee. However, each new allegation carries with it the prospect of unearthing prior claims for which no corrective action was taken. Where there is a clear pattern of misconduct, we would ordinarily expect the company’s human resources (HR) function to insist successfully on the repeat offender’s termination of employment and possible clawback of prior compensation. In the case of superstars and rainmakers, however, HR and in-house legal departments charged with ensuring compliance with antidiscrimination laws frequently lack the internal influence to respond appropriately and prevent this spiral of abuse.
EEOC Maintenance of an “Alleged Offenders” Log
In short, a company’s business imperatives can overwhelm its compliance obligations, and it is unrealistic to expect employers to properly police themselves when faced with such competing incentives. In our view, the Equal Employment Opportunity Commission (EEOC or Commission), the federal agency responsible for enforcing the major antidiscrimination laws, has a special role to play in counteracting the spiral that allows recidivist abusers to escape punishment for their misconduct—one that lies in reforming how the agency chooses to oversee and investigate claims of sexual harassment.
Based on its statutory authority under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-8, the EEOC could promulgate a new reporting rule that requires employers to report basic information to the Commission any time it reaches a settlement agreement that includes nondisclosure or confidentiality provisions purporting to resolve an allegation of sexual misconduct. The Commission would then maintain a log of these reports, studying any unusual patterns involving the same employee or company. Should such a pattern develop, the EEOC could then initiate a Commissioner Charge on its own accord under another Title VII provision, 42 U.S.C § 2000e-5(b).
Such an “alleged offenders” log can find inspiration in the Department of Labor’s Occupational Safety and Health Administration’s (OSHA) reporting scheme for workplace incidents. Under its regulations, OSHA requires employers to report to the agency all serious incidents, including workplace fatalities and hospitalizations. After it receives such a report, OSHA can then conduct a closer investigation to see if there was any wrongdoing or review a randomized selection of closed investigations for any problematic patterns. Crucially, OSHA’s regulations are authorized under statutory language that closely mirrors Title VII.
The EEOC can also find inspiration from the efforts of private universities who have begun experimenting with new reporting requirements to combat sexual misconduct on their campuses. One of the most noteworthy examples is a platform called “Callisto Campus” used by 12 universities throughout the U.S. Professor Ayres of Yale notes, “[i]n addition to traditional reporting options, the Callisto platform gives survivors a ‘matching option’ of depositing an encrypted, time-stamped complaint into escrow that will be released to the school’s Title IX coordinator for investigation only if another complaint is received accusing the same person.” This platform, much like the proposed “alleged offenders” log, provides victims with both privacy and assurance that repeat offenders will be investigated.
And finally, one version of the “alleged offenders” log is already being considered by some members of Congress. For example, Representative Carolyn Maloney of New York recently re-introduced the Ending Secrecy About Workplace Sexual Harassment Act, which, if passed, would require every employer to “submit the number of settlements reached by the employer with an employee in the resolution of claims pertaining to discrimination on the basis of sex” via the annual EEO-1 report.
Balancing Employer, Claimant, and the Public’s Concerns
Importantly, the proposed offenders log sensibly balances the relevant interests of employers, claimants, and the broader public.
From an employer’s perspective, an “alleged offenders” log would immediately recalibrate the cost-benefit analysis of the “repeat offender” problem and enable HR and in-house legal departments to investigate allegations closely even when they involve superstars or rainmakers. For a first-time offense, it may still be prudent to quickly settle a claim to minimize damage to the employer’s reputation. With the EEOC’s maintenance of an alleged offenders log, the calculus should change with repeat incidence of misconduct by the same employee. The potential for external Commission oversight means the employer cannot simply resort to new, more restrictive agreements to cover its tracks. HR departments would be empowered to take disciplinary action against the accused employee, no matter how important they may be to the company’s bottom line.
The proposed offenders log also accounts for employer concerns regarding the confidentiality of the data it will be required to report to the Commission. The EEOC is not permitted to disclose information that it collects pursuant to its data-collection and investigative authority to broad members of the public, even when requested via the Freedom of Information Act (FOIA). By the terms of Title VII itself, along with applicable Supreme Court precedent, the EEOC can only disclose information specific to an individual complainant’s case. Therefore, potential future litigants will not be able to obtain from the EEOC the details of prior allegations against a particular employer as maintained within the proposed offenders log.
From a claimant’s perspective, an “alleged offenders” log also preserves the NDA as an important tool to protect the claimant’s privacy interests. In the wake of the #MeToo movement, some states quickly enacted statutes to ban NDAs for harassment claims, and there has been proposed legislation in Congress to do the same at the federal level. However, “[t]here is a crucial difference between correcting past wrongs and removing the option for confidentiality going forward.” As described by civil rights lawyers Debra Katz and Lisa Banks, “[f]or many women, having a legal guarantee that their harasser and co-workers will not be able to share painful, sometimes highly intimate, details about past events has great value,” and “[v]oluntarily entering into an NDA in these circumstances is not a cynical decision for women to ‘sell’ their silence.” And for many victims, the NDA is the most reliable means of receiving any form of compensation for their suffering without damaging their career prospects.
Finally, an “alleged offenders” log addresses the public’s broader interest regarding transparency about harassment in the workplace. It is clear that employers and victims have legitimate, if divergent, interests in reaching a quiet resolution to harassment allegations. However, some commentators have expressed concern that privately negotiated agreements “undermine the public’s interest in knowing about these repeat sexual offenders.” Put simply, NDAs may put future, unknown victims at risk. However, by maintaining a log of all such settlements, the EEOC can provide some assurance to the public that NDAs are no longer executed in complete secrecy. Furthermore, given its investigative and lawsuit authority, the agency can also send a message that a pattern of abuse will not be tolerated.
*An earlier version of this article appeared as Samuel Estreicher, “How to Stop the Next Harvey Weinstein: Regulators have the power to curb abuse of nondisclosure agreements. It’s time they use it,” Bloomberg View, November 12, 2017.