Legislature mulls nondisclosure agreements — again

BOSTON (MA)
Massachusetts Lawyers Weekly [Boston MA]

April 19, 2023

By Pat Murphy

Bill targets workplace bias, sexual assault settlements

A bill under consideration by the Legislature would restrict the use of nondisclosure agreements in the settlement of employment cases involving sexual assault and discrimination.

In January, Republican Rep. Alyson M. Sullivan-Almeida introduced H. 1778, which generally would prohibit nondisclosure agreements in the settlement of employment cases involving claims of sexual assault, sexual harassment and discrimination based on sex. The bill is currently before the Joint Committee on the Judiciary.

David I. Brody is one employment attorney who supports the measure.

“Some of the components of the bill were done in a very effective way, including a private right of action to enforce and protections for individuals who may want to remain anonymous,” said Brody, president of the Massachusetts Employment Lawyers Association.

The Boston attorney said MELA has not taken an official position on the legislation and that he was expressing his own views on the issue.

Strident opponent of NDAs

The only problem Boston attorney Mitchell Garabedian has with Sullivan-Almeida’s bill is that it doesn’t go far enough. Garabedian, renowned for his successes representing the victims of clergy sexual abuse, said he would be in favor of an outright ban on nondisclosure agreements.

“Nondisclosure agreements should be completely done away with because they re-victimize the abuse victim and prevent the public from knowing about dangerous predators,” Garabedian said. “I will receive calls from brave abuse victims who are not my clients who tell me they still feel trapped and controlled by the perpetrator who abused them and by the institution that allowed the abuse to happen because they cannot talk about the sexual abuse except in a very limited manner.”

Garabedian added that it would be a mistake to discount the threat NDAs may pose to public safety.

“History has taught us that if the clergy sexual abuse victims in Boston had to sign NDAs, the public would have been kept in the dark and more abuse would have occurred,” he said.

Because of the re-victimization he’s witnessed as a result of a sex abuse plaintiff being subject to an NDA, Garabedian said he refuses to accept clients who indicate they want such clauses as part of any settlement.

“Victims of abuse who come to me want to try to heal and gain a degree of closure,” Garabedian said. “NDAs prevent the healing process from taking place.”

For similar reasons, Garabedian said he would support a ban on NDAs in any form of discrimination or harassment case.

But getting the Legislature to pass restrictions on NDAs has proven to be a tough slog.

Before becoming state auditor, Diana DiZoglio introduced a bill in 2021 as a state senator that would have banned NDAs in taxpayer-funded settlements.

However, S. 2047 died in committee.

In response to an interview request, DiZoglio issued a statement making clear her continued support for legislative reforms addressing the use and abuse of NDAs.

“As a state representative and then-senator, I advocated to ban the use of taxpayer-funded non-disclosure agreements to silence victims of discrimination, harassment or abuse,” DiZoglio said. “When victims are forced into silence about abuse, our democracy suffers. This is an issue of injustice —  racial injustice, disability injustice, gender injustice, LGBTQ+ injustice and beyond.”

But one litigator who is skeptical about the very utility of NDAs is Leonard H. Kesten, who represents cities and towns in his municipal law practice. In fact, the Boston attorney said he sees a downside even for defendants in keeping settlements under wraps.

“One of the things that I have seen so often in litigation is if people know you’re keeping something secret, they will think it’s much worse than what you are actually keeping secret,” Kesten said. “I’m a firm believer in putting the information out there and letting the people decide. Secrets are never a good idea.”

Employment reform

Brody sees NDAs in the employment sector as particularly problematic.

“The payments in these settlement agreements are designed to make people whole, to place people in the position they would have been had they not been discriminated against or harassed,” Brody said. “To put nondisclosure or nondisparagement as a condition of being made whole is particularly offensive to some people. I see that a lot. If we as a community want to say that, absent certain exclusions, that’s something we find to be against public policy, I can get behind that.”

On the other hand, Brody said he recognizes that some clients are willing to trade silence for an increased settlement package.

“And there are any number of employers who are willing to pay for that post-agreement restriction,” Brody said. “So there is a school of thought out there that if you make nondisclosure against public policy, you may make some deals harder to reach.”

Sullivan-Almeida’s bill proposes amending the state’s anti-discrimination law, Chapter 151B, by inserting new Section 11, “Nondisclosure agreements relative to sexual harassment and discrimination.”

Section 11(a) would prohibit a settlement agreement or a provision within a settlement agreement involving work-related sex offenses or sexual harassment “that prevents the disclosure of information related to a claim filed in a civil action or a complaint filed in an administrative action.”

Proposed Section 11(a)’s prohibition on NDAs further extends to settlement of claims involving work-related discrimination based on “sex, gender identity or sexual orientation,” as well as to claims of retaliation against those who report or cooperate in the investigation of misconduct.

However, Section 11(c) does allow for provisions that shield the identity of a claimant or victim, as well as the disclosure of facts that could lead to the discovery of the claimant’s/victim’s identity.

The proposed law affords protection to employees in that Section 11(c) “shall not be construed to limit the right of the claimant/victim to disclose this information.”

While passage of the bill would render “void as a matter of law and against public policy” noncompliant settlement agreements entered into on or after the effective date of the act, there are also important provisions that would have retroactive effect.

Specifically, Section 11(e) provides that, with respect to agreements entered into before the effective date of the act, “disclosure by a claimant/victim of any information subject to a nondisclosure agreement that would be void as a matter of law and against public policy pursuant to this Act may not be used to invalidate the claimant’s/victim’s right to consideration under the agreement or to require the return of consideration that has already been provided to the claimant/victim.”

And the measure contemplates a civil action for damages for violation of Section 11(a)’s prohibition of NDAs. Proposed Section 11(g) states that a plaintiff “shall be entitled to a trial by jury on any issue of fact in an action for damages … . A person who enforces or attempts to enforce a provision that would be void as a matter of law and against public policy pursuant to this Act shall be liable for the claimant’s/victim’s reasonable attorney’s fees and costs.”

Importantly, the bill includes some sharp teeth that members of the bar need to be wary of.

Proposed Section 11(i) provides that attorneys who demand as a condition of settlement inclusion of an unlawful NDA, or those who advise a client to accept such a clause, may be subject to professional discipline.

“[T]he Massachusetts Board of Bar Overseers shall investigate and take appropriate action in any such case brought to its attention,” the proposal states.

Taxpayer-funded settlements

According to DiZoglio, NDAs for years have been a feature of settlements involving state employees, yet the Office of the Comptroller has no record of how many harassment, discrimination and abuse cases included NDAs as a condition of settlement.

In her statement, DiZoglio pledged that, going forward, her office would provide the hard data needed by policymakers to press for reform.

“My office will be conducting an audit of tax-payer funded settlement agreements across state government,” she said. “Our goal is to help shine a light on areas of potential abuse of taxpayer funds to silence victims and protect powerful perpetrators across state agencies.”

The legislation proposed by DiZoglio in 2021 would have amended Chapter 6 of the General Laws by adding a new Section 220. Specifically, G.L.c. 6, §220(b), would have provided that no state entity “shall include or permit the inclusion of a nondisclosure, non-disparagement or other similar clause as a condition of employment or in a settlement agreement between the governmental entity and an employee or a student.”

The one exception to the nondisclosure prohibition in the bill was for a provision included in a settlement agreement at the request of an aggrieved employee or student that “prevents the governmental entity from disclosing the individual’s identity and all facts that could lead to the discovery of the individual’s identity.”

But Kesten questioned the very need for a ban given that the state’s open records and public meeting statutes to a certain extent effectively nullify NDAs in public sector settlements.

“The meetings that a board of selectmen or city council have on these cases are in [non-public] executive session while the case is pending,” Kesten said. “As soon as the case is over, those minutes become public, likewise the settlement documents.”

Brody sees much the same problem in public sector settlements, though he thinks the problem is manageable.

“In a public setting, it’s highly unlikely that you are going to be able to keep an agreement like that confidential,” Brody said. “But that doesn’t mean that an individual cannot condition their settlement on certain restrictions about what they say. While the employer needs to understand that those facts may get out, if they come out through the mouth of the individual [plaintiff], that still may be a basis for [the employer to claw back] the settlement. So the risk for the employee is still there.”

On the other hand, Kesten said he sees no reason to oppose NDAs in settlements between private parties that don’t involve government entities.

“Sometimes, the plaintiffs don’t want [information about the case] to get out to the public, so it’s not one-sided,” Kesten said,

While DiZoglio’s bill didn’t pass, Garabedian said he’s not giving up hope, likening the efforts to ban NDAs to the fight in state legislatures across the country to enact laws extending the statute of limitations on childhood sexual abuse claims.

“It’s a process of resiliency and educating the legislators and the public about the need for the eradication of NDAs,” Garabedian said. “If it doesn’t happen this session, we’ll be back.”

https://masslawyersweekly.com/2023/04/19/legislature-mulls-nondisclosure-agreements-again/