Can NDAs be useful in the settlement of sexual harassment claims?

Can NDAs be useful in the settlement of sexual harassment claims?

| May 26, 2021 | Employment Law |

Sexual harassment in professional offices is, unfortunately, a reality for many. When a person is the victim of sexual harassment in the workplace, they may work out a settlement with their employer. Included as part of that settlement may be a nondisclosure agreement (NDA). While it may seem unlikely, NDAs in New York can benefit both employees and employers.

Not all laws are NDA-friendly

NDAs have a poor reputation among many, and laws have been enacted limiting what an NDA can do. For example, under the Federal Tax Cuts and Jobs Act of 2017, if an NDA is made part of a settlement of a sexual harassment claim, settlement payments made by employers cannot be tax deductible and neither the employee nor the employer can deduct legal fees or litigation costs. Specifically in New York, employees must be given at least 21 days to review the terms of a proposed NDA and seven days to revoke the NDA if they disagree with it. This law applies to any NDA made part of a workplace harassment settlement.

What are the benefits of an NDA?

While critics claim NDAs silence the voice of sexual harassment victims, there are some benefits that an NDA provides. Generally, when an employer and employee reach a settlement on a sexual harassment claim, they are agreeing to disagree about the facts of the case. Having these facts come to the public attention through litigation, this can cause embarrassment or even harm to both the employer and employee. An NDA can be used so that neither the employee nor the employer can publicly respond to their version of the facts. In addition, if an employer cannot have an NDA included in a settlement, they may lose an incentive to settle in the first place, which could be to the detriment of both the employee and employee, particularly with regards to confidentiality.

Learn more about employment law in New York

NDAs are a controversial topic. Some view them as unethical while others see them as a tool in the settlement process. Ultimately, this post is for educational purposes only and does not take a side in this debate nor does anything in this post constitute legal advice. Our firm’s webpage on employment law may be a good resource for those who want to learn more about this topic.