States Restrict Use of NDAs in #MeToo Cases
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UPDATED: Feb 13, 2019
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California will be among the first states to restrict the use of non-disclosure agreements (NDAs) to silence victims of sexual harassment and assault.
As the LA Times reported, Zelda Perkins, Harvey Weinstein’s former assistant in Miramax’s London office, was forbidden by a NDA from revealing what she knew about her boss’s activities:
Perkins… told no one about the movie mogul’s rampant bullying, how he had regularly exposed himself to her and forced her to take dictation while he bathed. She said nothing about the colleague who’d claimed that Weinstein had attempted to rape her, an incident that led Perkins (and the colleague) to leave the company after negotiating a settlement and signing a nondisclosure agreement that forbade them from discussing Weinstein’s behavior, even with family.
As I blogged about, Perkins eventually broke the NDA that she signed in connection with the settlement.
In September, then-Governor Jerry Brown signed into law a bill that would ban non-disclosure clauses in settlements of claims of sexual assault, sex discrimination, or harassment based on sex. That law went into effect on January 1.
A similar law will go into effect in New York later in 2019, and other laws are in the works. At least 16 states have reportedly introduced legislation that would limit the use of NDAs in cases involving sexual abuse and misconduct.
However, as the LA Times notes,
some advocates worry that the new law will make it harder for victims to extract settlements from their abusers and question whether it goes far enough in shifting the balance of power that has long protected powerful men in Hollywood and elsewhere.
For example, abusers may be less likely to make large payments to their victims (and avoid the embarrassment of a public trial) if they know the embarrassing facts will come out anyway.
The victims of harassment and assault may not have the resources to bring lawsuits that can drag on for years, and may also not want to be embarrassed by a public trial.
As the LA Times discusses, NDAs are widely used to protect confidential business information.
More than one-third of US employees have been required to sign an NDA, according to the Harvard Business Review.
However, according to the Review, NDAs can be misused to “suppress employee speech and chill creativity:
beyond the technical secrets of research and development that companies rightfully want to protect from leaking, plaintiffs in trade secrecy litigation frequently try to claim client lists and even general know-how as protected trade secrets. However, judges are rightly skeptical. In the ongoing Waymo v. Uber trade secrecy trial, Judge Alsup reminded the parties of this key distinction between actual secrets and general know-how: “Is an engineer supposed to get a frontal lobotomy before they go on to the next job?” Alsup asked.
As entertainment lawyer Marc Simon told the LA Times,
At some point, businesses or attorneys realized that NDA provisions could be used not just to protect legitimate business aspects but to shield issues that would be illegitimate or illegal.
Last March, the Weinstein Co. filed for bankruptcy and relinquished any rights it may have had to enforce NDAs signed in connection with Harvey Weinstein’s alleged sexual misconduct.