Seyfarth Synopsis: The New York Legislature has passed, and Governor Andrew M. Cuomo is expected to sign, a bill that will, among other things, prohibit all employers from requiring employees to arbitrate claims of sexual harassment. The bill will also prohibit employers from including non-disclosure agreements in settlements of sexual harassment claims, unless requested by the complainant. Additionally, the bill will require state contractors to implement sexual harassment training and policies, extend protections to non-employees, such as contractors or vendors, and require the Department of Labor to draft a model anti-sexual harassment policy and training program.
As part of a bill establishing the 2018-19 budget, the New York State Legislature has included provisions making sweeping changes to the law governing workplace sexual harassment. The new legislation, among other things, prohibits mandatory arbitration of sexual harassment complaints, requires court approval of settlements of lawsuits involving allegations of sexual harassment, and prohibits non-disclosure agreements (NDAs) in settlements of lawsuits involving sexual harassment allegations unless the victim requests confidentiality. The legislation will also expand protections to independent contractors and create a uniform sexual harassment policy and training for businesses.
The provisions in the bill affecting private employers are summarized briefly below. In contrast to an earlier version of the bill, the final enactment does not provide a definition of “sexual harassment.” While the Governor is expected to sign the bill shortly, the timetable remains uncertain, and it is possible, although unlikely, that changes in the fluid political environment in Albany could prompt some revisions.
Prevention of Sexual Harassment By Bidders for State Contracts
Subpart A amends the State Finance Law to require that, for every bid made to the State or any public department or agency of the State, where competitive bidding is required, the bidder must submit a certification, under penalty of perjury, that it has implemented a written sexual harassment policy and provides annual sexual harassment prevention training to all employees. The written policy must meet the requirements of Section 201-g of the New York Labor Law (see the discussion of Subpart E below).
Where competitive bidding is not required, the certification requirement is at the discretion of the department, agency or official. While the bill states that a bid shall not be considered, and a contract may not be awarded, where the bidder has not complied with the certification provision, it does permit the bidder to provide an explanation of its failure to provide the certification, suggesting that the absence of a certification may not be fatal to a successful bid.
This section will take effect on the first of January after the date on which it becomes law.
Prohibition of Mandatory Arbitration Clauses
Subpart B adds Section 7515 to the Civil Practice Law and Rules (“CPLR”). It provides that, “except where inconsistent with federal law,” employers are prohibited from including, in any contracts with employees, provisions that mandate arbitration for allegations or claims of sexual harassment. The law also declares null and void clauses in existing contracts that mandate arbitration of sexual harassment claims. Mandatory arbitration clauses requiring arbitration of claims other than sexual harassment are unaffected by the new legislation. The law will take effect on the 90th day after the bill becomes law.
Prohibition of Non-Disclosure Agreements
Subpart D, effective on the 90th day after it becomes law, adds Section 5-336 to the General Obligations Law (“GOL”) and Section 5003-b to the CPLR. Under GOL Section 5-336, employers are prohibited from including an NDA in any settlement of a sexual harassment claim unless the complainant requests confidentiality. If the complainant requests confidentiality, the terms must first be provided to all parties. The complainant then has 21 days to consider the terms, and, after 21 days, if the term is still the complainant’s preference, the condition must be memorialized in an agreement signed by all parties. The complainant then has 7 days to revoke the agreement, which shall not be effective or enforceable until the revocation period expires. GOL Section 5-336 appears to apply to settlements of all claims of sexual harassment, not just those filed in court.
CPLR Section 5003-b includes the same provisions as GOL Section 5-336, but applies to settlements of sexual harassment lawsuits.
Mandatory Sexual Harassment Prevention Policy and Training Program
Subpart E amends the Labor Law by adding Section 201-g, which requires the Department of Labor, in consultation with the Division of Human Rights, to produce a model sexual harassment prevention policy and a model sexual harassment prevention training program.
The model policy must include, among other things: information concerning the federal and state statutory provisions on sexual harassment; examples of what constitutes unlawful sexual harassment; a standard complaint form; a procedure for investigation of complaints; rights of redress and all available forums for adjudicating sexual harassment complaints; and a prohibition of retaliation.
Similarly, the training program must be interactive and cover specific topics, including the following: examples of conduct that would be unlawful; the federal and state statutory provisions concerning sexual harassment; remedies available to victims of sexual harassment; and rights of redress and all available forums for adjudicating complaints.
Every employer must either adopt the model policy and training program, or establish a policy and training program that equals or exceeds the minimum standards provided by the models. Employers are also required to provide all employees with a written copy of the policy and training on an annual basis. This Section takes effect on the 180th day after it becomes law.
Extension of Protections to Non-Employees and Individual Liability
Currently, non-employees, such as contractors, vendors, or consultants, are not covered by State law prohibiting sexual harassment. Subpart F, which will take effect immediately and apply to all employers in the State, extends protections to such non-employees by amending the Executive Law. Under new Section 296-D, an employer may be liable to non-employees when the employer, its agents, or supervisors knew or should have known that non-employees were subjected to sexual harassment in the employer’s workplace, and the employer failed to take immediate and appropriate corrective actions.
What Happens Next?
For the most part, the various sections of the bill will not go into effect until at least three months after the Governor’s signature, allowing employers sufficient time to ensure compliance. The provision of most immediate potential impact for employers concerns mandatory arbitration clauses. While an outright prohibition on such clauses, even one limited to sexual harassment claims, would be vulnerable to a legal challenge based on preemption by the Federal Arbitration Act, the bill includes the proviso “except where inconsistent with federal law.” Sorting out the legal issues around that proviso could, of course, take years to resolve. (A bill pending in the U.S. Senate, co-sponsored by New York’s Kirsten Gillibrand, would amend the FAA to outlaw arbitration clauses with respect to sexual harassment claims. If that is enacted, then preemption issues involving the New York provision would likely be moot.) In the meantime, employers should consult with legal counsel to assess whether to revise their agreements and/or policies and to be cognizant of the impact the law may have on pre-existing agreements.
Employers should similarly consider reviewing and revising their standard settlement agreements, at least as they pertain to employees within New York State, to ensure that they comply with subpart D’s prohibition of NDAs. This revision to standard settlement practice comes on the heels of recent changes at the federal level, where the 2016 tax reform law prohibits the deduction of any payments related to sexual harassment or sexual abuse settlements where an NDA is used.
Once the New York Department of Labor publishes the model policy and training program, employers will need to ensure that their existing sexual harassment policies, as well as their training for employees, are in compliance with the models. For those employers who do not have written policies or do not provide training, they will need to institute both.
Employers utilizing contractors, vendors, or consultants should also consider revising their policies to account for the broader scope of who can file claims under the new law. Given that this provision goes into effect immediately upon passage of the bill, employers should consider making such amendments sooner rather than later.