On May 15, 2018, Maryland Governor Lawrence Hogan approved new legislation intended to respond to the #MeToo movement. Effective October 1, 2018, the “Disclosing Sexual Harassment in the Workplace Act of 2018” (“Act”) prohibits Maryland employers from (i) mandating arbitration of sexual harassment claims, (ii) requiring employees to enter into agreements or abide by any policy that would require them to waive future sexual harassment or retaliation claims, and (iii) taking adverse action against any employee who fails or refuses to enter into a prohibited arbitration or similar agreement. In addition, the Act will require some employers to provide information on past sexual harassment settlements to the Maryland Commission on Civil Rights (“Commission”).
A. Prohibition of Mandatory Pre-Dispute Arbitration Clauses
The first prong of the Act constitutes a retroactive prohibition on all Maryland employers mandating arbitration of sexual harassment or related retaliation claims or waivers of other substantive or procedural rights to bring such claims (e.g., a jury trial waiver). This prohibition applies to employment contracts, policies, and agreements, including collective bargaining agreements.
Under the Act, prohibited mandatory arbitration clauses in employment contracts will be rendered null and void. How a court might interpret a contract that has such a provision, however, will depend on the other terms within the contract, including whether a “severability” clause exists.
Additionally, it is unclear what practical effect this new law will have, if any, given that Maryland’s prohibition of mandatory arbitration clauses may be preempted by the Federal Arbitration Act (“FAA”). Recent decisions by the U.S. Supreme Court have found in favor of permitting arbitration. In AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 341 (2011), the Supreme Court concluded that where, as under this law, the “state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” More recently, in Kindred Nursing Centers LP v. Clark, 137 S. Ct. 1421 (2017), a 7-1 majority of the Supreme Court held that the FAA preempts state laws that single out arbitration agreements for disfavored treatment. Even if the FAA preempts the Act, however, a court could find Maryland’s prohibition enforceable if mandatory arbitration clauses for sexual harassment claims are unconscionable under state law. To that end, the Act explicitly states that mandatory arbitration clauses are against the public policy of the state. In addition, as applied to private collective bargaining agreements, there is a strong argument for preemption under the National Labor Relations Act.
The uncertainty surrounding the Act’s prohibition of mandatory arbitration clauses is likely to lead to a challenge in court. In the meantime, employers seeking to enforce pre-dispute arbitration clauses with respect to sexual harassment claims should proceed with caution. Employers may continue to use pre-dispute arbitration clauses for claims unrelated to sexual harassment so long as the clauses are agreed to by the parties and comply with federal law.
B. Prohibition of Waivers of Future Sexual Harassment and Retaliation Claims
The second prong of the Act voids any provision contained in an employment contract, policy, or agreement waiving an employee’s substantive or procedural rights to make a future sexual harassment or related retaliation claim. Employers may not take adverse action against an employee who fails or refuses to enter into an agreement containing an impermissible waiver. Any employer who attempts to enforce any such waiver will be liable for the employee’s attorneys’ fees.
This portion of the Act is largely symbolic, as contract law already prohibits parties from waiving future claims.
C. Data Collection and Disclosure
The third prong of the Act requires employers with 50 or more employees to provide certain information to the Commission, including:
- the number of sexual harassment settlements made by or on behalf of the employer,
- the number of times the employer has paid more than one settlement to resolve a sexual harassment claim against the same employee over the prior 10 years (and any personnel action taken against that employee), and
- the number of settlements concerning sexual harassment that contain a non-disclosure provision.
Employers will submit this information through an electronic survey that will be administered by the Commission on or before July 1, 2020, and again on or before July 1, 2022. There is no provision for administering the survey in 2021. While attempts to learn more about the survey from the Commission or the offices of Delegates who sponsored the original legislation were unsuccessful, we are hopeful that the Commission will issue guidance on each of these requirements in the near future.
According to the Act, upon receipt of surveys from the covered employers, the Commission will post aggregate data of employer responses to the survey on its website. The aggregate data will not identify specific employers with one exception: the public may obtain information regarding the number of times a specific employer has paid a settlement to the same employee over the prior 10 years. Although the mechanism for requesting such information is not yet defined, the information may be available through the Maryland Public Information Act.
The Commission will also review and create an executive summary of a random collection of the surveys on or before December 15, 2020, and again on or before December 15, 2022. Though all identifying information for specific employers will be redacted, the Commission must submit the executive summaries to the Governor, the Senate Finance Committee, and the House Economic Matters Committee. It is unclear how many, or the method by which, surveys will be selected for review, or whether the public will have access to the executive summaries.
The Act’s reporting requirement will sunset on June 30, 2023, barring a renewal by the General Assembly.
What Maryland Employers Should Do Now
- Review existing employment agreements for potentially impermissible waiver provisions, including mandatory arbitration clauses, to determine if carve-outs for sexual harassment claims are required.
- Make sure that any employee agreement or contract executed, extended, or renewed on or after October 1, 2018, does not include a waiver of, or require mandatory arbitration of, sexual harassment claims.
- Ensure that all employment contracts and agreements include a severability clause.
- Consult with counsel before seeking to enforce any waiver of sexual harassment claims or mandatory arbitration provisions found in employee contracts, policies, or agreements.
- Employers with 50 or more employees should monitor updates from the Commission on Civil Rights and be prepared to complete the mandatory survey by July 1, 2020, and July 1, 2022.