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Home / VA Business Law Bulletin / New limits on confidentiality and nondisparagement clauses

New limits on confidentiality and nondisparagement clauses

The “Speak Out Act,” which limits the enforceability of confidentiality and nondisparagement clauses, has passed Congress and is expected to be signed into law by President Joe Biden.

The Act limits “judicial enforceability of predispute nondisclosure and nondisparagement contract clauses” in sexual assault and sexual harassment disputes.

When the law goes into effect, clauses in contracts that require the signatory to agree to stay silent about future instances of sexual assault or harassment will no longer be enforceable.

These types of clauses sometimes exist in pre-dispute agreements that some employers require new employees to sign.

According to the Act, 81% of women and 43% of men have experienced sexual harassment or assault, and 1/3 of women have experienced workplace harassment, although only around 6% report it. This reporting is often barred by nondisclosure and nondisparagement clauses in employment contracts.

The Act would remove these barriers to reporting of harassment, not only by the victim, but also by other employees who are aware of it.

Some states, such as Maine, have similar laws. Other states, such as New York and Illinois, ban nondisclosure provisions in a settlement agreement after a dispute has begun, unless the employee seeks such a clause. However, the new federal law doesn’t apply to post-dispute clauses.

With the president’s signature expected, employers are advised to rewrite any employee confidentiality and nondisclosure agreements to comply with the Act.