Employers Question the Validity of their Employment Agreements
Effective June 7, 2018, and in direct response to the #metoo movement, the Washington State legislature passed RCW 49.44.210, a new law prohibiting employers from requiring their employees, as a condition of employment, to sign a nondisclosure agreement, waiver, or any other document that prevents the employees from disclosing workplace sexual harassment or sexual assault. Any such documents are against public policy, and are void and unenforceable as a result. Additionally, pursuant to the new statute, it is an unfair practice under the Washington Law Against Discrimination (Chapter 49.60, RCW) for an employer to retaliate against an employee for disclosing or discussing workplace sexual harassment or sexual assault.
The law has left many employers wondering whether it invalidates employment agreements dated June 6, 2018 or earlier. The issue has not yet been litigated and unfortunately the statutory language does not provide a clear answer. While the surest approach is for employers to have their employees sign new agreements with a carve-out for such disclosures, this is an impractical solution for most. In addition to the administrative work required to have every employee re-sign every employment agreement, each agreement would also require new consideration. We advise employers to continue enforcing their original employment agreements, but with the recognition that all employees are free to disclose workplace sexual harassment and sexual assault regardless of the date the employees signed their respective agreements. We also suggest that employers send a memorandum to all employees clarifying that the purpose of their employment agreements was never to prevent disclosures of sexual harassment and sexual assault, and to remind employees that they should report such conduct right away. This would be a great communication to remind employees where they can locate the company’s discrimination and harassment reporting policy.
Lastly, while the statute permits the continued use of confidentiality provisions in settlement agreements between an employer and an employee or former employee alleging sexual harassment, it is important to remember that there is still an increased cost of doing so. The new federal tax code section 162(q) states that employers cannot deduct from business income “any settlement or payment related to sexual harassment or sexual abuse” if the settlement is confidential. Moreover, attorney’s fees related to such a settlement are non-deductible.
We have seen a significant increase in sexual harassment claims over the past year and we expect that trend to continue into the foreseeable future. Now is the time for employers with questions about RCW 49.44.210 and its affect on employment agreements to consult with counsel.
About the Author
Lauren Parris Watts’ practice focuses on representing and advising individual clients and small to medium-sized business clients in risk management, contractual matters, employment and general tort litigation. She counsels clients on a variety of issues, including compensation and severance agreements, non-competition and non-solicitation restrictions, disability accommodations, FMLA and other leave rights and misconduct investigations. She also represents her clients in lawsuits alleging wrongful termination, sexual harassment, retaliation and discrimination.