Violating a confidentiality clause in a settlement agreement can cost you “liquidated damages” or the company clawing back the settlement money
Hush money has its limits.
Alleged serial sex predator Harvey Weinstein reportedly wielded nondisclosure agreements and confidential settlements to silence his victims. But former assistant Zelda Perkins recently declared her intent to “publicly break (her) non-disclosure agreement,” recounting disturbing allegations of the mogul’s alleged sexual misconduct in the ’90s to the Financial Times. “Unless somebody does this there won’t be a debate about how egregious these agreements are and the amount of duress that victims are put under,” she said. Separately, some Weinstein Co. staffers asked in a statement last week to be released from NDAs of their own.
So what exactly are NDAs, what are their limitations, and what can happen if you breach them? Here’s what you need to know.
NDAs include contracts signed as a condition of employment and can preclude employees from disparaging their employer. They’re commonly required by public figures of their assistants and by companies intent on keeping trade secrets and confidential company information secure, employment lawyer Ann Fromholz told Moneyish.
Confidentiality provisions or clauses within settlement agreements can also mandate an employee’s silence. In the case of a serial violator, NDAs can function as “a way to prevent (employees) from being witnesses for each other, bolstering each others’ cases, or making the information public and shaming the violator and the company,” attorney Paula Brantner, a senior adviser to the nonprofit Workplace Fairness, told Moneyish.
An NDA that prevents employees from taking claims of illegal harassment or discrimination to law enforcement, the Equal Employment Opportunities Commission, the Securities and Exchange Commission or other state anti-discrimination agencies would be unenforceable, employment attorney Debra Katz told Moneyish. “The EEOC exists to protect the public, and therefore to prohibit someone from complaining would be against public policy,” Fromholz said of NDAs. Employees can also be compelled to testify in court when subpoenaed by a third party.
It’s hard to avoid signing an NDA that’s presented to you, Katz said, since employers typically condition their offer on an employee’s willingness to sign one. And confidentiality provisions are often a condition of settling a lawsuit, Brantner said. “Maybe they haven’t been able to find another job, and they just want to settle the case and take the money that they’re offered,” she said. “It’s a choice you have to make: What do you see as your obligation to coworkers in rooting out this behavior … versus just trying to make yourself whole and move on?”
Breaching an NDA, depending on the conditions laid out, can lead to a monetary penalty, a lawsuit or even termination of employment, said Fromholz. People who violate a confidentiality provision in a settlement agreement, meanwhile, can fall prey to paying “liquidated damages” (a designated cash amount the employee must pay per breach) or the company clawing back the settlement money it paid.
If you’re considering breaking an NDA or confidentiality clause, Brantner said, consult with a lawyer to figure out the best course of action for you personally. “Obviously some of the actresses who spoke out were in a financial position to do so,” she said. “But most of us are not Hollywood actresses and have their kind of financial net worth and fame and power.”
Proposed legislation in New York, New Jersey and California seeks to make it easier for sex harassment and assault survivors to speak out. The New York bill, co-sponsored by New York State Sen. Brad Hoylman, would prohibit contractual provisions that have the effect of concealing claims of harassment, discrimination or other public policy violations.
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