On Nov. 16, 2022, the U.S. House of Representatives sent the Speak Out Act to President Joe Biden’s desk with a 315-109 vote. The legislation, which cleared the Senate unanimously on Sept. 29, aims to prohibit the use of pre-dispute nondisclosure and non-disparagement agreements, or NDAs, with regard to sexual harassment and sexual assault. After previously expressing support for the legislation, President Biden signed the bill into law on Dec. 7, 2022.
The law builds off the previous amendment to the Federal Arbitration Act, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021. That amendment gave individuals asserting claims of sexual harassment and sexual assault the option to file their claims in court, rather than be subject to pre-dispute mandatory arbitration clauses. The amendment also prohibited pre-dispute agreements that waive an employee’s right to participate in a joint, class or collective action in a judicial, arbitral, administrative or other forum relating to a sexual assault dispute or sexual harassment dispute. Both pieces of legislation are motivated in part by the #MeToo movement and are analogous to state laws passed in California, Illinois, New Jersey, New York and others.
Like its predecessor, the law only applies to pre-dispute NDAs that prohibit the discussion of sexual harassment or sexual assault claims. A bank and employee may still enter into an NDA, so long as the agreement is reached after the unlawful conduct is alleged. Furthermore, the law does not affect NDAs in other contexts, such as intellectual property, non-compete agreements, or severance agreements.
While the law prohibits the use of pre-dispute NDAs with regards to sexual harassment and sexual assault, it does not apply to other related discrimination claims such as race, age, gender or national origin. President Biden, however, expressed interest in advancing similar legislation that would apply to racial discrimination, unfair labor practices and others.
Even though the act has been signed into law, banks will not have to abandon NDAs entirely. NDAs will continue to be a useful tool for banks that wish to secure their confidential information. Bank board members will, however, need to update their employment handbook policies as well as any template NDAs. Additionally, it is important to remember that banks may still enter into NDAs regarding sexual harassment and sexual assault. Now, however, the choice will be in the hands of the employee after the unlawful conduct is alleged — and not the bank at the date of hiring. Additionally, it is also wise for a bank’s board of directors to keep pre-dispute NDAs intact for the other discrimination claims that the law does not effect.
Finally, after updating sexual harassment and sexual assault policies, it is always wise to ensure that a bank’s harassment reporting policy and investigation routine is effective at preventing and addressing harassment in the workplace. A comprehensive sexual harassment policy that encourages reporting, an open-door policy and quick and thorough investigations is the best way for board members to safeguard a bank’s work environment.