Firms use confidential settlements to silence victims of harassment
By A SECRET about sexual harassment on the job is finally coming to light. It’s not that harassment is still rampant in some industries, recalling the worst of the “Mad Men” days. Or that networks of women quietly help to protect their co-workers from the worst offenders. The real secret is that our regulatory and judicial systems are complicit in protecting harassers from public exposure and opprobrium. Recent revelations about Bill O’Reilly, Roger Ailes and Harvey Weinstein show that they confidentially settled harassment claims in the millions of dollars over decades, using legal maneuvers to keep their conduct under the radar. How common is this?
Since 1986, when the Supreme Court first recognised that sexual harassment is a form of discrimination, employers and their attorneys have generally insisted that victims who receive financial settlements as a result of harassment allegations sign confidentiality agreements. In my three decades of research and litigation on harassment claims, corporate officials have always insisted that unless settlements are confidential, firms will be overwhelmed by a deluge of accusations, with every disgruntled employee looking for a payout.
A typical confidentiality clause prohibits the employee not only from revealing the amount paid to her but also from discussing the facts and allegations relating to the underlying events. Often, these clauses contain a “liquidated damages” provision: If the facts are revealed, the employee automatically owes the employer some astronomical sum. Liquidated damages generally include the amount paid in the settlement and sometimes much more, especially if the settlement amount was small. This keeps many victims of harassment from making their experiences known to others who might face the same dangers.
In some instances, confidentiality clauses might protect an employee as well as her employer: Some women don’t want it known that they have made a harassment complaint, believing that it will hamper their future career prospects. But, according to my research, most confidentiality clauses are one-way, preventing revelations about the employer; they don’t address what can be said about the employee. It takes a savvy lawyer to negotiate a good reference and nondisclosure on the part of the employer also.
One reason it takes so long for sexual discrimination cases to emerge is that these lawsuits are governed by a certain timeline. In 1998, the Supreme Court decided that an employee must first make an internal complaint and that employers must have policies to afford workers that opportunity. Many incidents are resolved at this stage, with financial compensation and a confidentiality agreement. These deals never become public, and there is no way of knowing just how many such agreements have been reached with a certain employer.
If a victim and a company can’t resolve their dispute, the next step for the employee is to file a claim with the Equal Employment Opportunity Commission or the equivalent state or local agency - in the District of Columbia, for example, this is the Office of Human Rights. Under the legal test known as “exhaustion of administrative remedies,” this charge generally is a prerequisite to any court action. In 2016, the EEOC received almost 13,000 such claims, and probably at least that number were filed locally. The EEOC can be dreadfully slow in assessing these claims: As of the end of 2016, there were over 73,000 cases in the EEOC’s backlog. While the government can bring court actions for employees, in 2016 the EEOC initiated only 46 cases under Title VII of the Civil Rights Act. For the vast remainder of the claims, the EEOC only conducts investigations, which may result in mediation and conciliation efforts, or no action at all. That’s not an unusual outcome. In 2016, the EEOC found that there was no probable cause to investigate further in the majority of the complaints filed.
Except for its court filings (which may not name the harasser, since the action is against the company), the EEOC proceeds under guarantees of confidentiality. In fact, Title VII specifically mandates that the agency may not disclose to the public charges of employment discrimination or information about conciliation, with violations punished by fines up to US$ 1,000 or imprisonment for up to a year. This is why even now - amid reports of millions of dollars in payouts - we have no idea how many, if any, EEOC charges were filed against O’Reilly, Ailes or Weinstein.
Eventually, often after a very long wait, the EEOC will inform the employee that it has either found probable cause or no cause to bring a case. If nothing is resolved at the EEOC level, the employee has the right to bring a lawsuit. Here for the first time in the process, allegations may become public, since federal and state court complaints and further proceedings are generally matters of public record. In fact, it was Gretchen Carlson’s 2016 lawsuit against Ailes that eventually led to his ouster.
But despite the theoretical openness of court proceedings, much of what happens in litigation still remains secret. Less than three per cent of employment discrimination cases go to trial, with a public verdict. Legal scholars and researchers estimate that close to 80 per cent of the cases result in settlements, with the remainder dismissed before trial.
Cases that settle are protected by confidentiality agreements, so we don’t know what the terms look like. Another factor that contributes to secret settlements relates to how attorneys are paid for representing employees and the pressure they may place on their clients.
Most employment lawyers work on a contingency-fee basis, receiving a percentage - usually one-third - of the settlement. When an employer offers a sum to make a case go away, it comes attached to a confidentiality clause; if the plaintiff refuses the clause, she gets nothing at all - and neither does her lawyer. Ethical standards enforced by state bar associations and courts require that settlement decisions be made by clients, but attorneys who want to collect their fees have every incentive to steer their clients toward accepting the confidentiality clause. And retainer agreements often say an attorney may withdraw if a client “unreasonably” fails to accept a settlement offer. Some lawyers have been known to switch to an hourly fee if a client refuses a settlement, an ethically questionable tactic that can make it financially impossible for the employee to continue with her claim.
Confidentiality agreements help protect serial harassers. But with public attention now focused on harassment, victims and their lawyers can shift the balance of power in settlement negotiations. They can agree with their lawyers at the outset that they will not accept a settlement that includes confidentiality.
Plaintiffs must be equally assertive, especially once a court action is filed and the underlying facts are in the public record. If employers balk, they can always go to trial and take their chances in front of a jury. — WPBloomberg