This blog has tried to stay apolitical throughout its 12+ years so I’m not going to start talking politics now.
But, over the last week, the issue of confidentiality provisions and non disparagement clauses in settlement agreements of discrimination claims has moved front and center of the political debate between Senator Elizabeth Warren and Michael Bloomberg. He agreed to have his company release details late last week.
But it’s worth understanding the legal context to such clauses.
(ABC News has a pretty good recap of the background of the settlement agreements of Bloomberg here.)
The suggestion being made by Senator Warren and others is that there is something nefarious with such clauses and that the plaintiffs who signed settlement agreements should now be able to “talk” about being discriminated against.
In theory, that sounds unobjectionable.
But in practice, that is simply not how the overwhelming number of employment law cases get settled and ignores how such clauses are critical to getting deals done.
(I’m not the only one who feels this way. After I finished this post, I came across Robin Shea’s excellent post on the subject too. As she explained, NDAs — or Non-Disclosure Agreements are something different than your ordinary settlement agreement.)
In many cases, the allegations of discrimination or harassment are hotly contested. The employer might even find such allegations as unfair or frivolous.
But for various reasons — the cost of litigation, the time, perhaps even press coverage — an employer may wish to settle the claim to be done with it.
Cases settle for a whole range of amounts; the $50M settlements with Fox News are the undisputed outliers. More often, cases settle for some “nuisance” value which can be anywhere from just a job reference to tens of thousands of dollars. (To be sure, some settle for higher than that too — that does not necessarily mean the allegations have more merit to them.)
For employees, money is typically the biggest driver to settle the case.
For employers, what’s important beyond just ending the lawsuit itself is that the employer is trying to buy peace. They also worry about opening up the flood gates; we’ve seen instances where one lawsuit settlement begets another. Making an agreement confidential typically increases the amount the employer is willing to offer to settle if they know word won’t get out.
In settlement agreements, each side can privately claim victory but each side typically agrees to let bygones be bygones by keeping the settlement confidential. Most times, the parties agree on a mutual non-disparagement clause. “You don’t say anything disparaging or defamatory about me and I won’t say anything bad about you.”
Confidentiality provisions in harassment cases have been subjected to increased tax liability. But they are still expressly permitted by every jurisdiction too. Why? Because courts like settlements; courts don’t have the resources to hear every case.
Now, obviously Michael Bloomberg is a special case; should a person running for office be obligated to share the details of lawsuits that have been settled? That’s up to the public to decide.
But in general, confidentiality and non-disparagement clauses in employment settlement agreements serve a valuable purpose.