The New York State legislature recently passed a budget bill for fiscal year 2019. Governor Andrew Cuomo is expected to sign the bill into law shortly. Within the bill are a number of provisions aimed at sexual harassment prevention. Once enacted, the new law will require New York State employers to adopt mandatory sexual harassment prevention policies and conduct annual training on such policies, restrict the use of non-disclosure and arbitration provisions related to claims of sexual harassment, and extend workplace protections against sexual harassment to non-employees. The new law will require prompt action on the part of most, if not all, New York State employers.
Mandatory sexual harassment prevention policies and training
Effective 180 days after the bill is signed into law, every New York State employer (regardless of size and including those who employ only domestic and household employees) will be required to adopt a sexual harassment prevention policy that meets the following requirements:
- Prohibits sexual harassment consistent with guidance to be issued by New York State, and provides examples of conduct that would constitute unlawful sexual harassment;
- Includes information about the federal and New York State statutory protections against sexual harassment, the remedies available to victims of sexual harassment, and a statement that there may be applicable local laws (such as those of New York City);
- Includes a standard complaint form;
- Includes a procedure for the timely and confidential investigation of complaints that ensures due process for all parties;
- Informs employees of their rights and remedies, and the forums available to them for adjudicating sexual harassment complaints administratively and judicially;
- Clearly states that sexual harassment is considered a form of employee misconduct and that sanctions will be enforced against individuals engaging in sexual harassment and against supervisory and managerial personnel who knowingly allow such behavior to continue; and
- Clearly states that retaliation against individuals who complain of sexual harassment or who testify or assist in any proceeding under the law is unlawful.
New York State employers who currently have anti-harassment policies in place will likely need to update their policies, as most policies that we have seen do not cover every item on the above list. In order to assist employers, New York State will issue a model sexual harassment prevention policy that employers can adopt to meet these requirements, or employers can establish their own written policies that meet or exceed the new law’s requirements. The policy must be provided to all employees in writing. Employers should obtain written or electronic acknowledgements from employees in order to prove that they have satisfied this requirement.
The new law will also mandate that all New York State employers conduct annual sexual harassment prevention training for all employees. New York State will develop a model sexual harassment prevention training program, and employers will be required to either use that model training program or establish their own training program that meets or exceeds the new law’s requirements. The training program must be interactive and will need to include at least the following:
- An explanation of sexual harassment consistent with guidance issued by New York State;
- Examples of conduct that would constitute unlawful sexual harassment;
- Information about the federal and New York State statutory protections against sexual harassment and the remedies available to victims of sexual harassment; and
- Information concerning employees’ rights of redress and the forums available to them for adjudicating complaints.
These written policy and training requirements are similar to initiatives that are already in effect in some other states, such as California. Employers operating in multiple jurisdictions may want to work with employment counsel to craft a policy and training program that will meet the minimum requirements in each of the jurisdictions in which they operate.
Employers looking to do business, or to continue to do business, with New York State should be especially motivated to comply with these new requirements. Beginning January 1, 2019, any employer submitting a bid to New York State or any of its public departments or agencies for a public contract will need to include a prescribed statement in the bid, certifying under penalty of perjury that the bidder (1) has implemented a legally-compliant written policy addressing sexual harassment prevention in the workplace and (2) provides annual sexual harassment prevention training to all of its employees. Failure to provide such certified statement may result in ineligibility for the contract.
Restrictions on non-disclosure provisions
Effective 90 days after the bill is signed into law, non-disclosure provisions in agreements settling claims of sexual harassment will be prohibited, unless inclusion of the non-disclosure requirement is the complainant’s preference. This prohibition will apply to any non-disclosure provision that would prevent the disclosure of the “underlying facts and circumstances” of the sexual harassment claim. It appears that this provision will apply only to settlements entered into after this provision becomes effective.
Notwithstanding this prohibition, the new law will permit a non-disclosure provision to be presented to a complainant in connection with a settlement in accordance with a procedure similar to those under the Older Workers Benefit Protection Act (the law that governs releases of age discrimination claims under federal law). The bill states that the complainant must have 21 days to consider the non-disclosure provision and if, after 21 days, the complainant’s preference is to include the provision, then the parties must memorialize such preference in a writing signed by all parties. There must also be a seven-day revocation period following the execution of such agreement, and the agreement may not take effect until the seven-day revocation period has expired without the complainant’s revocation.
This new prohibition raises a number of questions. For example:
- Does this prohibition apply to information related to a settlement besides the underlying facts and circumstances of the alleged sexual harassment (such as the amount of the settlement payment)?
- May the 21-day consideration period be waived by the complainant (as it can when waiving federal age discrimination claims)?
- Does this prohibition permit non-disclosure agreements that cover any other allegations of wrongdoing that are raised together with sexual harassment allegations? Unless this uncertainty is resolved, employers may consider using multiple settlement agreements in such situations, one agreement without a non-disclosure provision related to the sexual harassment allegations and one agreement with a non-disclosure provision for the other allegations.
- Is an employer permitted to invalidate the entire settlement agreement if the complainant elects not to include the non-disclosure provision or revokes a prior election to include such a provision?
Because the statutory language does not provide clear answers to these questions, further guidance from New York State would be welcome.
When considering whether to include a non-disclosure provision in a sexual harassment settlement agreement, employers should also keep in mind that, as a result of the recent federal tax reform legislation, settlements or payments related to sexual harassment claims are no longer tax-deductible if they are subject to a clause prohibiting disclosure of the settlement or payment.
Restriction on mandatory arbitration clauses
Effective 90 days after the bill is signed into law, contractual provisions that require individuals to resolve claims of sexual harassment via arbitration will be prohibited. The bill is clear that this prohibition will not apply to preexisting arbitration agreements. Also, the bill expressly provides that if there is a conflict between this prohibition and a collective bargaining agreement, the collective bargaining agreement will control. Finally, the bill does not prohibit individuals from voluntarily agreeing to arbitrate a dispute at the time the dispute arises.
This restriction on mandatory arbitration clauses has a very significant carve-out that is likely to limit its impact on most private employers. This restriction will not apply in those situations where it is inconsistent with federal law. This is important because the Federal Arbitration Act (FAA) has broad application. It applies to arbitration contracts involving or affecting interstate commerce (other than employment contracts for transportation workers), and in the modern age, few employment relationships have no nexus to interstate commerce. Therefore, only few employee arbitration agreements will fall outside the scope of the FAA. As a side note, a case addressing the breadth of the FAA’s exception for transportation workers is currently expected to be heard by the United States Supreme Court during its upcoming fall term.
The FAA applies to an arbitration clause regardless of whether or not the FAA is expressly mentioned in the contract, and should preempt any state law selected in a general choice of law provision unless the contract expressly evidences the parties’ clear intent otherwise. Where an arbitration clause is covered by the FAA, this new New York State restriction on mandatory arbitration clauses should not apply. To make sure that there is no confusion about intent, employers should consider adding an express statement to their arbitration provisions that those provisions will be governed by the FAA.
Protections for non-employees
The new law will extend protections against sexual harassment to non-employees in the employer’s workplace, including contractors, subcontractors, vendors, consultants, and other individuals providing services pursuant to a contract in the workplace. Under the bill, an employer may be held liable for sexual harassment of such non-employees when (1) the employer, or its agents or supervisors, knew or should have known that such a non-employee was subjected to sexual harassment in the employer’s workplace, and (2) the employer failed to take immediate and appropriate corrective action. Unlike the other new provisions discussed above, which will provide a short grace period for compliance, these expanded protections for non-employees will take effect immediately once the bill is signed into law.
Next steps for employers to take now
While we await Governor Cuomo’s signature on the bill and New York State’s issuance of the model sexual harassment prevention policy and training program, and regulations and/or other guidance clarifying aspects of the new law, employers will want to review their existing policies and training programs covering sexual harassment and consider what updates will be needed to comply with the new law. New York State employers that do not currently have such policies and/or training programs will need to adopt them to comply with the new law. Given the focus of the new law on the role that supervisors play in reporting and handling incidents of sexual harassment, employers should make sure that their supervisors are properly trained on the law and their employer’s policy. Finally, New York State employers should review their employment-related forms to determine if their non-disclosure and/or arbitration provisions need to be revised in light of the new law.
New York City employers should stay tuned for further developments, as the New York City council has introduced a number of bills designed to strengthen sexual harassment protections. If enacted, these New York City laws would impose additional requirements on New York City employers.
Please contact us with any questions. We would be happy to assist your company with compliance with the new law.