Here’s Something The News Media Hasn’t Explained Regarding The Weinstein Scandal: Those Victim Confidentiality Agreements Are Unethical, And Maybe Illegal

Rose McGowan, the new Sexual Harassment Fury on social media, says she was raped by Weinstein and had to accept a $100,000 settlement with a confidentiality agreement as a condition of the deal. That means that if she subsequently told her story and accused Weinstein, she would be liable for damages, and would have to return the money. Right?

Not exactly. Most of the accounts in this sordid series of events make it seem like confidentiality agreements are iron clad and enforceable. Often they are neither. McGowan’s almost certainly wasn’t.

Debra Katz, an attorney specializing in sexual harassment law suits, recently explained that if employees or former employees came forward with information about Weinstein participating in criminal misconduct, their non-disclosure agreements or confidentiality agreements would probably be unenforceable, saying,

“These kind of very broad NDAs or confidentiality agreements typically violate public policy. Employees have to have the legal ability to discuss any concerns about unlawful behavior in the workplace … These broad provisions that would effectively silo people, make them feel like they can’t speak about this, are simply an instrument to put fear in people.”

My position has always been that lawyers who construct such agreements, knowing that they are unenforceable, are committing sanctionable ethical misconduct. The lawyer for the employee being silenced, moreover, has an obligation to let the client know that the requirement is unconscionable. Of course, it’s the client’s decision whether she wants to take the money.  It is also unethical to make an agreement you have no intention of honoring.

Not all non-disclosure/confidentiality agreements are the same. It is reasonable, indeed essential, for companies to protect trade secrets, for example. I sign confidentiality agreements with my law firm clients, in case I encounter a law firm client secret that the firm must protect. Think about, it though: if McGowan witnessed Harvey committing a murder, would a court enforce her “I’ll never tell if you give me money” deal? No. Nor would  Weinstein be able to enforce a contract that prevented employees from reporting sexual harassment claims to the Equal Employment Opportunity Commission.

The problem with beating confidentiality agreements is that they tend to be kept confidential. Many are not as binding as the parties, or at least one of them, think they are. Public policy and many laws prohibit confidentiality in several spheres, and some laws declare that certain information cannot be kept confidential. A basic principle of  contract law is that agreements that violate sound public policy and are against the public welfare will not be enforced.  This can occur when an employer tries to make employees sign confidentiality terms that are  outlawed by statute. In California, for example, an ex-Google employee has sued the company for violating labor laws by requiring workers to sign agreements that they will not disclose their working conditions or wages.

Now, if a confidentiality agreement gags and employee and stops her from alerting authorities that a sexual predator is on the loose and attacking helpless young women, is that an arrangement that courts will enforce?

No.

Courts will set confidentiality aside if they violate the law or public policy. The U.S. Eleventh Circuit Court of Appeals, for example, has held that settlements in Fair Labor Standards Act litigation should not involve confidentiality because it contravenes congressional intent for the law and undermines regulatory efforts. Similarly, the National Highway Traffic Safety Administration says that protective orders, settlement agreements, or other confidentiality provisions violate public policy and law if they prohibit motor vehicle safety-related information from being transmitted to the government. GM continued to install dangerous airbags for years by settling lawsuits with confidentiality agreements and paying large settlements, a vivid example of how vital information about motor defects that should have been disclosed for public safety were withheld using the unethical contracts.  GM decided that it was cheaper to pay for the deaths and injuries than to replace the equipment on millions of cars. The infamous Pinto case involved Ford doing the same thing: paying the victims or their families when the cars exploded, and making silence a condition of their compensation. This was what McDonalds was doing with its third-degree burn-making coffee: every time somebody scalded themselves, Mickey D’s paid them off and required silence in return…so more people were scalded. As a witness for the company said on the stand, “We make back what a settlement costs in about ten minutes of coffee sales.”

Confidentiality agreements have also been struck down when they are used to block whistleblowers, as in the saga of Jeffrey Wigand, the biochemist and former vice president of research and development at Brown & Williamson, who eventually told the nation that cigarette companies were altering their tobacco blends with chemicals such as ammonia to increase the effects of nicotine, and had lied to Congress when their executives swore that nicotine wasn’t addictive.

For these reasons, the American Association for Justice, decades ago (when I worked there), established a position that its member trial lawyers should make every effort to discourage clients in product liability cases from signing confidentiality agreements that withheld information about dangerous products and practices from the public.

Understanding the legal status of confidentiality agreements is essential to understanding the constraints, or lack of them, on Weinstein’s victims. I doubt that any of the confidentiality agreements regrading Weinstein would have been upheld, and all of them were unethical, not that the abused and harassed women would have any way to know that unless their lawyers explained it to them—as they had an obligation to do.

Have any of the mainstream media reports included this crucial information in their reporting? If so, I haven’t seen it.

 

5 Comments

Filed under Business & Commercial, Ethics Train Wrecks, Journalism & Media, Law & Law Enforcement, Professions, Workplace

5 responses to “Here’s Something The News Media Hasn’t Explained Regarding The Weinstein Scandal: Those Victim Confidentiality Agreements Are Unethical, And Maybe Illegal

  1. Plaintiffs lawyers working on contingency have somewhat of a personal interest conflict here. They want to maximize the settlement amount, which means agreeing to whatever confidentiality language the defendant wants without giving too much thought to enforceability.

    That being said, there is an important distinction between rape and the more typical gender discrimination/sexual harassment case. Employers almost always want confidentiality in the latter cases. More often than not, the confidentiality is not to protect a “predator” but rather so that a financial payout to one plaintiff does not encourage additional lawsuits. There is nothing wrong with this.

    • I agree. This is the kind of settlement Spartan has described having to sign. Wnen there is actual assault, however, the CA is more cover-up than anything else.

      Contingency representation has always posed an inherent conflict, and is a case of ethics balancing by the profession. As you know.

  2. Chris marschner

    Great information, I always thought these CA’s were far to broad to be enforceable. With that said, I do not understand why an individual should sue for these violations of law. Might it not be more prudent for the government to sue the firm and any award won be used to fund actual damages incurred ( ie therapy, lost wages etc.) What concerns me is that when a high profile accusation is made in which the plaintiff might get a sizable award we begin to see a parade of “it happened to me toos”. These new accusers, who up to now were silent, bolster the original plaintiffs case and lay the groundwork for their own suit. They become self reinforcing and presumptively corroberating claims. Each successive person “bravely”coming forward now is suspect in my mind because when it comes to sexual harassment the female plaintiff is presumed virtuous and the male defendant presumptively guilty.

    We need to figure out a way to punish violators and compensate victims without creating the incentive for false claims. Using the DOJ to prosecute these suits would eliminate the problem of unequal power to litigate thus mitigating the claim of being powerless to fight guys like Weinstein and would render such CA’s moot.

  3. Rich in CT

    Are 6 figure settlements lump sums or annuities? I would think a lump sum would be relatively safe, but couldn’t an annuity be easily be cut off for breach of confidentiality.

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