How Nondisclosure Agreements Protect Bosses Like Weinstein

By | October 19, 2017

A first-year associate at a Manhattan law firm brought her complaint of sexual harassment to the managing partner. Her male boss, she said, had told her to take off her clothing. After months during which she continued to work for the same man, she left, signing a nondisclosure agreement in connection with a severance package.

The associate won’t give her name, fearing retribution for what she thinks would be an obvious breach of a legal contract. A provision in the nondisclosure agreement, or NDA, says that, in exchange for $40,000, she agrees to “not disclos[e] to any person or entity any information … about any one at the firm.” She also agreed to not sue or disparage the law firm. Her boss kept his job.

This is very often how the Harvey Weinsteins at companies stay employed—and part of the reason his story rarely spreads beyond office whispers.

Dozens of women have come forward to add to the record of alleged sexual assault and misconduct by Harvey Weinstein in the days since the New York Times first reported on decades of silenced accusations. Some of those speaking publicly about the high-powered movie producer are breaking confidentiality contracts, risking lawsuits to do so. Weinstein has reached at least eight settlements with women, according to the Times, and some of these featured NDAs.

In one of several such settlements reported by the Times, Weinstein made a $100,000 payment to actress Rose McGowan in 1997 to keep her quiet about conduct that she has since described as rape. McGowan, who was 23 years old at the time, appears to have gone two decades without explicitly identifying Weinstein. CNN reported that she retracted an interview with the New Yorker for its competing investigation into Weinstein’s conduct over fear of legal consequences.

At this point, with Weinstein shamed in lengthy exposes and shunned by his industry and peers, it’s unlikely that he will pursue in court any of the women who may have violated NDAs. But there can be little doubt that the agreements have helped keep his conduct from coming into the open, according to multiple employment lawyers.

Possible Criminal Activity

Nondisclosure agreements come in a few flavors, with varying degrees of enforceability. Many employees sign NDAs as part of their employment contracts when they first start a new job, agreeing not to sell a company’s trade secrets and other intellectual property. Google Inc., LinkedIn Corp., and Facebook Inc., among many others, require anyone who walks into their headquarters to sign an NDA. Reality-show contestants sign contracts saying they have to pay steep fines if they reveal a show’s secrets.

Weinstein also used NDAs in cases that have nothing to do with allegations of harassment or sexual assault. In 2015, for example, he was at the center of a financial dispute with the AIDs charity AmfAR. As part of Weinstein’s attempt to resolve the dispute, he asked AmfAR board members and others involved to sign NDAs.

An unsigned copy of the NDA given to Thomas Ajamie, a lawyer hired by AmfAR’s board to investigate the matter, was reviewed by Bloomberg. It seeks to prevent the recepient from talking to virtually any third party about Weinstein’s personal and business activities or otherwise assisting in any investigations. “For the avoidance of doubt,” the document reads, “‘any third party’ as used herein shall include, without limitation, any individual or entity of the press and/or media.” Employment lawyers who reviewed the Weinstein NDA said its language is standard. Ajamie declined to comment, and a spokeswoman for Weinstein declined to comment because the agreements are private.

In workplace harassment cases—both in Hollywood and in the rest of the American workforce—many companies try to use NDAs and other legal agreements to protect the employer from legal consequences for wrongdoing and, whether that is the intention or not, to keep criminal behavior out of the public eye and the courts. That way, someone like Weinstein can be a repeat offender without consequence.

“It’s buying silence. It’s buying confidentiality. It’s trying to sanitize,” said Peter Romer-Friedman, an employment lawyer at Outten and Golden. “These agreements are often protecting criminal activity.”

The constellation of people for whom a settlement can become a pact for silence is relatively small. Only from 6 percent to 13 percent of victims formally report workplace harassment to their employer or law enforcement, according to a recent study by the Equal Employment Opportunity Commission. NDAs are geared to ensure that the fraction of people who do come forward can’t warn others or bring claims to light, all of which contributes to the culture of silence around workplace harassment.

Legal scholars are now asking if settlements backed by nondisclosure pacts are protecting criminal activity. “It should be a question of whether all of this is enforceable for public policy reasons,” said Orly Lobel, a labor and employment law professor at the University of San Diego. “When these stories come out, it helps every one understand their rights and what is totally inappropriate and unlawful.”

Some companies also tack on broader nondisparagement clauses alongside NDAs. While an agreement limiting disclosure will typically bar either party from describing the facts of a particular case, nondisparagement clauses prevent an employee from saying anything negative about the company—at all, even down to a post on social media. Nondisparagement clauses are particularly popular in Silicon Valley, and critics argue that their use has helped shroud a sexist culture in the tech industry.

Ann Lai, a former principal at Binary Capital LLC, had to sign a nondisparagement clause when she joined the venture capital firm. A complaint Lai filed against her former employer alleges that the clause became a means to ensure her silence about what she alleges was a culture of harassment at Binary. Lai’s complaint describes repeated texts from Justin Caldbeck, a partner at the firm, urging her not to speak out. She did anyway, and she now faces a potential countersuit for breaking her NDA. (Binary did not immediately respond to questions about the case.)

A 2006 case, Lyle v. Warner Bros., pushed writers’ rooms on television shows to consider potential harassment claims as liabilities. A female comedy writers’ assistant working on “Friends” claimed her coworkers used vulgar language, drew lewd pictures and talked about personal sexual experiences. Warner Bros. said it had warned the employee, Amaani Lyle, that she would be in earshot of many of these conversations. The California Supreme Court ruled that raunchy sexual comments made in the workplace, in this case, didn’t equal a hostile work environment because the jokes weren’t directed at Lyle.

But the judge also found that context matters: A writers’ room, as a workplace, isn’t immune to harassment claims just because employees routinely tell lewd jokes and stories. The finding put employers on notice for legal risk, even if workers knowingly enter a job associated with behavior that can be construed as harassment.

Still, it’s not clear that these contracts hold as much power as a superficial reading would suggest. Breaking an NDA doesn’t necessarily mean giving back all the settlement money. “It’s unlikely that a court would approve of something like that,” said Romer-Friedman, an employment lawyer. More likely, he added, someone who violates a nondisclosure provision would have to pay a smaller fine.

The specter of a lawsuit by an employer, past or present, is one part of what keeps people quiet. “You might see a nasty threatening letter…saying we’re going to bankrupt you,” Lobel said. Dealing with a lawsuit, even if you win, is expensive.

An NDA also can’t prohibit an employee from filing a sexual harassment complaint with the Equal Employment Opportunity Commission, something former Fox News Network LLC founder and Chairman Roger Ailes reportedly tried to require of at least one of his victims. (A representative for Fox News did not immediately respond to questions.) The agency recently sued CVS Health Corp. for asking its employees to sign broad severance agreements that were alleged to prohibit communication with the EEOC, although a federal judge dismissed the suit. A representative for CVS said nothing in its severance agreement prevents complaints to or cooperation with the EEOC.

After the Weinstein revelations, however, the power of NDAs may face new legal and legislative challenges. Two New York State lawmakers recently introduced legislation to void any contract that includes a provision to silence workers about harassment or discrimination. “It is past time that we looked at why we allow this to occur,” said Brad Hoylman, one of the co-sponsors of the bill in the State Senate. “By silencing victims, we’re just creating new victims.”

Latest Comments

  • October 24, 2017 at 6:03 pm
    Underwriter4Life says:
    She could have committed a crime called compounding by accepting money in exchange for her not reporting a crime. Not sure a prosecutor would go after her for that considering... read more
  • October 23, 2017 at 11:09 am
    Alice says:
    If it is a criminal or illegal activity, the agreement should be null & void - like other contracts would be - and make the person (and the company who is hiding it)be res... read more
  • October 20, 2017 at 11:14 am
    TxLady says:
    Would be nice if we had some type of law that states if an NDA is used to hide criminal or possible criminal activity, the NDA is null and void.
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