Disclosed: How to Restrict Non-disclosure Agreements
(Part Two of Two)
In recent years, we’ve seen a growing list of abuses hidden by non-disclosure agreements (NDAs) in Hollywood, religious institutions, major corporations, and local government. For example, after public fallout from Amazon’s headquarters search, New York City legislators are working to make sure that, in the future, talks for such deals do not include non-disclosure requirements. Part One of this series shows, across industries, how NDAs have limited free speech and kept serious and dangerous situations from reaching a resolution.
However, while current events might highlight concerns about NDAs, attempts to regulate their use is nothing new. Florida enacted a law limiting NDAs for public hazards in the ‘90s. Many states followed its model, or created standards of their own. Illinois lawmakers contemplated regulations nearly two decades ago. So, if there is a will — a real commitment to adequately protecting the public’s interests while keeping private industry private — there's a way, including plenty of experience from which Illinois policymakers can draw.
Florida’s “Sunshine-in-Litigation Act” prohibits the concealment of public hazards by the courts. The act has been most frequently applied to product liability and sexual abuse of minors. Although untested, in theory, Florida’s law also should apply to NDAs in cases like those signed by Harvey Weinstein’s accusers. As one Florida lawyer writes, “sexual harassers are arguably individuals and workplace conditions that cause injury to the unknowing public and create a public hazard.”
Florida’s law also prohibits secret settlement agreements involving government entities. It states that, “[a]ny portion of an agreement or contract which has the purpose or effect of concealing information relating to the settlement or resolution of any claim or action against the state, its agencies, or subdivisions or against any municipality or constitutionally created body or commission is void, contrary to public policy, and may not be enforced.” The act gives not just those who signed the agreement but “any substantially affected person,” like a new victim of harassment or a representative of the news media, the ability to challenge non-disclosure.
A number of states across the country have adopted laws or judicial branch rules similar in their effect to Florida’s law, including Nevada, New York, Washington, and Texas. Others, like North Carolina and Oregon, have adopted narrower laws that apply only when the settlements involve public sector defendants. For example, Oregon’s law states:
A public body, or officer, employee or agent of a public body, who is a defendant in an action...may not enter into any settlement or compromise of the action if the settlement or compromise requires that the terms or conditions of the settlement or compromise be confidential. Or. Rev. Stat. Ann. § 17.095 (1)
In such cases, North Carolina’s law gives some limited discretion to adjudicators:
No judge, administrative judge or administrative hearing officer of this State, nor any board or commission, nor any arbitrator...shall order or permit the sealing of any settlement document in any proceeding described herein except on the basis of a written order concluding that (1) the presumption of openness is overcome by an overriding interest and (2) that such overriding interest cannot be protected by any measure short of sealing the settlement. Such order shall articulate the overriding interest and shall include findings of fact that are sufficiently specific to permit a reviewing court to determine whether the order was proper. N.C. Gen. Stat. Ann. § 132-1.3(b)
If similar laws or rules were adopted in Illinois, they would prevent governing bodies from entering into confidential settlements, unless certain specific criteria were met, such as, in Oregon’s case if, “the terms and conditions…are required to be confidential under federal law.”
Still, other states have focused their attention on sexual harassment. In 2006, and amended in 2016, California approved laws directed specifically at the use of NDAs in settlements of sexual offenses. Its’ legislature also recently passed two additional bills aimed at regulating mandatory arbitration and sexual harassment settlements. California’s law places specific responsibility on attorneys, stating that lawyers who demand inappropriate material be included in an NDA might face discipline.
Illinois lawmakers frequently have championed — and abandoned — sunshine-in-litigation laws
Illinois began contemplating sunshine-in-litigation laws as early as 1997. A bipartisan group, including current state House Republican Leader Jim Durkin and Democratic U.S. Rep. Jan Schakowsky, sponsored legislation with language similar to what was in place in Florida.
Two more attempts followed. The most recent attempt, in 2003, achieved the most success. Former state Rep. James D. Brosnahan’s (D) legislation passed the House with bipartisan support, but languished in the Senate. That bill included much of the same language from 1997 and would have addressed both NDAs and other court orders or judgments, such as protective orders. However, Brosnahan’s legislation removed “person” from the definition of a public hazard, a key change that would have carved out an exception for many cases of sexual harassment and abuse.
Legislators now are indicating they are ready to take on the issue again. In April of 2018 a bill was introduced by state Rep. Jaime M. Andrade (D) focusing on regulating the use of non-disclosures in settlements related to sexual abuse of minors. While his bill never was brought forward for consideration by legislators, interest in NDAs keeps surfacing. For example. one of the recommendations of the Anti-Harassment, Equality, and Access Panel — convened in 2018 to address sexual harassment in political campaigns and political organizations — was that campaigns should be prohibited from using NDAs in their employment agreements. And GOP state Reps. Grant Wehrli (R) and Avery Bourne (R) have introduced another bill that would require candidates for statewide office to report whether they are a party to any NDAs at the time they file paperwork to run.
State Senator Melinda Bush (D), a co-chair of the Senate Sexual Discrimination and Harassment Awareness and Prevention Task Force as well as the Anti-Harassment, Equality, and Access Panel and is optimistic about Springfield's appetite for change. Reflecting on 2018 she says, “We did a lot to dig into sexual harassment in the legislature and politics but we did very little in the private sector, so I think that’s the next step.” But, she feels, regarding NDAs in the private sector,“we are talking more than sexual harassment here," adding, "there are conversations that need to take place with the private sector and I’m hopeful that they are ready to be at the table."
If a solution isn’t found in the Capitol, a second option also exists just across the street. The Illinois Supreme Court could adopt a rule, similar to Texas, directing judges to reject NDAs that fail to honor the Freedom of Information Act and that hide a danger to the public. Given Chief Justice Anne Burke’s continuing concern over sex abuse cases hidden by the Catholic Church, in-part through the use of non-disclosure agreements, a new court rule is not out of the question.
It’s time for serious debate and action in Springfield
As with any policy change, the idea of regulating NDAs carries risks. Executives in private industry likely will be concerned about the potential for trade secrets, and, frankly, their mistakes becoming public. Some advocates worry that limiting NDAs might mean companies will be less willing to settle in the first place, or are likely to offer less money to victims. On the other hand, others have suggested that current laws don’t go far enough. They point out that addressing limitations on NDAs in civil litigation and related activities will not directly address their use in basic employment contracts and other areas outside the courts.
These concerns and critiques point to a need for thoughtfully crafted rules, but they should not be a reason to neglect transparency that serves the public’s interest. If recent legislation and the findings of the Anti-Harassment, Equality, and Access Panel are any indication, legislators may be ready to get to work — for a fourth time — on crafting a solution. The use and variety of statutes limiting NDAs has expanded since 2003. So, a good solution should be achievable. Perhaps Springfield will bring litigation in Illinois a little sunshine in 2019.