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#MeToo law restricts use of nondisclosure agreements in sexual misconduct cases

#MeToo law restricts use of nondisclosure agreements in sexual misconduct cases
Harvey Weinstein's former assistant, Zelda Perkins, shown in November 2017, signed a nondisclosure agreement that she now calls an "unethical" bargain. (David M. Benett / Getty Images)

For nearly 20 years, Zelda Perkins, Harvey Weinstein’s former assistant, lived with a secret.

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Perkins, who had worked at Miramax’s London office, told no one about the movie mogul’s rampant bullying, how he had regularly exposed himself to her and forced her to take dictation while he bathed. She said nothing about the colleague who’d claimed that Weinstein had attempted to rape her, an incident that led Perkins (and the colleague) to leave the company after negotiating a settlement and signing a nondisclosure agreement that forbade them from discussing Weinstein’s behavior, even with family.

But once investigations into Weinstein turned up claims of rape in October 2017, Perkins was forced to reconsider the “unethical” bargain she made. “I was just so angry and frustrated, and I wasn’t allowed to speak to anybody about what happened,” she told the Los Angeles Times. Although she faced crushing legal and financial repercussions if she went public, “I felt I had an absolute moral duty to break this agreement.”

Perkins told her story in the Financial Times later that month, helping stir up questions about NDAs and the role they’ve long played in enabling men accused of abuse to evade discovery.

The onerous agreement Perkins signed — which included a $316,000 payout, split with the co-worker who had accused Weinstein of sexual assault — not only prohibited Perkins from speaking out, but also barred her from sharing her story with friends, family or doctors, unless they too signed NDAs. It also limited the scope of what she could say in any criminal case brought against the producer and bound Perkins’ lawyers to their own set of confidentiality agreements. Perhaps most bizarrely, Perkins wasn’t even allowed to possess a copy of the NDA she’d signed.

Weinstein, through a spokesperson, declined to comment on Perkins’ claims, and has repeatedly denied “any allegations of nonconsensual sex.”

Critics have long argued that NDAs can protect serial abusers from discovery and prosecution, and thus enable further abuse. In the 14 months since she broke what she calls an “immoral agreement,” Perkins has sparked British Parliamentary hearings about the legality of NDAs and a broader move to ban them as cudgels that mask workplace harassment and discrimination.

California will be among the first places to restrict the use of nondisclosure agreements. (Last April, New York endorsed a new NDA law that starting in 2019 permits confidentiality clauses only at the request of the victim; other laws are in the works.)

In September, outgoing Gov. Jerry Brown signed into law a bill that would ban nondisclosure provisions in settlements involving claims of sexual assault, harassment or discrimination based on sex. The California bill, one of a raft of #MeToo-inspired laws, goes into effect Jan. 1.

Other new laws include requiring publicly held companies to have at least one woman on their board of directors and banning nondisparagement clauses as a term of employment or in exchange for a raise or bonus.

At a recent news conference in North Hollywood, Assemblywoman Laura Friedman (D-Glendale) called the laws the “most comprehensive policies in the nation, bar none,” adding that California is “setting the gold standard,” when it comes to greater protections against sexual harassment.

But some advocates worry that the new law will make it harder for victims to extract settlements from their abusers and question whether it goes far enough in shifting the balance of power that has long protected powerful men in Hollywood and elsewhere.

California’s new NDA law applies to both public and private employees and expands on an existing law that bars settlement provisions that would prevent the disclosure of felony sex offenses. The new law bans the use of a confidentiality clause to suppress factual information in sexual harassment, discrimination and retaliation claims.

It also allows an accuser to shield her identity along with any information that might lead to her unveiling as long as the case does not involve a government agency or public official. Both parties can request that settlement amounts remain sealed.

Last January, lawyer Ally Coll Steele founded the Purple Campaign to end workplace discrimination. She hailed California’s NDA bill as “critical to the kind of change coming out of this moment.”

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A former lawyer with the powerhouse Washington firm Boies, Schiller, Flexner, Steele said she formed the nonprofit after learning not only that her firm’s founding partner, David Boies, was representing Weinstein but also that the firm had hired private investigators to discredit the women who had brought claims against him.

This bill will help force more transparency and accountability on the part of employers, Steele said. “NDAs allowed employers to systemically settle claims in a way that did not address the problem,” she said.

Originally developed to be used for reasonable business purposes, such as preventing employees from sharing trade secrets, nondisclosure agreements were customarily put into place at the outset of employment.

“At some point,” said Marc Simon, an entertainment lawyer with Fox Rothschild, “businesses or attorneys realized that NDA provisions could be used not just to protect legitimate business aspects but to shield issues that would be illegitimate or illegal.”

As NDAs evolved, they became routinely used as a part of settlement agreements, creating what Simon called “an environment of secrecy.”

“All of these sexual harassers, how do they stay in the workplace?” asked Nancy Erika Smith, a partner at New Jersey law firm Smith Mullin. “NDAs, that’s how.”

Comedian Bill Cosby used NDAs when settling claims of sexual misconduct. And among the disclosures churned up in CBS’ investigation into alleged sexual misconduct by former Chief Executive Leslie Moonves, the New York Times found that the network signed an agreement with a female employee in the 1990s, paying her more than $5 million to settle sexual assault claims against “60 Minutes” creator Don Hewitt, whose career at the network continued for years.

The flood of revelations about nondisclosure agreements has also laid bare the power imbalance between claimants and the accused. In addition to imposing strict confidentiality clauses, they are typically loaded with harsh financial and legal penalties for talking about any allegations, or even acknowledging that an NDA exists.

Among the punitive terms in several of the NDAs between former Fox News host Bill O’Reilly and a number of women, for example, were that they give up any diaries, photos and emails describing his alleged harassment, and agree to disclaim "as counterfeit or forgeries" any of the materials if they were made public. (O’Reilly denies mistreating his female colleagues.)

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Smith, who has backed a bill to ban NDAs in New Jersey, calls them untenable for women.

“I’ve been fighting NDAs for 38 years,” she said. “Every time they say they won’t settle unless we agree not to talk about it.”

Smith’s client, former Fox News host Gretchen Carlson, won a $20-million settlement against the late Fox Chairman Roger Ailes, but Carlson is prevented from discussing in detail the terms of her own settlement.

In March, the Weinstein Co. filed for bankruptcy and released anyone who had signed an NDA as a result of claims of sexual misconduct on the part of Harvey Weinstein.

However, Smith said another client wants to talk about a Weinstein sexual assault claim she made in 1998, the NDA she then signed, and the role of NDAs in enabling his behavior since. But the client is fearful and remains barred from doing so because her settlement took place when she worked for another company, one that hasn’t revoked those agreements.

A spokesperson for Weinstein said: “The allegations are absolutely untrue, and there has never been any claim of sexual assault that was part of any agreement.”

“Women don’t want to sell silence and lawyers shouldn’t be selling or buying silence,” Smith said.

Perkins had trouble finding work in the film industry after her settlement with Weinstein. She said that was partly because she could not explain why she had abruptly left the employ of a powerful and ascendant producer. And so Perkins, now 46, moved to Guatemala and trained horses for five years.

“I don’t think I understood the impact of being silent for 20 years,” she said.

For Weinstein, she said, “this is 10-minute drama. Six weeks later he was picking up the Oscar for ‘Shakespeare in Love.’ I should have been there too. It was the last movie I worked on.”

But when Perkins decided to break her NDA in the Financial Times in the fall of 2017, she found that no law firm would represent her.

“No one would touch me,” she said. “It was infuriating.”

She said the lawyers who negotiated her settlement told her not to bother. “They said, ‘Harvey was being exposed,’ ” she recalled, “But I said, ‘This is bigger than Harvey.’ There are always going to be Harveys, and if the law is being used immorally to cover up criminal behavior, we’re in a dire situation.”

So Perkins lobbied members of Parliament, which recently established a committee devoted to examining the misuse of NDAs. “We will find out whether we will follow in the footsteps of California,” Perkins said.

Not everyone is satisfied that California’s new suite of #MeToo laws will improve outcomes for victims.

Feminist lawyer Gloria Allred called the new NDA ban “a mixed bag.” Removing the confidentiality clause, she said, will make it more difficult to achieve a maximum settlement for victims because there will be less incentive for defendants to settle.

“Yeah, the law passed and the public has a right to know, but some of this is not going to be positive for victims,” she said.

And given the difficulty of criminally prosecuting sexual misconduct cases, the only legal recourse victims have is civil litigation. Allred said she fears that taking confidentiality off the table will make it more difficult to get defendants to negotiate.

A settlement can also spare victims costly lawsuits. “We just won a jury verdict for $4 million,” she said, but it took seven years. “Many victims won’t or can’t go through seven years of litigation.”

Moreover, confidentiality cuts both ways. “The way they operate now,” attorney Lisa Bloom said, “the claimant also gets confidentiality, and oftentimes they don’t want to be subjected to the scrutiny that comes with filing a case. That can include public shaming and difficulty in gaining new employment.”

These questions about how the new law may constrain options for individual victims are one upshot of the way it treats harassment not as a series of individual misdeeds best handled by affected parties through civil litigation but as a public policy concern.

Despite these potential challenges, Bloom said, the law “is definitely a step in the right direction.”

Schuyler Moore, a partner at Greenberg Glusker, calls legal restrictions on NDAs misguided. He said that many sexual harassment cases are “extortion” and pointed to a recent settlement he negotiated on behalf of a celebrity client, who he said was wrongfully accused.

Moore said the client wanted to move past the allegation and would never have signed a deal without a confidentiality clause. “In this country the Constitution prohibits government interference with contracts. Everyone ignores that.”

What lawmakers and advocates are keenly aware of, they say, is that the new restrictions on NDAs are just an opening gambit.

“While we’ve made great strides, there is so much more to do,” state Sen. Hannah-Beth Jackson (D-Santa Barbara) said at a recent news conference.

Brown signed into law several important bills but declined to enact laws banning forced arbitration and extending statutes of limitations on filing a claim.

Others believe current proposed legislation could go further.

Bloom said perpetrators accused of harassment should not be allowed to walk away with massive financial rewards. Moonves was to exit CBS with a $120-million severance package until the company’s board found that he had misled the investigation into alleged sexual misconduct; Ailes left Fox with a $40-million payout after multiple allegations of sexual harassment and abuse.

“I think things are starting to change,” said Cathy Schulman, president emerita of Women in Film and the head of Welle Entertainment. But she said harassment is a symptom of a larger problem: gender disparity. For the last seven years she’s been working with a group of Hollywood executives on Reframe, an organization devoted to creating new systemic models in Hollywood.

“I think this legal relief coming our way has to be coupled with an effort to attack the problem systemically,” she said. “Harassment is a symptom not a cause of a discriminatory environment.”

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