Accusations of sexual harassment against movie mogul Harvey Weinstein have eclipsed other news stories in recent days, coming in the wake of Fox News’ ouster of Roger Ailes and Bill O’Reilly, also for sexual harassment. In the wake of the accusations, lawmakers and others are raising questions about confidentiality agreements – and raising the possibility that the Weinstein Company and Miramax, Weinstein’s former employer, could be liable for failing in their fiduciary duty to investors and shareholders.
Weinstein, who was fired by the Weinstein Company, has denied claims of nonconsensual sex.
Disney owned Miramax from 1993 to 2005. As an employer, Disney is obligated to protect employees against harassment. Under California law, employers can be found liable for sexual harassment by a manager, even if others at the firm were not aware of the harassment.
Meanwhile, New York Attorney General Eric Schneiderman has opened an investigation of the Weinstein Company. His civil rights division has subpoenaed company records of all complaints relating to sexual harassment, along with information on how complaints were handled.
Weinstein company board members have said the accusations came as a surprise, but The New York Times story that broke the allegations says board members were aware of the payouts.
The Weinstein Company could face a “derivative suit” filed by outside investors. They could argue that the board breached its fiduciary duty by failing to monitor Weinstein, thereby exposing the company to unreasonable financial risk.
Similar questions of liability are facing 20th Century Fox, which fired Bill O’Reilly for sexual harassment and has acknowledged being aware of a $32 million settlement with Lis Wiehl – although the company said it did not know the size of the settlement.
Meantime, lawmakers in New York, New Jersey and California are considering legislation to limit the use of nondisclosure agreements and confidentiality clauses that muzzle those who receive them.
Many industries have employees sign nondisclosure agreements as a condition of employment. The goal is to keep sensitive corporate information from leaking outside the company. Those agreements can’t prohibit an employee from bringing a charge of harassment or discrimination, but the vague wording in most NDAs – for example, clauses designed to prevent employees from saying “disparaging things” about a company – aren’t written in a way that makes that clear.
The move to eliminate such agreements raises some knotty issues. Without confidentiality agreements, many companies and individuals will go to court rather than settle. That can lead to years of litigation and legal expenses for both sides. In addition, eliminating the clause could reduce the amount paid out in settlements, since silence would no longer be assured.
And finally, confidentiality agreements can protect an aggrieved party who wants to avoid undue attention or retaliation.
It’s also the case that victims who have signed a confidentiality agreement can report harassment, discrimination and criminal activities to authorities, including police or the federal Equal Employment Opportunity Commission. In California, confidentiality agreements can’t be enforced if the settlement involves potential crimes, such as felony sexual assault or child sex abuse.
New York state Senator Brad Hoylman, a Democrat, has introduced a bill that would void any clause in an employment contract forcing employees to conceal harassment or discrimination. His bill was prompted by the allegations against Fox News chief Roger Ailes. In the wake of allegations against Weinstein, Hoylman has added new language to expand the scope of his bill. New York Assemblywoman Nily Rozic plans to introduce a version of Hoylman’s bill in her chamber in January.
A similar measure is under consideration in New Jersey, where Senator Loretta Weinberg, the Democratic majority leader, is working with Assembly Republican leader Jon Brammick to draft such a bill.
California state Senator Connie Leyva has a different focus: confidentiality clauses in out-of-court settlements. She believes they silence victims who want to share their stories.
Meanwhile, the Weinstein episode has unleashed a flood of accusations against a number of powerful people. Among them:
1. Roy Price, the head of Amazon Studios, resigned after producer Isa Hackett came forward earlier this month with accusations against him.
2. Tech author and blogger Robert V. Scoble has been accused of inappropriate behavior by several women. Scoble has resigned from the Transformation Group, a consulting firm he co-founded.
3. Nickelodeon producer Chris Savino was terminated from his post following accusations of sexual harassment by 12 women.
4. Lockhart Steele, editorial director at Vox Media, lost his job after web developer Eden Rohatensky wrote a blog accusing him of sexual harassment.