On May 16, 2018, Governor Larry Hogan signed into law The Disclosing Sexual Harassment in the Workplace Act of 2018. The Act, a response to the “Me Too” movement, addresses two important areas affecting employees who raise concerns about workplace sexual harassment. First, the Act effectively ends mandatory arbitration of sexual harassment claims by prohibiting employers of any size from including a “provision in an employment contract, policy or agreement that waives any substantive or procedural right or remedy to a claim that accrues in the future of sexual harassment or retaliation for reporting or asserting a right or remedy based on sexual harassment …” Under the Act, employment agreements and other contracts containing a requirement that a future sexual harassment or related retaliation claim be arbitrated are null and void. The legislation also prohibits employers from taking any adverse action (such as discharge, suspension, demotion, discrimination or any other retaliatory action) against workers for refusing to waive their rights. Any employer who enforces or attempts to enforce a provision that violates the Act will be liable for the employee’s reasonable attorneys’ fees and costs.
Second, the Act requires companies with 50 or more employees to report to the Maryland Commission on Civil Rights (1) the number of settlements made after an allegation of sexual harassment by an employee, (2) the number of settlements made containing a mutual confidentiality clause, and (3) the number of times the employer has paid for a settlement of allegations against the same employee over a 10-year period. The survey will include a space for the employer to report whether the employer took personnel action against the employee whose conduct was the subject of a settlement pursuant to subsection (3) above. The surveys must be submitted on or before July 1, 2020, and July 1, 2022. The Maryland Commission on Civil Rights will collect and compile the data and make publicly available on its website the aggregate number of responses for each subsection above, and will retain and make available for public inspection upon request responses from specific employers to subsection (3). While the publicly available data is intended to hold employers more accountable for addressing sexual harassment in the workplace, it is important to note that certain confidential data, such as the identities of the alleged harassers or victims or the total amounts of settlements, is not requested under the Act.
One open question is whether the provisions in the Act that would end mandatory arbitration of sex harassment claims are preempted by the Federal Arbitration Act (FAA), which favors arbitration and generally requires the enforcement of arbitration agreements despite state law to the contrary. In fact, in an opinion just issued on May 21, 2018, Epic Systems Corp. v. Lewis, the Supreme Court reiterated its historical deference to the FAA in upholding the validity of class action waivers in arbitration agreements signed by employees at the time of hire. Time will tell whether Maryland’s new law and others like it can coexist with the FAA.
The new Act becomes effective on October 1, 2018. Maryland employers that currently require arbitration of employment disputes will have to decide whether to eliminate the requirement with respect to sexual harassment claims or to take a stand that federal law preempts Maryland’s attempt to void such agreements. Employers subject to the reporting requirement should create a method for tracking settlements to meet the requirement. Consult legal counsel for further guidance on this important new law.