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U.S. states reconsider confidential deals in workplace harassment (nytimes.com)
277 points by KirinDave 6 months ago | hide | past | web | favorite | 103 comments

Slightly off-topic, but this article shows what has been tried in some NDAs:


The clauses attached to the Weinstein agreement signed by Perkins offer an insight into how egregious some NDAs can be. She was prohibited from even obtaining a copy of the agreement – she could only look at it supervised at a law firm’s office, a clause that also prevented MPs from acquiring the document. Ultimately she obtained the agreement in June through a personal data request. Its contents confirmed that she was banned from talking to a doctor, therapist or psychoanalyst about Weinstein’s alleged harassment unless they also signed an NDA and that she should not speak about the payment even if HMRC questioned her about it.

“If a therapist, for instance, broke the agreement, I would be held responsible for their disclosure. There were guns pointed from every angle,” said Perkins, who has since managed to rebuild her career as a successful associate producer.

I really would like to see how banning health care professionals from knowing about a case would fly on the courts (though being in the US you never know). Also how do you prove it? They're under patient confidentiality laws.

Still makes me think Weinstein deserves what has come to him.

> I really would like to see how banning health care professionals from knowing about a case would fly on the courts (though being in the US you never know). Also how do you prove it? They're under patient confidentiality laws.

There is actually a reason for a clause like that. There is doctor-patient confidentiality, but the patent is allowed to waive it, and has the incentive to do so if they didn't actually want to be bound by the NDA and can use that as an exception. Or if the doctor blabs in violation of doctor-patient confidentiality, the patient would have a claim against the doctor (but no incentive to pursue it) while the party the NDA is protecting wouldn't have a claim against the doctor or the patient. So the NDA has that clause to give them one.

There isn't really any way to know if they tell a doctor without an NDA and then the doctor never tells anyone else, but then nobody cares either. The only time it matters is if the doctor does tell other people, and then that's how they know.

Ah yes, it's a legal justification, but as the article said, criminal investigations should not be blocked by civil agreements.

Ethical-wise I can think of only a couple of acts (usually headline worthy) that look less ethical than that.

> Ah yes, it's a legal justification, but as the article said, criminal investigations should not be blocked by civil agreements.

The solution to which is, of course, don't sign them.

The settlements are a compromise. The defendant would rather pay money than admit to wrongdoing and the plaintiff would rather be paid a lot of money than have to relive the incident in court, so they come to an agreement.

If you take that away, you're leaving the option that neither party preferred over what actually happened -- otherwise either of them could have chosen it to begin with.

If the victims don't like that trade off then they can stop agreeing to it. But if they continue to decide it's the right choice for them then who the heck are we to tell them they're wrong?

I don’t think they especially care about having a perfect court case so much as making the prospect of a lawsuit so intimidating and expensive that it’s never tested. It’s sleazy abuse of the system but I’m sure it’s effective.

If the judge doesn't throw out the suit and decides to try it, because of that clause alone, the feeling of dread and despair that poor woman would go through is more than enough harm caused.

A bit tangential, but I think services which include an arbitration clause should be forced to display it up front in plain language during registration and get clear confirmation from the user, and it should be strictly opt-in.

Ever since GDPR became a thing I started reading the Terms of Service of every major site I use.

Yesterday I found out my Starbucks account has a forced arbitration clause which you can only opt out of by sending a physical letter to their headquarters, and only if you do so within 30 days of having signed up. This is customer abuse at its finest, and should definitely not be legal. If I can sign up online I should be able to opt-out online, at least.

Even worse is their linking policy, which I cannot imagine is actually legally enforceable. How can linking to a publicly accessible page have terms associated with it? And the terms are incredibly user-hostile, since it basically says you can't link to them if you're saying anything bad or negative about the company.

I'd normally include a link, but I guess you'll have to search for it yourself if you want to confirm what I'm saying. Just look up "Starbucks Terms of Service", it'll be the first result ;).

One thing I love about the GDPR is that you can consent to data processing, but the requirement is that you can withdraw consent and "It shall be as easy to withdraw as to give consent".

So "click a button here to consent, send a written letter here to withdraw" means you don't have consent in the first place.

In that particular case, it seems that the problem is with how the regulation was implemented, rather than the regulation itself.

A lot of contracts (especially ToS) are just throwing stuff at a wall to see what sticks. I've yet to see a ToS or EULA that's 100% enforceable in the EU and I'd be surprised to hear they're 100% enforceable even in the consumer-hostile, corporation-friendly US.

An overeager ToS is a good way to scare people who are unwilling to risk a legal dispute. In practice a lot of the more preposterous clauses are nonsense.

It doesn't matter if the nonsense provisions are ultimately enforceable, so long as they're credible enough to be litigated. The courts provide a battlefield where the army of company lawyers will fight you in a lopsided war of attrition that ends with your financial ruin. Might makes right.

Seems like there should be a fine for putting unenforcable clauses into contracts to discourage this practice

I agree, but I think your perspective on this depends on who you think the courts are supposed to serve.

In the US, courts enabling wealthy corporations to smash individual citizens into meat paste are working as intended. It is "justice for sale", albeit indirectly -- you don't pay the judge, you pay for enough lawyering to destroy the opponent, win or lose.

Legal questions are rarely truly settled. You might think a clause is unenforceable based on some lower court rulings in your state, but a different lower court could is still free to rule the other way, an appeals court could still overturn, a federal court could overrule the state courts on a Contract Clause theory, etc. And even in the rare case where there is an on-point US Supreme Court ruling, the Supreme Court is free to reverse itself tomorrow.

Also, consider that you and I are free to agree to anything we want, enforceable or not. All that enforceability tells you is whether a court will be willing to intervene. For example, we can agree that you will donate a million dollars to my foundation, but a court will likely not enforce that because I didn't give you anything in exchange (the doctrine of consideration).

Funny thing is that if there's a single illegal phrase in the agreement, in my country, whole agreement illegal and thus void.

Since my country is in the EU it pretty much means that in my country law agrees with practice of ignoring all ToS by deefault.

That's why most contracts contain a clause that specifically accounts for this: https://en.wikipedia.org/wiki/Severability

That said, under German consumer protection laws a ToS may also not contain anything that could be considered "surprising" (which is generally interpreted in favor of consumers) so most ToSes are fairly pointless as soon as they go beyond the basics.


What bothers me most is the price David has to pay to slay the ToS of the Goliath. It is prohibitive, to say the least. Thus, there is nothing to stop this trend of ridiculous ToSs.

Such violation of human rights should attract swift and exemplary punishment. Also, the small guy should not pay for this community service he is performing.

> there is nothing to stop this trend of ridiculous ToSs.

That's easy right here. Let's just tax corporations 1¢ per user per word in their ToS.

Or just fine them if they try to assert rights they aren't legally allowed to assert. After all you're trying to trick consumers into thinking they are subject to a contract that's actually invalid.

I'd like to have a browser extension which, upon the click of a button, shows the EULA for the current website in plain English, and what it means for the user, written by a real lawyer.

You should write the extension and find an attorney to help you. I'm sure it would be popular.

how much would you be willing to pay for this service?

This here is the problem. You shouldn't have to pay for something like this, it should be provided by default in a readable form.

Otherwise ask yourself this: how much are you willing to pay Amazon to not list your address and a list of possible items at that address for the whole internet to see?

Ideally, companies would pay for this (of course the lawyer should be completely independent, so companies could pay e.g. EFF which will then pay the lawyer).

However, to get this started, perhaps an organization like EFF or Mozilla can pay for the first 10-100 most popular websites?

Didn't you know software developers and attorneys should be giving away their skills and time for free?

Software developers do not write ToSs. Attorneys get paid to make it intentionally overly complicated. The same ones can just get paid twice to turn it back to simple/understandable. Or maybe just get paid once by the company using the ToS and have them come up with something reasonably readable.

And if your job is to make other people's lives harder for no good reason other than to abuse them then yeah, maybe you should be legally obliged to fix that crap for free.

I think the above poster was talking about whomever is actually developing the extension and supporting infrastructure for this "EULA in plain English" button.

That's why I said it should be done by the original company and the same attorneys that made it complicated in the first place. Asking a 3rd party to do it for them on the user's dime is not really a solution.

As long as the software world keeps intentionally writing user-hostile, obtuse ToS documents and screaming bloody murder at the mere suggestion that a professional code of ethics that can be enforced by a regulatory industry body...then yes, I think it's someone's responsibility to do this pro bono.

This is something we built in our spare time to help people: https://levelplayingfield.io/

You can use it to search for companies with forced arbitration agreements.

Also, this: https://blog.levelplayingfield.io/aaa-arbitration-waiver-dat...

This is likely to be struck down, as it conflicts with the FAA


Maybe. To the extent a case involves a purely intra-state contract (e.g. your typical employment contract), it might be viable. I’d argue it’s unconstitutional to apply the FAA to a preempt state contract law that has purely intra-state effect.

Almost nothing is "purely intra-state" commerce, even growing weed in your own backyard for your own personal use (see the--I think absurd--decision in Gonzalez v. Raich). I agree with you that this is unfortunate.

You're a lawyer and you know all this, but for the rest of the HN crowd: an extremely broad definition of "interstate commerce" has applied since the New Deal era when the Supreme Court folded to immense pressure from the FDR administration and stopped striking down his New Deal programs. This generally favors the left, by allowing more regulation by the federal government. But it can work the other way; like here, for example, by allowing the Federal Arbitration Act to apply very broadly.

And the Radiolab: More Perfect-podcast episode to explain it for you [1]

[1] https://www.wnycstudios.org/story/one-nation-under-money

The Supreme Court has pulled back on that though in recent years. E.g. finding the individual mandate invalid as an exercise of the commerce clause (but valid as an exercise of the taxing clause).

If they force california companies to do this to out of state employees, for sure they'd lose that argunment.

The interesting provision of the FAA is this one: " but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce."

The way this works is the same for nocompetes. They still put the language in your employment contract, but stipulate that the unenforceable bits (which they don't name) don't invalidate the entire contract. That way, out-of-state contractors can still have less rights; don't worry!

Of course, we might see Californian companies simply give up the practice. Your post did conjure in my mind the delightful image of an angry out-of-state contractor shouting into the phone, "Why do I have so many rights?! Why aren't I railroaded by arbitration? Why can't I be locked into a one-sided non-disparage agreement because some executive slid his hand into my pants? I'm furious at all my options here! While I'm at it, I demand you enforce a no-compete clause."

It's standard practice to include language about how some portions of a contract bring invalid doesn't invalidate the rest of the document just about everywhere, I think.

It's called severability.

Right, that's what I was thinking of. Thanks.

There was a case about that provision, Circuit City v. Adams, and it was held that it only works to exclude transportation workers from the FAA. By the legal maxim ejusdem generis, a catch-all provision, like "any other class..." here, is generally interpreted to only include things of the same kind as the previous items in the list.

Edit: I had some commentary about the case here, but upon a closer read of the majority and dissenting opinions, it's really not as clear cut as I thought. There's plenty of good reasons to agree or disagree with what the Court did in Circuit City.

Thanks. I was just too lazy to look for precedent on it.

....or any other class of workers engaged in foreign or interstate commerce."

Not a lawyer, but doesn't a FB engineer writing FB App code from CA affect foreign and intrastate commerce?

Affecting ≠ engaged in

What is the meaning of "purely intra-state effect" given Wickard v. Filburn? How could there be a contract with only intra-state effects?

Can someone modify the title to simply "California bans forced arbitration"? "No-disparge" is a typo, but more importantly I don't see any mention of non-disparagement clauses in the bill itself. IANAL but it appears to be 100% related to banning forced arbitration.

[Edit] Also, the news articles referenced in a comment below make no mention of non-disparagement clauses, only forced arbitration.

There is some mention of non-disparagement on the "bill analysis" tab. At least in the Office of Senate Floor Analyses, haven't looked at the others.

Does it invalidate such provisions in your already-signed existing employment agreement with your current employer?

> 432.6. (a) A person shall not, as a condition of employment, continued employment, the receipt of any employment-related benefit, or as a condition of entering into a contractual agreement, require any applicant for employment or any employee to waive any right, forum, or procedure for a violation of any provision of the California Fair Employment and Housing Act (Part 2.8 (commencing with Section 12900) of Division 3 of Title 2 of the Government Code) or this code, including the right to file and pursue a civil action or a complaint with, or otherwise notify, any state agency, other public prosecutor, law enforcement agency, or any court or other governmental entity of any alleged violation.

> [...]

> (f) This section applies to contracts for employment entered into, modified, or extended on or after January 1, 2019.

So, note that arbitration could still be mandated for violations of your employment contract, but not for litigation concerning employer violations of the California Fair Housing and Employment Act. If your employment contract has a defined end date, then renewal of that contract after 2019 will be under the provisions of this new law. For ones that don't have a defined end date, I'm not clear on whether they could be considered continually extended, or if it would just be a grandfathered-in contract.

Sadly, at least some of it only applies from Jan 1, 2019 onwards:

> (b) This section applies to contracts for employment entered into, modified, or extended on or after January 1, 2019.

That's just how California does non-urgent law changes. They turn on at the beginning of the next year. Newspapers often publish a list of new laws becoming effective on January 1.

No, that also avoids a big question about the law's constitutionality under the contract clause.

IANAL, but my understanding is that it makes it a crime for the employer to enforce the provision which prevents them from suing for it in civil court.

IANAL, but the introduction says yes

I don't see it banning non-disparagement clauses. Only aspects pertaining to sexual harassment.

Sorry, I didn't have room in the title. I think you're right: non-disparage agreements are null in the face of sexual harassment lawsuits but in other cases don't seem to be affected. Forced arbitration seems to be unenforceable in all cases.

That being said, I have been thinking about Yishan-style CEOs for a while now.

This seems like the Federal Arbitration Act might at least partly pre-empt it. But I wonder why no legislature has taken advantage of the limited scope of the FAA? Specifically, it only pertains to the enforceability of contracts, but not other disincentives.

For example, a state could raise its corporate income tax rates, but as a separately severable provision, give a tax credit reversing X% of the tax hike if X% of their employees have no restrictions on their ability to publicly litigate and disclose harassment and discrimination claims. (Many variations on the specifics are possible.)

If companies drop these restrictions, it's no extra tax for them and just a few extra lines to complete on a tax form.

Alternatively, if companies keep these restrictions, there's no conflict with the FAA, just a financial penalty.

And if they get the tax credit provision struck down somehow, they keep the tax hike regardless of their employment legalese, so they may not want to fight that battle.

What major flaw am I missing? Just the optics/PR around this politically speaking, or something worse?

It’s arguable that that is a fine on allowed behavior.

Consider somone charging 10,000$ per month rent, but giving white people a 9,000$ discount would clearly be illegal.

Without the Federal Arbitration Act, states could clearly ban forced arbitration agreements within the normal course of contract law and labor law. Federal statutory preemptions of this should not be construed more narrowly than the federal law says.

The Supreme Court has construed this preemption pretty broadly, but always in the context of contract enforcement or validity.

I can indeed imagine that the Supreme Court would write disapprovingly about the tactic of using a financial incentive to discourage forced arbitration clauses, but that's very different from whether they'd go beyond that to actually strike down the tax credit, since the arbitration clauses would remain fully valid and enforceable either way.

As a matter of realpolitik, it matters that the tax hike in my idea is explicitly severable from the offsetting tax cut: most of the judges and ideologically related advocates who like forced arbitration also dislike higher corporate taxes. The only thing they could credibly do against this law would result in higher corporate taxes. A separately severable tax hike conducted in accordance with state law is clearly constitutional.

I don’t understand how this connects to racism.

Swap block for disabled if it helps. The point is if it’s illegal to charge more for some group, it’s also illegal to give people discounts because they are not in that group.

Aka, Charging X more is equivalent to giving everyone !X a discount while excluding X from the standard discount.

You can give benefits to the disabled. You cannot simply switch disabled with whites and say that because a transmutation of the practice is racist, so is the practice. The original proposal was for corporations, who are not capable of being discriminated against.

Expect, Non-disabled is not a protected class so you can directly give the disabled discounts much like how you can give seniors discounts.

And again, discrimination is not the point, the point was discounts is not a way to get around charging X more. If a state can’t charge a fine for doing X the also can’t give a discount for not doing X.

As long as they aren't a protected class you can do this just fine. If I want to charge football fans twice the price but charge soccer fans half the price, I'm allowed to do that.

Or simply say, “the state of California will not do business with companies that use forced arbitration agreements.”

Sure, that'd also work.

The point of arbitration is to settle a problem with the help of a trusted, neutral 3rd party. Forced arbitration does not seem as neutral.

Arbitration should just be banned in contracts of adhesion, where one party dictates the terms and the other party cannot edit or change them. Sure, if you're writing a real contract, where both sides are negotiating terms, arbitration can be something the weaker party can agree to in return for some other concession. It doesn't make sense in one-sided contracts.


What I don't understand is that if arbitration has any of its purported merit, then why can't both parties just agree to enter into binding arbitration at the time of a dispute - when it would be worthwhile to actually research whether it makes sense? I do understand this would leave the possibility of expensive court still on the table. But the alternative seems to undermine the very concept of a contract, by asserting that one party has an ability to unilaterally choose the interpreter of the words.

As in: "I'll give the first person who responds to this comment $20", but only per my chosen interpreter. (And I choose /dev/null)

If you did that, the arbitration decision would get vacated by a court. You can't just choose any arbitrator willy-nilly who will always rule for you. That's just not how this works. Here's a decent-looking article going through some of the bases for getting a court to overturn an arbitration decision: https://www.floridabar.org/news/tfb-journal/?durl=%2FDIVCOM%...

As for why not change the law to let parties choose at the time of the dispute, what you prefer ex ante and ex post is rather different. Ahead of time, you don't know who will be the one claiming wrongdoing of the other, so you'll be willing to agree to binding arbitration. After all, most people go into a deal intending to abide by it, and everyone goes into a deal at least trying to convince the other side of that. But after the fact, the party likely in the wrong would prefer to impose the high cost of litigation on the one likely not in the wrong. It can then unfairly capture a portion of this potential cost by proposing a settlement.

An example with made-up numbers: say you owe me $20,000 and refuse to pay and that it would cost me $5,000 in court and attorney's fees to sue you in court for it. You could offer me a settlement of $16,000 and it would be irrational for me to decline it, as it would leave me better off than winning the lawsuit (and I might not win). Now you have unfairly but legally taken $4,000 from me. If there was an arbitration option at the time of dispute, providing for a process that would only cost me $1,000, you would never accept it. Why would you?

It has to be binding and agreed to before the dispute arises for it to work.

Yes, I did acknowledge the possibility of long tail costs being higher. A case of money being owed should be relatively simple to substantiate, and if the amount is that well defined, then I'd think attorney's fees would be awarded when the other side didn't accept your offer to take $20k and insisted on litigation. But obviously many types of contracts would love to write "you cannot sue us for any reason whatsoever", and yet this is not allowed - even though it would make a lot of sense for many things like no-economic-consideration software licenses (rather than that whole NO WARRANTY rigmarole).

The main problem, as I focused on, is malinterpretation.

My example had to be very unsubtle to be understood, which is the norm in software land. But yes my contrived example would not pass the smell test in legal land and would thus be easily contested. So now we get to argue about the epsilon. Directly from the article you linked:

> Crucially, these grounds do not include substantive review of the award for "mere" errors of law or fact. As a result, "judicial review of arbitration decisions is among the narrowest known to the law."

It seems like one would likely have to show an overt conspiracy with the arbitrator or other gross arbitrary behavior to contest a decision. Given how much corruption is based on cooperative wink-wink, and that the contract drafter/arbitrator purchaser is likely to be the repeat customer, it's a bad setup.

Also directly from that article:

> Before the enactment of the Federal Arbitration Act (FAA) and its Florida counterpart, the Florida Arbitration Code (FAC), courts were generally hostile to arbitration, viewing it as "an attempt to oust courts of [their] lawful jurisdiction."

So yes, it seems that the courts even agree with me. Then the arbitration industry got the ear of lawmakers, who proceeded to undermine the courts.

Don't get me wrong - philosophically I would very much like to reduce court costs and lawyer overhead. Stripping away the right to sue through contracts of adhesion is not the way to go about that though.

Arbitration is way more expensive than court. The up front fees to a business are $3,400 for AAA. Sometimes more. This does provide an incentive for a business to settle a small dollar claim quickly.

Arbitration is much faster though, which means less attorney’s fees. That is where the cost really is.

Not in my experience. It took 7 months for the AAA to appoint an arbitrator. And, often the companies refuse to pay the upfront fees, which drags things out. See Uber.

For the 16000 settlement case, wouldn't the courts award both the legal cost plus damages incurred, so as long as you win, you'd be ahead?

Attorney’s fees are not awarded in the US. With a few exceptions, each side pays for their own lawyers.

Which is why you even get such big problems like patent trolls and anti-SLAPP....

Courts force mediation as well.

For example, a lot of states now force mediation in family law cases. They would (and should) force arbitration if they could.

(The vast majority of these cases are people failing to act like reasonable adults, not serious legal issues)

It depends a lot on the situation.

In such cases the court would determine the arbiter, not the company.

In most cases, which follow JAMS rules (even when not done by JAMS), the companies do not name the arbiter.

See https://www.jamsadr.com/rules-comprehensive-arbitration/

Rule 15.

(This is true even when, as in most cases, the company pays for arbitration)

The issue is usually information asymmetry. A repeat player has better information.

That’s why we built https://levelplayingfield.io

This is good start towards striping power of employers to become judge and the jury by exercising their "at will" clause. I would still like to see:

1. Prohibiting employers to punish employees for exercising their free speech outside of the work (right of free speech).

2. Prohibiting employers to punish employees for alleged wrongdoings outside of the work (right of due process).

My employer sent me a form asking me to sign on to an arbitration agreement for my already existing salaried job a year or so back. I considered saying sure, so long as you're willing to offer me an employment contract, but eventually I decided to ignore it. Looks like that's moot now.

This is the problem with passing laws that directly conflict with federal law - it makes people think, like you do, that these issues are moot, when that's wrong.

It also frequently gets resolved by a case making it to the Supreme Court.

State laws are not supposed to conflict with federal law.

If I'm not mistaken, SCOTUS recently ruled that the FAA lets employers force arbitration on their employers. (Simplifying slight for the purpose of a snappy comment, but this California law may not be fully valid.)

Except for the evident marijuana exception.

Yes, a large scale movement can challenge federal law. It starts by passing laws at the state level.

In a case like that, they are sort of hoping it goes to the Supreme Court and the court finds in their favor.

One of the issues marijuana growers and sellers are having is that they have trouble establishing bank accounts because banks don't want to be in violation of federal regulation.

The people passing pro mj laws and starting legitimate mj businesses could be viewed as a quiet, non violent civil rights movement. Everyone doing stuff in that space is sticking their neck out.

I'm allergic to mj, so I'm not willing to stick my neck out, but I am for the legalization of mj. I have done some research on the topic and I have tremendous respect for the people quietly working to make this legal in the US.

I had an employer who did this on a regular basis. HR would hound you to sign all sorts of agreements, even going so far as to say "You have to sign this."

It was never clear what would happen if I didn't. I'm not certain you can force someone to sign a contract as a condition of employment.

My buddy came up with an ingenious solution-- we signed each other's documents in our own handwriting, so if we ever had to we could say, "That's not my handwriting."

"Do you know whose handwriting it is?"


If you're just going to lie, why bother having someone else sign it?

Plausible deniability.

“In employment”: forced arbitration and non-disparagement clauses are in contracts in other domains as well.

Also, not yet law; the status on the bill is enrolled, which means it has past both houses of the legislature but not been signed by the governor. Presumably, Brown will sign and not veto this, but that's just a reasonable assumption about the future, not the state of the law.

I am impressed. Great move.

I was reading about non-disparage clauses and I find it disturbing that these clauses are allowed to override a law as fundamental as free speech. It's disturbing that the US needs to make new laws just to reaffirm the validity of some of its oldest, most fundamental laws.

Doesn't that in itself reduce the credibility of all laws? Maybe the real problem is that the justice system is not doing its job properly.

free speech in terms of the 1st amendment is about _government_ restrictions on free speech, the law is mostly totally silent on private agreements or arrangements.

This is a fundamental distinction that is missed entirely in way too many online conversations.

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