Tag Archives: confidentiality

Shhh? Sexual Harassment Settlements May No Longer Be Deductible

The tax reform law that passed in December has been the topic of much discussion.  One aspect of it that has not received as much discussion is a provision which impacts whether a payment made as part of a sexual harassment settlement is deductible.

In response to the #MeToo Movement Congress included the following in the new tax reform bill:

No deduction shall be allowed under this chapter for – (a) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement; or (b) attorney’s fees related to such a settlement or payment.”

It seems clear that the intent of this provision is to remove the tax deduction from a payment made to settle a sexual harassment or sexual abuse suit  if the payment is subject to a nondisclosure or confidentiality agreement.   But several questions remain.

What if there are multiple claims being settled?  Is the entire payment not deductible if a confidentiality provision is included in the agreement, or just a portion of it? And will allocating a specific portion of the payment to the sexual harassment claim suffice, so that only that amount is not deductible?

What about the attorney’s fees? If a nondisclosure agreement is required is the deduction lost for all the fees in the case, or just the portion “related to such a settlement or payment”?

In most cases the settlement is subject to a confidentiality provision.  Congress has now given employers settling sexual harassment claims reason to pause before automatically making confidentiality a part of the settlement.  Remember to discuss this with your lawyer, and consider the pros and cons of silence verse the tax deduction,  before you make this decision.


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NLRB Lightens Up On At Will Disclaimers And Confidentiality Of Investigations

Recently the NLRB’s General Counsel issued two memos which greatly improve the positions the Board had previously taken on the legality of At Will Disclaimers and requiring the confidentiality of investigations.

In the memo addressing At Will Disclaimers the Board determined that the following language is lawful: ” Only the Company President is authorized to modify the Company’s at-will employment policy or enter into any agreement contrary to this policy.  Any such modification must be in writing and signed by the employee and the President.”  The Board reasoned that the language is lawful because it provides that the at will relationship can be modified in the future.

In the memo addressing the confidentiality of investigations the Board provided us with the following language which it found to be lawful: ” [Employer] may decide in some circumstances that in order to achieve these objectives, we must maintain the investigation and our role in it in strict confidence.  If [Employer] reasonably imposes such a requirement and we do not maintain such confidentiality, we may be subject to disciplinary action up to and including immediate termination.”

Based on these memos employers should do the following:

1.  Make sure that your At Will Disclaimer provides for the ability to modify the relationship.  Limiting the ability to modify to the President and requiring that it be in writing is permissible.

2. When you impose a confidentiality requirement on an investigation have a specific, reasonable reason for doing so.  Protecting witnesses from intimidation or retaliation, preserving evidence and preventing witnesses from collaborating are certainly reasonable reasons for preserving confidentiality.

Here’s hoping the NLRB continues to be reasonable!

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Is Your Confidentiality Policy Legal?

Most employers have a confidentiality policy that is distributed to all employees.  Most of those policies broadly define confidential information.  But if your policy defines confidential information to include employee wages and salaries is it legal?

A confidentiality policy that prohibits employees from discussing wages, salaries or other terms and conditions of employment is illegal because it violates the National Labor Relations Act (NLRA).  This fact was reinforced in a recent ruling  against Aerotek Inc. after two of its recruiters in Nebraska told several employees they were not allowed to disucss their wages as a condition of employment.

Employers need to make sure that their confidentiality policy gives specific examples of what constitutes confidential information, such as business plans and profit margins, and does not prohibit employees from discussing their wages, salaries, working conditions or other terms and conditions of employment.

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