By: Judy Hermann
This blog post is a part of Lane & Waterman’s M & A Blog Series.
The #MeToo movement did not change the substantive law applicable to sexual harassment claims, and for attorneys who have been practicing in this area for a number of years the response is generally that sexual harassment claims are not new. The real change is the perception of these claims, and the floodgate of newly reported claims including claims that involve alleged conduct going back many years. In response to the #MeToo movement, companies have taken notice and are utilizing additional legal measures to manage this risk, which may include:
- The now fairly common “Weinstein Reps” or “#MeToo Reps,” which are made in corporate transactions where the selling entity affirmatively states there are no sexual harassment claims that they are aware of for a specified period of time—often up to five years or to a specific date that is consistent with the passage of the statute of limitations, and sometimes limited to a certain category of employees such as high-level salaried employees and employees who manage a large number of employees. If a claim of sexual harassment is disclosed, information about the the status of the claim and if it has been resolved are also disclosed. Companies are using carefully drafted indemnity provisions and clawback provisions in the event these representations turn out not to be true. The representations only include what the company is aware of, and part of the issue with the #MeToo movement is that claims were not reported when the conduct occurred, so there may be #MeToo claims that are reported later that were not known at the time of the transaction, making the indemnity and clawback provisions even more important;
- It is a good practice during a corporate acquisition to go beyond asking for a representation about sexual harassment claims and also request the company’s sexual harassment policy, information about any sexual harassment training conducted by the company (and how often it was conducted), and historical data regarding sexual harassment claims filed against the company and its employees. Depending on the size of a company, if no claim has ever been filed that is a red flag that the policy or process for reporting claims is not effective. In addition, the quality of the sexual harassment training should be reviewed by an HR professional or an employment law attorney to determine its effectiveness;
- Adding provisions to employment agreements where the individual being hired affirmatively states that they have not had any sexual harassment claims, or claims of that nature, asserted against them in any of their former employment situations. This is the only way a company is likely to obtain this information, unless there is industry buzz or other communications about the issue. This is often reserved for high level salaried employees, but depending on the nature of a company’s business it might be appropriate to include this more broadly; and
- Proactively as part of routine risk management and compliance, companies are reviewing information about sexual harassment claims filed, settlements, and workplace culture (including areas that could be breeding grounds for significant future claims).
Moving forward, companies should pay careful attention to these issues and include an analysis of these issues as part of regular compliance measures.
Judy Herrmann joined the firm in 1996, and her practice focuses on employment law and insurance law. Judith’s employment practice includes defending employers in administrative proceedings and litigation and advising employers on a variety of employment issues including drafting employee handbooks and contracts, counseling employers on difficult employee issues, and providing training on harassment, disability, FMLA, and documentation issues. Judith’s insurance practice focuses on complex insurance coverage issues.