Bill to limit non-disclosure agreements moves forward

LD 965 approved by a majority of Labor committee in final work session

At what was likely to be its last work session of 2022, the Joint Standing Committee on Labor went out the same way it has operated for most of the past two years – divided along party lines on controversial workplace legislation.

With majority Democrats approving, and minority Republicans opposing the proposal, the committee approved passage of LD 965, An Act Concerning Nondisclosure Agreements in Employment. Previously introduced during the 129th Legislature, the proposal was defeated on the appropriations table when that session abruptly ended due to the onset of the coronavirus pandemic.
 
Sponsored this session by Rep. Thom Harnett (D-Gardiner), LD 965 will significantly restrict the right of an employer to use non-disclosure agreements (NDA), both with prospective employees at time of hire and in cases where settlements for discrimination claims contain an NDA – unless the aggrieved party agreed to the NDA as part of the settlement. However even in those select cases, the bill goes on to render most NDAs as unenforceable, because they cannot limit a victim’s right to provide testimony or statements to the Maine Human Rights Commission or the Maine Department of Labor.
 
LD 965 is built on the assumption that non-disclosure agreements are problematic: hiding, and therefore implicitly encouraging, bad behavior. To be clear, the Maine State Chamber is resolute in its commitment to ending illegal employment discrimination of all kinds in Maine, and we have in fact consistently supported legislation that seeks to do just that. With illegal employment discrimination, there is no ambiguity; it needs to be outlawed and stopped. The merits, or lack thereof, of non-disclosure agreements, however, are more ambiguous and complicated.
 
Maine employers and employees operate in a different sphere for the most part, and often the NDA is a reasonable tool for reaching a compromise and resolving differences – a highly valued policy goal in almost every setting. Not all claims are clear cut, and there can be behavior issues or work performance shortcomings on the part of the employee, the supervisor, or even a co-worker who is not part of the claim. Perspectives on what happened can be honestly different. In our testimony before the committee in 2021, the Maine State Chamber asked the committee if it was appropriate public policy for the legislature to be creating impediments to legitimate dispute resolution.
 
Dispute resolution is a good thing, and it is easier to resolve matters, often for everyone, if there is confidentiality. Without resolution, the parties continue to be adverse, costs for both sides rise, and the company often cannot take corrective measures for fear of incriminating itself. Frequently, the company wants to implement discipline on the supervisor or alleged wrongdoer but is concerned that its corrective action will give rise to a claim. The bottom line is that passage of LD 965 will result in the elongation of claims, litigation, and costs to both parties. This serves neither side well.
 
The Maine State Chamber opposed this bill more than three years ago when it was first introduced, and we remain opposed to it today. As drafted, the net effect would be to end the use of NDAs in the workplace. Once again, while some might hail this as something positive, NDAs have a role in protecting not only the privacy of the business, but also of the victim of discrimination as well. If a business cannot rely on an agreed upon NDA as part of a settlement, then why should they settle any claim?
 
These concerns must have resonated with Governor Janet Mills. Before the bill died on the table in 2020, it had already passed in both the House and Senate. Upon its arrival on the Governor’s desk, she had it recalled. This session, the bill has languished until the committee’s deadline for making a final decision on its fate. It is our understanding that the Governor remains very concerned about the bill as it currently stands.
 
As indicated, the Maine State Chamber remains opposed to LD 965 as it is currently drafted. We will be following the progress of LD 965 as it makes its way through the remainder of the legislative process. For additional information or questions, please contact Peter Gore, executive vice president, by calling (207) 623-4568, ext. 107, or by emailing [email protected].