Labor committee approves bill limiting non-disclosure agreements

Governor Mills said to have concerns with final version
 
At a work session on Wednesday, March 4, 2020, the Joint Standing Committee on Labor and Housing approved along party lines a bill designed to limit the use and enforcement of “non-disclosure agreements” (NDAs) for both hiring and in the settlement of discrimination claims. The net effect of the bill, should it become law, would be to end the use and efficacy of NDAs in Maine.

LD 1529, An Act Concerning Nondisclosure Agreements in Employment, sponsored by Rep. Thom Harnett (D-Gardiner), was heard in committee last session and carried over for final committee action this year. The bill actually passed in both the House and Senate, but when the bill arrived on the Governor Mills’ desk, she had it recalled. The bill was subsequently sent back to the Labor and Housing committee.
      
As originally drafted, the bill would have significantly restricted the right of an employer to use NDAs, both with prospective employees at time of hire or in cases where settlements for discrimination claims contained an NDA, unless the aggrieved party agreed to the NDA as part of the settlement. However even in those cases, the bill went on to render most NDAs as unenforceable, because they could not limit a victim’s right to report and provide testimony or statements to the Maine Human Rights Commission or the Maine Department of Labor.
      
At the committee’s work session, the bill’s sponsor offered an amendment that is only slightly different than the original – and equally problematic for employers. The amended version would prohibit an employer from requiring any new hire enter into a non-disclosure agreement as a condition of employment. As a matter of practice, the Maine State Chamber is not aware this is an issue in the Maine workplace, and certainly not one for the average worker.
      
Furthermore, under the amended version of the bill, an employer cannot require an employee to enter into any type of severance or settlement agreement that would prohibit or limit that employee’s right to report allegations of discrimination to a state agency or other enforcement body. According to both the bill’s sponsor and the committee co-chair, Governor Mills expressed concern over this part of the bill.  When questioned by Sen. Stacey Guerin (R-Penobscot), Rep, Harnett indicated that he and other bill supporters did not reach agreement with the administration on this part of the bill.
      
This is an important change to Maine law. While an individual cannot be denied the right to testify by any agreement, or be subpoenaed with respect to allegations of discrimination, reporting such allegations are usually part of any NDA agreement.
      
What’s more, under the proposed language, an NDA can only be used if it is requested by the employee. In any discrimination settlement negotiations, the employer would not be able to make such a request as part of the settlement. In addition, even if the employee requested an NDA, it must specifically state that the employee retains the right to report, testify, or provide evidence in any federal or state proceeding that might involve the company or individual.
      
The net effect of the bill is to make NDAs meaningless, even if entered into by both parties. While some might hail this as something positive, NDAs have a role in protecting not only the privacy of the business, but also the privacy of the victim of discrimination as well. If a business cannot rely on an agreed upon NDA as part of a settlement, then why settle any claim?  In addition, the employer cannot even put the idea of an NDA as a settlement tool on the table, placing them at a disadvantage when it comes to trying to settle a claim. LD 1529 sets up an unlevel playing field when it comes to settling discrimination cases of any kind. There will be little, if any, rush to reach settlements, resulting in higher legal costs, and ultimately in a higher cost of doing business in Maine compared to other states. 
             
The Maine State Chamber opposed this bill, as drafted last session, and we remain firmly opposed to the amended version approved by a majority of the Labor committee. For additional information or questions, please contact Peter Gore by calling (207) 623 4568, ext. 107, or by emailing pgore@mainechamber.org.