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Proposals made by New York Governor Andrew Cuomo to change workplace sexual harassment laws in New York were enacted into law as part of the Fiscal Year 2019 budget. Here is what you need to know about these new laws and some related developments.

Mandatory Training & Anti-Harassment Policies

All employers are required to: (1) adopt a sexual harassment prevention policy; and (2) train all employees annually about how to prevent sexual harassment. The New York State Department of Labor, in consultation with the New York State Division of Human Rights, will develop a model policy and a model training program.

Employers can use these models, or develop their own, so long as the policy and training equal or exceed the minimum standards in the models. These requirements go into effect on October 9, 2018.

No Mandatory Arbitration

Employers are prohibited from imposing mandatory arbitration clauses to “resolve any allegations or claims of an unlawful discriminatory practice of sexual harassment” except where inconsistent with federal law.

Whether this provision will be enforced under previously decided United States Supreme Court cases is unknown. The Supreme Court had held consistently that the Federal Arbitration Act preempts state laws which expressly prohibit a category of claims from being arbitrated. This provision takes effect on July 11, 2018.

Employer Liability for Sexual Harassment of Non-Employees

The new law confirms that employers may be held liable for sexual harassment of non-employees (e.g., contractors, vendors and consultants).

Employers are liable if they knew or should have known that the non-employee was subjected to sexual harassment at the employer’s workplace and failed to take appropriate corrective action. This provision took effect immediately upon signing.

No Non-Disclosure Provisions

Parties to a settlement or other resolution of a sexual harassment claim are prohibited from including terms that would “prevent the disclosure of the underlying facts and circumstances” related to such claim unless such terms are the preference of the alleged victim.

Any agreed upon confidentiality provisions must apply to both parties. Further, an alleged victim must be given 21 days to consider whether to accept the proposed confidentiality language, and then seven days to revoke his or her acceptance of it. Any agreed upon confidentiality provisions only become effective after the seven-day revocation period has expired. This provision takes effect on July 11, 2018.

New Language in State Contract Bids

Every bidder on a competitive state contract (seeking to provide services, work or goods) must certify that it: (1) has implemented a written policy addressing sexual harassment prevention in the workplace; and (2) provides for annual training for its employees on sexual harassment prevention.

Where competitive bidding is not required, bidders nevertheless may be required to make the necessary certification as determined by the salient state agency or official. Failure to include the required language in a bid will result in the bid not being considered. This provision will take effect on January 1, 2019.

Reimbursement of Public Funds Paid to Victims

Public employees or officers–whether elected, appointed, paid or unpaid–who are found personally liable for sexual harassment must reimburse the government for taxpayer funds used to pay the victim(s).

There are important caveats and limitations. For example, a public official’s reimbursement obligation is limited to his or her “proportionate share” of the liability and the obligation arises only with respect to “final judgments” and “adjudicated awards.” This provision took effect immediately upon signing.

2017 Federal Tax Reform: No Deductions for Sexual Harassment Payments & Legal Fees

Major tax reform was approved by Congress in the Tax Cuts and Jobs Act (“TCJA”) on December 22, 2017. At least two parts of this complex legislation affect sexual harassment claims.

Employers are no longer entitled to a tax deduction for payments they make in sexual harassment cases (to the alleged victim and to the attorney for the alleged victim) if there is a non-disclosure agreement. More significantly, employers are no longer entitled to a tax deduction for legal expenses they incur to defend these claims. Thus, the new tax law treats sexual harassment settlements and related legal fees more harshly than nondeductible government fines (where legal fees still could be deducted).

Don’t hesitate to contact us if you have any questions.