The new law invalidates any employment contract or policy that waives an employee’s right to sue in court for sexual harassment or retaliation.

The law also requires employers with more than 50 employees to submit a report detailing its settlements of sexual harassment claims.

Employers may not take any adverse action against an employee who refuses to sign an agreement that requires mandatory arbitration of sexual harassment claims.

On May 15, 2018, Maryland Governor Larry Hogan approved the Disclosing Sexual Harassment in the Workplace Act of 2018. The Act, which goes into effect on October 1, 2018, prohibits employers from requiring their employees to submit to mandatory arbitration for sexual harassment or retaliation claims. The law also creates new reporting obligations for employers with 50 or more employees.

Mandatory Arbitration Provisions for Sexual Harassment Are Invalid
The Act voids any employment contract, policy or agreement that waives an employee’s substantive or procedural rights or remedies in court for a claim of sexual harassment or retaliation in the workplace. Subject to the requirements of the Federal Arbitration Act, employers will no longer be able to require employees to arbitrate harassment claims, and should update their employment agreements accordingly to ensure that they will be enforceable after October 1.

Because the Supreme Court has held that the Federal Arbitration Act may supersede state laws that would otherwise render arbitration agreements unenforceable, it is possible that the Act’s anti-arbitration provisions could be preempted by the FAA. The FAA applies to all contracts involving interstate commerce, which the Supreme Court has interpreted broadly to encompass any transaction that affects interstate commerce. This means that the FAA will likely apply to most commercial contracts, even if they do not involve obvious interstate activity. To ensure the continued validity of arbitration provisions, employers whose business affects interstate commerce should revise their employment policies and agreements to make clear that they are covered by the Federal Arbitration Act.

Additionally, employers may not take any adverse action against an employee because he or she fails or refuses to sign an agreement that waives or mandates arbitration for sexual harassment claims. Adverse actions include:

  1. Discharge
  2. Suspension
  3. Demotion
  4. Discrimination in the terms, conditions or privileges of employment; and
  5. Any other retaliatory action that changes the terms or conditions of employment such that a reasonable employee would be dissuaded from making a complaint, bringing an action or testifying in an action for sexual harassment or retaliation.

Not only are these mandatory arbitration agreements now null and void, employers who enforce or attempt to enforce these now-void provisions will be liable for the employee’s reasonable attorney’s fees and costs.

New State Reporting Requirements
The Act also requires employers with 50 or more employees to submit a survey to the Maryland Commission on Civil Rights by July 1, 2020, and again by July 2, 2022. The survey must include:

  1. The number of settlements made by or on behalf of the employer after an employee has alleged sexual harassment;
  2. The number of times in the past 10 years that the employer has paid a settlement to resolve a sexual harassment allegation against the same employee;
  3. The number of settlements made after sexual harassment allegations that included a provision requiring both parties to keep the terms of the settlement confidential.

The survey will also ask the employer to report whether it took any personnel action against an employee who was the subject of a settlement.

Once the survey is complete, the Commission will publish the aggregate number of responses for each survey item. Further, upon request, any member of the public will be able to inspect a specific employer’s survey responses.

By December 15, 2020, and on December 15, 2022, the Commission will review a random selection of the submitted surveys and provide an executive summary to the governor, redacting any identifying information for specific employers. After June 30, 2023, the survey requirements will lapse unless the Maryland General Assembly takes further action.

Next Steps
Employers should review their employment agreements and policies well before October 1, 2018, to ensure they comply with the Act’s provisions. Employers will also want to determine whether any of their agreements are covered by the Federal Arbitration Act, which could override some of the obligations imposed by the new Maryland law. Finally, employers should plan to train employers and managers to ensure compliance with the Act.

If they do not already do so, employers with more than 50 employees should also begin tracking sexual harassment settlements and compiling information on past settlements to prepare for the 2020 and 2022 surveys.

Special thanks to Pillsbury Summer Associate Ian Wahrenbrock for his invaluable assistance in preparing this alert.