Employment Law Daily Bill would require harassment and discrimination settlement reporting in SEC filings
Friday, March 2, 2018

Bill would require harassment and discrimination settlement reporting in SEC filings

By Pamela Wolf, J.D.

Proposed legislation introduced in the House on February 14 and the Senate on February 27 would require publicly traded companies to disclose the number and monetary value of settlements paid out as a result of sexual harassment and other discrimination claims against corporate officers based on race, religion, sex, national origin, genetic information, status as a service member, and other criteria to the Securities and Exchange Commission (SEC).

The Sunlight in Workplace Harassment Act (H.R. 5028; S. 2454) was apparently prompted by the rash of sexual harassment allegations that has emerged as a result of the “MeToo” movement.

So far the measure has attracted only Democratic sponsors. The required disclosures are related to settlements of certain harassment and discrimination allegations raised under Title VII, the ADA, the Rehab Act, the ADEA, GINA, the Violence Against Women Act, and USERRA, pertaining to uniformed service members.

“The flood of allegations of sexual misconduct against powerful individuals has created a moral imperative for all of us to shine a spotlight on these abuses of power in the workplace,” Representative Jacky Rosen (D-Nev.), one of the bill’s sponsors, said in a statement. “This is a real problem for workers in Nevada and across the country, and Congress has a responsibility to take a leading role in putting an end to workplace sexual harassment and discrimination. Requiring public companies to report these settlements will help lead to greater transparency, safer work environments, and a more robust discussion of how to prevent workplace misconduct and hold people in power accountable.”

Material risk to shareholders. Announcing the legislation, Senator Elizabeth Warren (D-Mass.) said that for publicly traded companies, secret settlements pose a material risk to investors. She noted that some investors have argued that the manner in which companies treat their workers, including the company’s response to harassment allegations, is critical to financial success or failure. Investors “deserve to know” how much money companies spend on settlements related to discriminatory behavior, Warren contends.

Required disclosures. If enacted, the Sunlight in Workplace Harassment Act would, according to sponsors:

  • Require public companies to disclose the total number and aggregate dollar amount of disputes settled by the company related to sexual abuse or harassment or discrimination based on race, religion, sex, national origin, age, disability, genetic information, servicemember status, gender identity, or sexual orientation.
  • Require public companies to disclose the average length of time it takes to resolve harassment complaints, as well as the total number of pending harassment complaints the company is seeking to resolve through internal processes or through litigation.
  • Prohibit the SEC from disclosing the names of accusers and provide accusers with the option of limiting the extent to which details of their settlements are disclosed to the public.
  • Require public companies to disclose information on their efforts to prevent the perpetration of harassment, discrimination, and abuse by their employees.

The required disclosures would be made to shareholders annually on the Form 10-K.

Covered discrimination. Among other things, the Sunlight in Workplace Harassment Act would specifically require disclosure of “the total number of settlements entered into by the covered issuer, a subsidiary, contractor, or subcontractor of the covered issuer, or a corporate executive of the covered issuer that relate to any alleged act of sexual abuse, covered harassment, or covered discrimination ….” The covered discrimination extends to sexual orientation and gender identity harassment and bias. As used in the bill, “sexual abuse” means “any type of sexual contact or behavior that occurs without the explicit consent of the recipient, including forced sexual intercourse, forcible sodomy, child molestation, incest, fondling, and attempted rape.”

“We are in a moment in American history where people are coming together to say enough,” Senator Warren said in a release. “But there won’t be real change until harassment in all corners of the country is exposed and the harassers are held accountable. Our bill will help unmask secret settlements that provide cover for the powerful to get away with abuse, harassment, and discrimination, while simultaneously protecting accusers’ privacy. Congress has a responsibility to pass it right away.”

The legislative proposal has attracted the supported of the National Organization for Women; Feminist Majority; Public Citizen; The Arc of the United States; Human Rights Campaign; Michael W. Frerichs, Illinois State Treasurer; and Thomas P. DiNapoli, New York State Comptroller.

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