The Legal Risks of Non-Disclosure Agreements in Sexual Harassment Settlements
Non-disclosure agreements (NDAs) are often used in settlements involving sexual harassment claims, aiming to protect confidentiality and prevent reputational damage. However, when these agreements restrict victims from speaking out or reporting misconduct, they raise serious legal and ethical concerns.
In Colorado, recent legislative changes have placed new limits on the use of NDAs in cases involving workplace harassment, reshaping how these agreements can be legally enforced.
Anderson Barkley, LLC works with Colorado clients to address the growing legal risks tied to NDAs in sexual harassment settlements. With heightened attention on employee rights and corporate responsibility, both employers and individuals must carefully assess how confidentiality clauses align with current state law.
Failing to comply with Colorado’s updated requirements could lead to voided agreements, civil liability, and lasting reputational damage. To avoid this, be sure to contact a reliable law firm such as Anderson Barkley, LLC.
NDAs in Sexual Harassment Cases
A non-disclosure agreement is a legally binding contract that restricts parties from sharing specific information. In sexual harassment settlements, these agreements often prevent the complainant from discussing the incident, the accused individual, or the settlement terms. Historically, NDAs were used to protect reputations, limit liability, and avoid public scrutiny.
However, the #MeToo movement and similar efforts have brought attention to the ways NDAs can be misused, especially to conceal repeated instances of misconduct.
Colorado lawmakers have responded by introducing legal safeguards that prohibit certain NDA provisions in sexual harassment matters. These reforms aim to preserve victims’ rights while holding wrongdoers accountable. Despite these advances, employers and employees must tread carefully, as violating these new standards can carry serious legal consequences.
Colorado Laws Limiting NDA Use in Sexual Harassment Claims
As of 2022, Colorado law has significantly restricted the enforceability of NDAs in connection with workplace discrimination and harassment, including sexual harassment. The POWR (Protecting Opportunities and Workers’ Rights) Act updated existing employment laws and added provisions that target overly restrictive NDAs.
Under this legislation, any nondisclosure clause involving sexual harassment allegations must meet specific requirements to be valid. According to Jeanine Anderson, co-founder of Anderson Barkley, LLC, agreements must now:
Be mutually agreed upon without coercion
State that the worker has the right to disclose the underlying facts of the harassment
Not prevent disclosure to government agencies, legal counsel, or family members
Provide terms that are equally binding for both parties
Employers who attempt to impose NDAs that violate these rules could face penalties, including the invalidation of the agreement and civil liability. Additionally, repeat violations may be seen as a pattern of behavior that elevates risk in future employment litigation.
Public Policy and Freedom of Speech Concerns
A central legal risk with NDAs in sexual harassment cases involves potential conflict with public policy and constitutional protections. Courts in Colorado and across the country have increasingly scrutinized NDA provisions that limit a person’s ability to speak about harassment.
Judges may refuse to enforce clauses that infringe upon a victim’s freedom of speech or that are deemed to suppress evidence of unlawful behavior.
Furthermore, federal agencies such as the Equal Employment Opportunity Commission (EEOC) have taken the position that blanket NDAs may interfere with a person’s right to file charges or participate in investigations. Employers who use NDAs too broadly risk being accused of obstructing justice or engaging in retaliatory practices, which could trigger further litigation.
In recent years, public sentiment has shifted to favor transparency over confidentiality when it comes to sexual harassment. As a result, courts are more willing to set aside NDA clauses that hinder victims from speaking out, especially when there's a public interest in revealing the details of misconduct.
Enforceability Issues and Potential Legal Consequences
Another key risk for employers is the uncertainty surrounding NDA enforceability. Even if an NDA appears valid at the time of signing, later legal challenges may render the agreement void. This is especially true if the agreement contains vague language, lacks mutual benefit, or was signed under duress.
In Colorado, the POWR Act specifically voids NDA provisions that prohibit workers from disclosing factual information related to alleged harassment or discrimination. If a court finds that such a clause exists in an agreement, the entire NDA could be struck down, leaving the employer exposed to reputational harm and additional claims.
Moreover, employers who continue to rely on outdated or overly restrictive NDA templates could face statutory damages, attorney’s fees, and loss of credibility. For victims, signing a non-compliant NDA may delay their access to justice or discourage them from pursuing legitimate legal remedies.
In either case, the use of NDAs in sexual harassment settlements has become a risk-laden area of employment law.
Common NDA Pitfalls in Sexual Harassment Settlements
Employers in Colorado must approach confidentiality clauses with increased caution in the context of sexual harassment settlements. Many agreements continue to include overly restrictive language that can no longer withstand legal scrutiny under state law.
One frequent pitfall involves drafting clauses that prohibit all forms of disclosure without acknowledging the worker’s right to speak to attorneys, government agencies, or family members. Agreements that fail to make these exceptions clear risk being invalidated.
Another common issue arises when NDAs are written to be one-sided—offering confidentiality protections only for the employer while placing all the burden of silence on the employee. Colorado law now requires mutuality in these provisions, and any imbalance may render the agreement unenforceable.
Additionally, employers sometimes include language that discourages or prevents the filing of future claims. Such provisions aren't only unlawful but may also expose employers to allegations of retaliation or obstruction.
Some NDAs include settlement language that implies blame or guilt, even when the agreement includes standard disclaimers of liability. This can create confusion or fuel future disputes. Equally problematic are agreements presented under pressure or without providing the employee a fair opportunity to review the terms with legal counsel.
Clauses signed under such conditions are vulnerable to legal challenge and may be dismissed by the court.
In each of these scenarios, the use of outdated or improperly worded NDAs can have serious consequences. Employers must draft settlement agreements that comply with Colorado’s evolving legal standards while respecting the rights of individuals who have experienced sexual harassment. Failure to do so may lead to further litigation and lasting reputational harm.
The Broader Implications for Employers and Employees
Beyond enforceability and statutory compliance, NDAs in sexual harassment settlements have far-reaching implications for workplace culture and legal exposure. Employers who rely on secrecy to address misconduct risk enabling a toxic environment that can erode trust and lead to higher turnover, lower morale, and future lawsuits.
Transparency and accountability are becoming legal standards and ethical expectations. Employees who feel pressured to remain silent may eventually seek recourse through legal or media channels, especially if they believe the harassment was part of a broader pattern.
This shift in attitude has led many companies to voluntarily limit their use of NDAs, opting instead for policies that focus on prevention and reporting.
For individuals subjected to harassment, the decision to sign an NDA shouldn't be taken lightly. While financial compensation and privacy may seem appealing, the long-term impact of silence can be significant. Those considering settlement should fully understand their rights under Colorado law and consider the possibility that the agreement may not hold up in court.
Get Legal Clarity Before You Sign
NDAs tied to sexual harassment settlements now carry significant legal risks under Colorado law. Those involved must understand their rights and obligations before signing or enforcing these agreements.
Anderson Barkley, LLC advises clients in Denver and throughout Jefferson, Douglas, Arapahoe, Larimer, and Boulder Counties on legally sound approaches to sexual harassment claims and settlement terms. Contact Anderson Barkley, LLC today to protect your rights and make informed decisions in sensitive legal matters.