House legislation targets ‘loophole’ in state law protecting victims of workplace sexual harassment

A change to agreement wording could further assist sexually harassed workers.

Workers can be asked to sign nondisclosure agreements with companies after enduring sexual harassment or abuse in the workplace. However, depending on language, a financial settlement can subject the employee to taxes on the payment.

Sponsored by Rep. Heather Edelson (DFL-Edina), HF3010 would prohibit financial settlements of sexual harassment or abuse be provided as severance or wages, which are taxed by the state, in instances where a nondisclosure agreement has been signed.

The bill was approved 13-0 by the House Labor, Industry, Veterans and Military Affairs Finance and Policy Committee Tuesday and referred to the House Judiciary Finance and Civil Law Committee. It has no Senate companion.

“What we are talking about is a loophole in the law that benefits companies at the cost of victims of sexual harassment,” Edelson said. “It takes an attorney one minute to change the wording from settlement to severance. Then, this can further traumatize a victim financially while benefiting that company. We should not accept this.”

According to Edelson, the state doesn’t tax settlement awards.

Edelson said the issue was brought to her by a constituent, Julie Risser, who signed a nondisclosure agreement in 2014 following a sexual harassment claim.

“When payment came, I was stunned,” Risser said. “It was a sliver of the validation that I had agreed to and even the state of Minnesota got a cut. My unemployment benefits stopped. I couldn’t use settlement funds to retrain. My expertise was narrow. I would have had to move out of state for a job that matched my skills. That wasn’t an option.”

The bill would also provide an income tax subtraction for damages received for nonphysical injuries or sickness, such as emotional distress, humiliation and defamation. The tax subtraction would also be granted to individuals without a nondisclosure agreement receiving a settlement as severance.

“These NDAs buy silence,” Edelson said. “By making these changes before you today, we can help create a safer workplace and ensure companies are having robust discussions to prevent harassment and abuse in the workplace.”