The rise of #MeToo clauses in commercial contracts.

There has been a reported increase in the use of ‘#MeToo clauses’ in commercial contracts, due diligence exercises and codes of conduct – sometimes referred to as a ‘Weinstein clause’ or a ‘#MeToo rep’.

As reported by the Financial Times, the typical wording of such a clause is along the following lines: “There are no allegations, complaints or claims of sexual harassment made against any directors, officers or employees of the [company] and, so far as the

are aware, there are no facts or circumstances likely to give rise to any such allegations, complaints or claims.”

Inevitably, as the #MeToo movement has developed and more and more people have felt emboldened to speak out about sexual harassment, the commercial world has tried to meet the demand for more action to be taken. Consequently, #MeToo clauses have been designed to allow companies to mitigate risk when deal-making. They allow companies to assess the reputational and financial damage that can result from prior allegations of sexual misconduct having been brought against senior individuals, in particular. 

The tech sector is also beginning to see an increase in these clauses, with tech investors reportedly often including #MeToo clauses in deals with start-ups, no doubt brought on in large part by recent high-profile allegations of sexual harassment in the industry involving the likes of Google and Uber. 

Towards the end of last year, Google employees staged mass walkouts across the globe in response to reports that the tech company had paid a top executive a US$90m payout after determining that sexual misconduct allegations against him were credible. 

Careful handling of clauses

We are likely to see more of these kinds of clauses being used in employment contracts and service agreements for senior executives. This will have to be handled carefully. 

Let’s take the above #MeToo clause as an example of a clause that might be found in an employment contract (of course, not all will be the same). On a strict reading of that clause, it would mean a senior executive would have to disclose the existence of an allegation – regardless of how genuine the allegation was. 

On the one hand, this might be seen as a positive move towards eradicating sexual harassment in the workplace and a sensible move for an employer to minimise risk. On the other, this could open the door to potentially career threatening – yet vexatious – allegations being made, which would have to be disclosed.  

That is not to say that a candidate could not seek to clarify the allegation or develop their response to that clause, for example by explaining there was an investigation and the allegation was not upheld. However, one could appreciate the concern an employee would have in being required to disclose the fact of an allegation in the first place if nothing was upheld. 

Alternatives could be used which might redress the balance. For example, in a regulated industry, a clause might say something along the lines of: “There are no allegations, complaints or claims of sexual harassment made against you that have been reported to the regulator”, or in an unregulated industry, “there are no allegations, complaints or claims of sexual harassment made against you which have been investigated and upheld.”

There is no question that steps need to be taken to ensure sexual harassment in the workplace is eradicated and some form of #MeToo clause could be used effectively. However, a balance needs to be struck in the employment context to ensure that #MeToo clauses are workable and reasonable. 

16 Jul 2019 By Beth Hale and Nick Hawkins

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