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  • Weinstein’s Contract May Have Protected Him against Sexual Assault Claims

    Details continue to emerge surrounding the major sexual harassment allegations against film producer Harvey Weinstein. One of the most shocking developments involves language in Weinstein’s employment contact with the Weinstein Company that may have permitted him to be sued for sexual harassment while continuing to keep his job.

    According to various news outlets, Weinstein’s contract contained a provision whereby if he were sued for sexual harassment the company would pay settlements or judgments to his victims. This clause also included language that allowed Weinstein to keep his job so long as he reimbursed the studio for whatever penalty they paid on his behalf along with an additional fine that gradually increased for each sexual harassment claim against him.

    The contract reportedly states: “You will pay the company liquidated damages of $250,000 for the first such instance, $500,000 for the second such instance, $750,000 for the third such instance, and $1,000,000 for each additional instance.” This language essentially means that Weinstein could retain his job no matter how many women filed claims against him so long as he paid the specified fines.

    While this contract clause is clearly reprehensible on a moral level, it has also raised a number of legal and employment related issues as well. One potential legal question surrounds the board of directors at the Weinstein Company and what they actually knew about the number and validity of sexual harassment claims levied against Harvey Weinstein over the years.  This contractual language indicates that the board knew about Weinstein’s transgressions and helped to cover them up by helping him pay his way out of trouble.   This could potentially lead to members of the board being found personally liable to the shareholders of the Weinstein Company should they chose to file suit against such board members.

    Some have also called into question the legality of such a contract clause. A basic principle of American contract law is that a contract is illegal if it is intended to further illegal activity.  Weinstein’s contract could interpreted as the company assisting him in committing acts of sexual misconduct by providing him a “permission slip” to commit such acts without being fired.  The potentially illegal contract language has been met with such outrage that many are now calling for the company to such down all together.

    Employers should always treat employee claims of sexual harassment seriously. To do so, employers should ensure that there are stated procedures for the handling and investigation of such claims.  Further, employers should be sure that all employees are aware of what is considered sexual harassment and that those found to have committed these types of acts will be disciplined accordingly, including termination of employment and notification to law enforcement.

    If you, or your organization, have questions concerning employment issues, please contact Cynthia A. Augello at 516-357-3753 or via email at caugello@cullenanddykman.com.

    Thank you to Ryan Soebke, an intern with Cullen and Dykman LLP, for his assistance with this post.