The inability to deduct settlements may impact negotiations
In late 2017, Congress embarked on a mission to reform American tax law. These reforms were ultimately signed into law by President Trump in late December 2017. No matter what you may think of these changes to the tax code, they contain some key provisions that impact the lives of every American — including those who are involved in sexual harassment or abuse cases.
As a skilled employment law attorney can explain, the update to the tax code contains a provision that would prevent anyone from taking a deduction for:
- Any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement; or
- Attorney’s fees related to such a settlement or payment.
This new section will be added to Section 162(q) of the Internal Revenue Code, and will be all claims paid or settled after December 22, 2017. When it applies, it may require the defendant in a sexual harassment or abuse case to choose between being able to deduct the amount of the settlement or having a non-disclosure provision in the settlement.
In other words, according to a seasoned employment law attorney, if someone who has sexually harassed you at work wants to settle the claim that you have made, then he or she will have to make a choice. First, he or she could decide that privacy is more important, and include a nondisclosure provision in the settlement (if allowed to do so under state law). If there is a nondisclosure provision, then you will not be able to talk about the case — but the person who harassed you will not be able to deduct the amount of the settlement from his or her taxes. Second, if the person who harassed you decides that it is more important to deduct these amounts, then he or she could have a settlement drafted without a nondisclosure provision, allowing him or her to take the deduction — and for you to speak freely about your case.
As a practical matter, this is important for anyone involved in a sexual harassment case because it can impact settlement negotiations. A knowledgable employment law attorney will use the changed tax law to his or her advantage, as a way to try to achieve a settlement. Your lawyer can also attempt to artfully draft a settlement to avoid invoking this part of the tax code — which could be another tool to be used as part of the negotiation.
While the details tax code and tax reform may seem unimportant when it comes to a sexual harassment or sexual abuse case, in reality, it is these types of technicalities that can help your employment law attorney achieve a favorable settlement for you.
At PLBH, our experienced employment law attorney stay abreast of the latest news and laws related to employment law so that we are fully prepared to aggressively advocate for you and your rights. Contact us today at (800) 435-7542 or info@plblaw.com to schedule a consultation and learn more about how we can help you if you have suffered workplace sexual harassment or abuse.