New Tax Implications for Confidential Sexual Harassment Settlements
![New Tax Implications for Confidential Sexual Harassment Settlements](/media/3410/pam10_-viewpoint.png?width=960&height=540&v=1d3637ab10fa9b0)
Companies that have made confidential settlement payments related to sexual harassment claims should be aware that the recently enacted federal tax reform law, the Tax Cuts and Jobs Act, includes a provision prohibiting employers from deducting such confidential payments from business income, potentially making sexual harassment settlements more expensive for employers.
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Key Takeaways
- The recent federal tax reform law states that an employer's confidential settlement payment relating to a sexual harassment claim is no longer deductible from business income.
- The new law also prohibits deduction of other expenses relating to such confidential settlements, including legal fees and potentially other unspecified expenses.
- Payments related to sexual harassment are not impacted by this prohibition if they are not governed by a confidentiality requirement, so employers will want to carefully consider whether to include a confidentiality term in their settlement agreements.
Kasowitz's Employment Practices and Litigation group has extensive experience and familiarity with negotiating settlement agreements and in defending sexual harassment and other employment-related claims. Our employment group has been recognized in Chambers USA, The Legal 500, Benchmark Litigation, and U.S. News - Best Lawyers "Best Law Firms."
For more information, please contact partners Mark W. Lerner or Jessica Taub Rosenberg.