• Marc Kroop

A Taxing Development In Sex Harassment Law

Congress recently enacted new legislation limiting an employer's ability to deduct a settlement or payment related to a sex harassment or sex abuse case as an ordinary and necessary business expense. This new legislation, Section 13307 of the Tax Cuts and Jobs Act, disallows deduction of such settlements or payments when the settlement or payment is made pursuant to a confidentiality/non-disclosure agreement. It also prevents an employer from deducting any such payment made for attorneys fees.

Our opinion is that this new tax law's implications will have a wholly negative impact on employers and employees ability to resolve cases of sex harassment and abuse.

In every case in which we have ever represented a client regarding sex harassment or abuse claims that resulted in a settlement, a non-disclosure/confidentiality agreement has been included in the settlement agreement. Not once have we ever settled a case without such a provision.

In our experience, the inclusion of a non-disclosure/confidentiality agreement in a settlement agreement is always one of the chief reasons for the employer's agreement to settle a sex harassment or abuse case. Employers are always concerned about limiting public information regarding potentially embarrassing facts in a sex harassment or abuse case.

Now that inclusion of a non-disclosure/confidentiality provision in a settlement agreement limits an employer's ability to deduct a settlement payment, a large incentive to settle sex harassment or abuse cases has been removed. More employees will now face ongoing litigation of their cases due to the reduced financial incentive to employers to settle these cases.

Moreover, now that attorneys fees that are regularly paid by the employer to the employee's counsel pursuant to a settlement agreement are no longer deductible, the value of settling the case from the employer's point of view is even further decreased.

Going forward, the impact of the new law is that an employer may be more willing to extend a sex harassment and abuse lawsuit through trial or appeal and take on more financial risk. Obviously, in taking cases further down the litigation road, an employer's own defense costs will increase. However, those costs will now be weighed by the employer against its costs of making a non-deductible settlement offer to the employee that also involves the payment of non-deductible attorneys fees to the employee's counsel.

Employee victims of sex harassment or abuse may be further victimized by ongoing litigation when their cases become non-resolvable due to tax implications for the employer.

In sum, we do not view this new tax law as positive for either the employer or the employee. It is a law, that while passed with the good intention of shedding public light on sexual harassment, in practical application, will hurt the victims of sexual harassment. At the same time, it will cause a substantial burden on the court system due to ongoing litigation of cases.

Kroop Labor Law has the knowledge and experience to help you with your sex harassment or sex abuse case. We have successfully litigated and/or resolved numerous sex harassment or sex abuse cases in 25 years of practice. Now that Congress has increased the risk in sex harassment and abuse cases with the passage of this ill-conceived new tax law, having the assistance of experienced counsel is more important than ever. If you have questions or concerns about sex harassment or abuse, you may contact Kroop Labor Law's managing attorney, Marc G. Kroop, direct. (925) 989-8264 Otherwise, you may email us with your concerns and we will immediately respond to you in writing. info@krooplaborlaw.com

16 views0 comments

kroop labor law

Copyright Kroop Labor Law 2018


This privacy policy constitutes the privacy practices for krooplaborlaw.com. This privacy policy applies only to information submitted to this website and includes the following information:
1. What personally identifiable information is collected from you through the website, how it is used and with whom it may be shared.
2. What choices are available to you regarding the use of your data.
3. The security procedures in place to protect the misuse of your information.
4. How you can correct any inaccuracies in the information.

Information Collection, Use, and Sharing

We are the sole owners of the information collected on this site. We only have access to/collect information that you voluntarily provide us by email or our contact form. We will not voluntarily sell, rent or otherwise provide this information to anyone outside of our office.
We will only use information provided by you to respond to you and or set up a free initial case consultation. We will not voluntarily share your information with any third party outside of our organization, other than as necessary to fulfill your request for us to contact you. 

Unless you ask us not to, we may contact you via email in the future to tell you about our services or changes to this privacy policy.

Your Access to and Control Over Information 

You may opt out of any future contacts from us at any time. You can do the following at any time by contacting us via the email address or phone number given on our website:

See what data we have about you, if any.
Change/correct any data we have about you.
Have us delete any data we have about you.
Express any concern you have about our use of your data.


We take precautions to protect your information. When you submit sensitive information via the website, your information is protected both online and offline.

If you feel that we are not abiding by this privacy policy, you should contact us immediately via telephone at (925) 989-8264 or via email info@krooplaborlaw.com.


Informational Purposes - This web site and the content have been prepared by Kroop Labor Law for informational purposes only and in no way constitutes legal advice. Kroop Labor Law designed this web site to provide general helpful information about California and Federal law to members of the public in need of an attorney licensed to practice in the State of California.

No Attorney Client Relationship - The use of this web site, and the sending or receipt of information does not create an attorney-client relationship between you and Kroop Labor Law.  Any agreement to represent you must be in writing and include the material terms of our representation.

Confidentiality - Communication with Kroop Labor Law through this web site is both privileged or confidential as are any future contacts with our firm.

Advertisement/Marketing - This web site is a California Electronic Media Advertisement. This website is not an advertisement or solicitation for business outside the state of California. Our practice solely limited to California and federal cases. We will not undertake the representation of any person who resides in a state where this web site fails to comply with state or local rules for marketing or advertising material.

Links - Any link from this web site to the web site of a private, governmental, educational, or other non-profit entity's web page is for informational purposes only.  Such link is provided for your convenience and is not meant to state or imply the existence of a relationship between Kroop Labor Law and that entity.

Seek Legal Counsel -  You should not act on your own upon any information contained on this web site or any other web site without first seeking the assistance of qualified legal counsel who can assist you with your legal matter.