In 2022, Zelda Perkins, a former assistant to Harvey Weinstein, described the draconian nondisclosure agreement she was forced to sign while working at Weinstein’s production company, Miramax.
“The NDA not only forbade us from talking about Weinstein’s behaviour, but also about our entire career at Miramax—to family, friends, medical practitioners including therapists, even to [the United Kingdom’s tax authority] if questioned about the damages payment,” Perkins wrote in The Guardian. “We were not even allowed to have a copy of the document that was to control our lives ‘in perpetuity.’”
In the wake of revelations like these, several U.S. states passed laws weakening or nullifying NDAs that restrict discussion of sexual assault and harassment. Eventually, the federal Speak Out Act of 2022 made unenforceable all preemptive nondisclosure and non-disparagement clauses related to sexual assault and harassment.
The startups may believe that they are vulnerable to potential issues from legal disputes. The easy way to avoid that is to hire fewer women.
Did these laws help create a more inclusive workplace? In a recent working paper, Yale SOM’s Song Ma, alongside Jun Chen of the University of Illinois Chicago and Feng Zhang of Southern Methodist University, examined how NDA-weakening laws affected the hiring of women within venture-capital-backed startup companies. (They focused on female hiring because, although people of all genders can suffer workplace sexual harassment, women are the most frequent victims.)
Ma and his colleagues expected that the new laws would result in more women getting hired. But their practical outcomes in the labor market proved more complicated than that. NDA-weakening laws actually resulted in significantly fewer women getting hired. However, there were some encouraging effects from the new legislation, including an increase in the number of women reaching managerial positions, that may yield long-term positive changes.
Understanding how NDA-weakening laws affect startups in particular is important, Ma says, because these small firms play a disproportionate role in innovation and job creation—and have long been male-dominated.
“Ultimately, if we want to have an economy that gives everybody the opportunity to create or join a startup, then we need to have a system that works for everyone and protects people with talent,” Ma says. “If women are, implicitly, not given the equal opportunity to pursue this career, that’s not ideal for the economy.”
To pinpoint the specific effects of NDA-weakening laws, Ma and his team gathered data on approximately 85,000 venture-backed startup companies and their hiring practices from sources including PitchBook and LinkedIn.
Next, the researchers looked at startups in states that passed NDA-weakening laws and examined their hiring activity before and after the laws took effect. (States passed these measures at different times, which gave the researchers additional confidence their findings stemmed from the laws and not from unrelated changes that happened to take place at the same time.) Then, they compared this set of companies against their control group: startups in states that did not pass NDA-weakening laws.
The results were stark. Startups in states that passed NDA-weakening laws hired 8% fewer women per year after the laws took effect, as compared to startups in the control group. The decline was especially noticeable among women in junior positions, who face a heightened risk of harassment.
To Ma, this suggests that startups affected by NDA-weakening laws see women—and especially young women—as risky hires. “The startups may believe that they are vulnerable to potential issues from legal disputes,” he says. “The easy way to avoid that is to hire fewer women.”
In line with this interpretation, the researchers found that the decline in female hiring was most pronounced in small startups and those with few women—companies that are unlikely to have strong anti-harassment protections in place. By contrast, larger firms, which are more likely to have human resources departments and articulated policy, as well as firms with more women, saw much smaller declines in female hiring after the passage of NDA-weakening laws.
They also found that startups promoted more women to managerial positions after the new laws took effect—perhaps filling vacancies left by male managers, who were more likely to leave. Elevating women to management “is usually a first step to strengthen women’s voices in the workplace,” Ma says, and a sign that startups “are doing more to prepare themselves for a more balanced workforce and a more diverse environment.”
Indeed, given that firms with more women saw smaller declines in female hiring, the elevation of women to management positions may begin a virtuous cycle with long-term positive effects. For this reason, Ma is optimistic that NDA-weakening laws may yet prove helpful, despite their upfront costs: “We’re very hopeful that if we keep tracking it, down the road, we might start to see a more positive effect on labor market participation.”
Ma also hopes that the research can shed more light on the inner workings of the startup sector. “Startups can be stressful, and the environment can bring out the best in people and the worst in people. I think it’s uniquely useful to understand people’s behavior in this labor market,” he says, especially given that startups punch above their weight in economic and cultural significance. “Working for a startup is now part of many people’s mindsets—they want to be founders or just join a startup team. It’s useful to track whether this startup ecosystem is indeed getting more inclusive for all people.”
“The Yale School of Management is the graduate business school of Yale University, a private research university in New Haven, Connecticut.”
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