Ending the Monopoly of Power Over Workplace Harassment through Education and Reporting Act
Bill: H.R.5842 | Sponsor: Rep. Frankel, Lois (D-FL)
Policy area: Labor and Employment

Summary:
Ending the Monopoly of Power Over Workplace Harassment through Education and Reporting Act or the EMPOWER Act
This bill makes it an unlawful labor practice for an employer to enter into, or attempt to enforce, a contract with an employee or job applicant that contains a nondisparagement or nondisclosure clause that covers workplace or sexual harassment, including retaliation for participating in a workplace harassment proceeding. The bill exempts certain settlement or separation agreements from such prohibition.
The bill also requires the Securities and Exchange Commission to promulgate a regulation that requires any issuer of securities to submit a report for the most recent five-year period with respect to workplace and sexual harassment. The commission must provide for the development and dissemination of training programs and information regarding workplace and sexual harassment.
The bill denies a tax deduction for amounts related to judgments and expenses in connection with litigation related to workplace or sexual harassment. It also excludes from gross income, for income tax purposes, any amount received in connection with a claim or settlement related to workplace or sexual harassment, or other unlawful discrimination.

To deter, prevent, reduce, and respond to harassment in the workplace, 
 including sexual harassment, sexual assault, and harassment based on 
protected categories; and to amend the Internal Revenue Code of 1986 to 
       modify the tax treatment of amounts related to employment 
   discrimination and harassment in the workplace, including sexual 
     harassment, sexual assault, and harassment based on protected 
                              categories.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Ending the Monopoly of Power Over 
Workplace Harassment through Education and Reporting Act'' or the 
``EMPOWER Act''.

       TITLE I--PREVENTING AND RESPONDING TO WORKPLACE HARASSMENT

SEC. 101. PURPOSE AND AUTHORITY.

    It is the purpose of this title, through the exercise by Congress 
of its power to regulate commerce among the several States, to deter, 
prevent, reduce, and respond to harassment in the workplace, including 
sexual harassment, sexual assault, and harassment based on other 
protected categories.

SEC. 102. DEFINITIONS.

    In this title:
            (1) Applicant.--The term ``applicant'' means an applicant 
        for employment as an employee, independent contractor, or 
        outside worker.
            (2) Charge of discrimination.--The term ``Charge of 
        Discrimination'' means a charge or complaint of discrimination 
        filed pursuant to section 706 of the Civil Rights Act of 1964 
        (42 U.S.C. 2000e-5), section 7 of the Age Discrimination in 
        Employment Act of 1967 (29 U.S.C. 626), section 107 of the 
        Americans with Disabilities Act of 1990 (42 U.S.C. 12117), or 
        section 207 of the Genetic Information Nondiscrimination Act of 
        2008 (42 U.S.C. 2000ff-6).
            (3) Commission.--The term ``Commission'' means the Equal 
        Employment Opportunity Commission.
            (4) Employee.--The term ``employee'' means--
                    (A) an individual employed by an employer described 
                in paragraph (5), including an outside worker in such 
                individual's office or place of employment;
                    (B) an employee to which section 703, 704, or 
                717(a) of the Civil Rights Act of 1964 (42 U.S.C. 
                2000e-2, 2000e-3, 2000e-16(a)) applies, including an 
                outside worker in such an employee's office or place of 
                employment, section 4 of the Age Discrimination in 
                Employment Act of 1967 (29 U.S.C. 623), section 102 of 
                the Americans with Disabilities Act of 1990 (42 U.S.C. 
                12112), or sections 202, 203, and 204 of the Genetic 
                Information Nondiscrimination Act of 2008 (42 U.S.C. 
                2000ff-1, 2000ff-2, 2000ff-3);
                    (C) a State employee to which section 302(a) of the 
                Government Employee Rights Act of 1991 (42 U.S.C. 
                2000e-16b(a)) applies, including an outside worker in 
                such a State employee's office or place of employment; 
                or
                    (D) a covered employee, as defined in section 101 
                of the Congressional Accountability Act of 1995 (2 
                U.S.C. 1301) or section 411(c) of title 3, United 
                States Code, including an outside worker in such a 
                covered employee's office or place of employment.
            (5) Employer.--The term ``employer'' means--
                    (A) a person engaged in an industry affecting 
                commerce, and any agent of such a person;
                    (B) an entity to which section 703, 704, or 717(a) 
                of the Civil Rights Act of 1964 applies, sections 4 and 
                15 of the Age Discrimination in Employment Act of 1967 
                (29 U.S.C. 623, 633a), section 102 of the Americans 
                with Disabilities Act of 1990 (42 U.S.C. 12112), or 
                sections 202, 203, and 204 of the Genetic Information 
                Nondiscrimination Act of 2008 (42 U.S.C. 2000ff-1, 
                2000ff-2, 2000ff-3);
                    (C) an employing authority to which section 
                302(a)(1) of the Government Employee Rights Act of 1991 
                applies; or
                    (D) an employing office, as defined in section 101 
                of the Congressional Accountability Act of 1995 or 
                section 411(c) of title 3, United States Code.
            (6) Fair employment practices agencies.--The term ``fair 
        employment practices agencies'' means State and local agencies 
        with the authority to enforce laws or regulations to prohibit 
        discrimination in employment, to grant or seek relief from 
        discrimination, or to institute criminal proceedings.
            (7) Independent contractor.--The term ``independent 
        contractor'' means an individual who, with respect to an 
        employer, is a contractor based on the common law of agency.
            (8) Law enforcement agency.--The term ``law enforcement 
        agency'' means a government agency with criminal or civil law 
        enforcement powers, which may include a government agency with 
        regulatory or licensing authority.
            (9) Nondisclosure clause.--The term ``nondisclosure 
        clause'' means a provision in a contract or agreement 
        establishing that the parties to the contract or agreement 
        agree not to disclose information covered by the terms and 
        conditions of the contract or agreement.
            (10) Nondisparagement clause.--The term ``nondisparagement 
        clause'' means a provision in a contract or agreement requiring 
        one or more parties to the contract or agreement not to make 
        negative statements about the other.
            (11) Outside worker.--The term ``outside worker'' means--
                    (A) a temporary worker hired through an employment 
                agency (as defined in section 701 of the Civil Rights 
                Act of 1964 (42 U.S.C. 2000e)) to provide services to 
                an employer pursuant to an agreement between the 
                employment agency and the employer, section 11 of the 
                Age Discrimination in Employment Act of 1967 (29 U.S.C. 
                630), section 101 of the Americans with Disabilities 
                Act of 1990 (42 U.S.C. 12111), or section 201 of the 
                Genetic Information Nondiscrimination Act of 2008 (42 
                U.S.C. 2000ff)'';
                    (B) an independent contractor for an employer or a 
                subcontractor thereof; or
                    (C) an intern or volunteer, whether paid or unpaid, 
                for an employer.
            (12) Sexual assault.--The term ``sexual assault'' means any 
        nonconsensual sexual act proscribed by Federal, tribal, or 
        State law, including such an act that occurs when the victim 
        lacks capacity to consent.
            (13) Subcontractor.--The term ``subcontractor'' means any 
        employer having a contract with a prime contractor or another 
        subcontractor calling for supplies or services required for the 
        performance of a contract or a government contract.
            (14) Workplace harassment.--The term ``workplace 
        harassment'' means unwelcome or offensive conduct based on sex 
        (including such conduct based on sexual orientation, gender 
        identity, and pregnancy), race, color, national origin, 
        disability, age, religion, or genetic information including 
        conduct that occurs in-person or through an electronic medium 
        (which may include social media), in a work or work-related 
        context, which affects any term, condition, or privilege of 
        employment.

SEC. 103. PROHIBITING NONDISPARAGEMENT AND NONDISCLOSURE CLAUSES THAT 
              COVER WORKPLACE HARASSMENT, INCLUDING SEXUAL HARASSMENT.

    (a) Unlawful Practices.--
            (1) Prohibition on workplace harassment nondisclosure 
        clause.--Subject to subsection (b)(1), it shall be an unlawful 
        practice for an employer to enter into a contract or agreement 
        with an employee or applicant, as a condition of employment, 
        promotion, compensation, benefits, or change in employment 
        status or contractual relationship, or as a term, condition, or 
        privilege of employment, if that contract or agreement contains 
        a nondisparagement or nondisclosure clause that covers 
        workplace harassment, including sexual harassment or 
        retaliation for reporting, resisting, opposing, or otherwise 
        participating in a workplace harassment proceeding.
            (2) Prohibition on enforcement.--Notwithstanding any other 
        provision of law, it shall be an unlawful practice and 
        otherwise unlawful for an employer to enforce or attempt to 
        enforce a nondisparagement clause or nondisclosure clause 
        described in paragraph (1).
    (b) Settlement or Separation Agreements.--
            (1) In general.--The provisions of subsection (a) do not 
        apply to a nondisclosure clause or nondisparagement clause 
        contained in a settlement agreement or separation agreement 
        that resolves legal claims or disputes when--
                    (A) such legal claims accrued or such disputes 
                arose before the settlement agreement or separation 
                agreement was executed; and
                    (B) such clauses are mutually agreed upon and 
                mutually benefit both the employer and employee or 
                applicant.
            (2) Unlawful practice.--It shall be an unlawful practice 
        for an employer to unilaterally include a nondisclosure clause 
        or a nondisparagement clause that solely benefits the employer 
        in a separation or settlement agreement.
    (c) Right To Report Reserved.--Notwithstanding signing (before or 
after the effective date of this title) any nondisparagement or 
nondisclosure clause including a clause referred to in subsection 
(a)(1), an employee or applicant retains any right that person would 
otherwise have had to report a concern about workplace harassment, 
including sexual harassment or another violation of the law to the 
Commission, another Federal agency (including an office of the 
legislative or judicial branch), a State or local fair employment 
practices agency or any State or local agency, or a law enforcement 
agency, and any right that person would otherwise have had to bring an 
action in a court of the United States.
    (d) Enforcement.--
            (1) Enforcement powers.--With respect to the administration 
        and enforcement of this section in the case of a claim alleged 
        by an employee or applicant for a violation of this section--
                    (A) the Commission shall have the same powers as 
                the Commission has to administer and enforce--
                            (i) title VII of the Civil Rights Act of 
                        1964 (42 U.S.C. 2000e et seq.);
                            (ii) the Age Discrimination in Employment 
                        Act of 1967 (29 U.S.C. 621 et seq.);
                            (iii) titles I and V of the Americans with 
                        Disabilities Act of 1990 (42 U.S.C. 12101 et 
                        seq.);
                            (iv) title II of the Genetic Information 
                        Nondiscrimination Act of 2008 (42 U.S.C. 2000ff 
                        et seq.); or
                            (v) sections 302 and 304 of the Government 
                        Employee Rights Act of 1991 (42 U.S.C. 2000e-
                        16b and 2000e-16c),
                in the case of a claim alleged by an employee or 
                applicant for a violation of the law specified in 
                respective clause of this subparagraph;
                    (B) the Librarian of Congress shall have the same 
                powers as the Librarian of Congress has to administer 
                and enforce title VII of the Civil Rights Act of 1964 
                (42 U.S.C. 2000e et seq.) in the case of a claim 
                alleged by an employee or applicant for a violation of 
                such title;
                    (C) the Board (as defined in section 101 of the 
                Congressional Accountability Act of 1995 (2 U.S.C. 
                1301)) shall have the same powers as the Board has to 
                administer and enforce the Congressional Accountability 
                Act of 1995 (2 U.S.C. 1301 et seq.) in the case of a 
                claim alleged by an employee or applicant for a 
                violation of section 201(a)(1) of such Act (2 U.S.C. 
                1311(a)(1));
                    (D) the Attorney General shall have the same powers 
                as the Attorney General has to administer and enforce--
                            (i) title VII of the Civil Rights Act of 
                        1964 (42 U.S.C. 2000e et seq.); or
                            (ii) sections 302 and 304 of the Government 
                        Employee Rights Act of 1991 (42 U.S.C. 2000e-
                        16b and 2000e-16c),
                in the case of a claim alleged by an employee or 
                applicant for a violation of the law specified in 
                respective clause of this subparagraph;
                    (E) the President, the Commission, and the Merit 
                Systems Protection Board shall have the same powers as 
                the President, the Commission, and the Board, 
                respectively, have to administer and enforce chapter 5 
                of title 3, United States Code, in the case of a claim 
                alleged by an employee or applicant for a violation of 
                section 411 of such title;
                    (F) the Commission shall have the same powers as 
                described in subparagraph (A) to administer and enforce 
                a claim by any employee or applicant who is not 
                otherwise able to seek remedy for a claim through an 
                enforcement entity described in subparagraph (A) 
                through (E); and
                    (G) a court of the United States shall have the 
                same jurisdiction and powers as the court has to 
                enforce--
                            (i) title VII of the Civil Rights Act of 
                        1964 (42 U.S.C. 2000e et seq.) in the case of a 
                        claim alleged by an employee or applicant for a 
                        violation of such title or in the case of a 
                        claim described in subparagraph (F);
                            (ii) the Age Discrimination in Employment 
                        Act of 1967 (29 U.S.C. 621 et seq.);
                            (iii) titles I and V of the Americans with 
                        Disabilities Act of 1990 (42 U.S.C. 12101 et 
                        seq.);
                            (iv) title II of the Genetic Information 
                        Nondiscrimination Act of 2008 (42 U.S.C. 2000ff 
                        et seq.);
                            (v) sections 302 and 304 of the Government 
                        Employee Rights Act of 1991 (42 U.S.C. 2000e-
                        16b and 2000e-16c) in the case of a claim 
                        alleged by an employee or applicant for a 
                        violation of section 302(a)(1) of such Act (42 
                        U.S.C. 2000e-16b(a)(1));
                            (vi) the Congressional Accountability Act 
                        of 1995 (2 U.S.C. 1301 et seq.) in the case of 
                        a claim alleged by an employee or applicant for 
                        a violation of section 201(a)(1) of such Act (2 
                        U.S.C. 1311(a)(1)); and
                            (vii) chapter 5 of title 3, United States 
                        Code, in the case of a claim alleged by an 
                        employee or applicant for a violation of 
                        section 411 of such title.
            (2) Procedures and remedies.--The procedures and remedies 
        applicable to a claim alleged by an employee or applicant for a 
        violation of this section are--
                    (A) the procedures and remedies applicable for a 
                violation of title VII of the Civil Rights Act of 1964 
                (42 U.S.C. 2000e et seq.) in the case of a claim 
                alleged by an employee or applicant for a violation of 
                such title or in the case of a claim described in 
                paragraph (1)(F);
                    (B) the Age Discrimination in Employment Act of 
                1967 (29 U.S.C. 621 et seq.);
                    (C) titles I and V of the Americans with 
                Disabilities Act of 1990 (42 U.S.C. 12101 et seq.);
                    (D) title II of the Genetic Information 
                Nondiscrimination Act of 2008 (42 U.S.C. 2000ff et 
                seq.);
                    (E) the procedures and remedies applicable for a 
                violation of section 302(a)(1) of the Government 
                Employee Rights Act of 1991 (42 U.S.C. 2000e-16b(a)(1)) 
                in the case of a claim alleged by an employee or 
                applicant for a violation of such section;
                    (F) the procedures and remedies applicable for a 
                violation of section 201(a)(1) of the Congressional 
                Accountability Act of 1995 (2 U.S.C. 1311(a)(1)) in the 
                case of a claim alleged by an employee or applicant for 
                a violation of such section; and
                    (G) the procedures and remedies applicable for a 
                violation of section 411 of title 3, United States 
                Code, in the case of a claim alleged by an employee or 
                applicant for a violation of such section.
            (3) Other applicable provisions.--With respect to a claim 
        alleged by a covered employee (as defined in section 101 of the 
        Congressional Accountability Act of 1995 (2 U.S.C. 1301)) for a 
        violation of this section, title III of the Congressional 
        Accountability Act of 1995 (2 U.S.C. 1381 et seq.) shall apply 
        in the same manner as such title applies with respect to a 
        claim alleged by such a covered employee for a violation of 
        section 201(a)(1) of such Act (2 U.S.C. 1311(a)(1)).
    (e) Regulations.--
            (1) In general.--Except as provided in paragraphs (2), (3), 
        and (4), the Commission shall have authority to issue 
        regulations to carry out this section.
            (2) Librarian of congress.--The Librarian of Congress shall 
        have authority to issue regulations to carry out this section 
        with respect to employees or applicants for employment of the 
        Library of Congress.
            (3) Board.--The Board referred to in subsection (d)(1)(C) 
        shall have authority to issue regulations to carry out this 
        section, in accordance with section 304 of the Congressional 
        Accountability Act of 1995 (2 U.S.C. 1384), with respect to 
        covered employees, as defined in section 101 of such Act (2 
        U.S.C. 1301).
            (4) President.--The President shall have authority to issue 
        regulations to carry out this section with respect to covered 
        employees, as defined in section 411(c) of title 3, United 
        States Code, and applicants for employment as such employees.
    (f) State and Federal Immunity.--
            (1) Abrogation of state immunity.--A State shall not be 
        immune under the 11th Amendment to the Constitution from a suit 
        brought in a Federal court of competent jurisdiction for a 
        violation of this section.
            (2) Waiver of state immunity.--
                    (A) In general.--
                            (i) Waiver.--A State's receipt or use of 
                        Federal financial assistance for any program or 
                        activity of a State shall constitute a waiver 
                        of sovereign immunity, under the 11th Amendment 
                        to the Constitution or otherwise, to a suit 
                        brought by an employee or applicant for 
                        employment of that program or activity under 
                        this section for a remedy authorized under 
                        subsection (d).
                            (ii) Definition.--In this paragraph, the 
                        term ``program or activity'' has the meaning 
                        given the term in section 606 of the Civil 
                        Rights Act of 1964 (42 U.S.C. 2000d-4a).
                    (B) Effective date.--With respect to a particular 
                program or activity, subparagraph (A) applies to 
                conduct occurring on or after the day, after the date 
                of enactment of this Act, on which a State first 
                receives or uses Federal financial assistance for that 
                program or activity.
            (3) Remedies against state officials.--An official of a 
        State may be sued in the official capacity of the official by 
        any employee or applicant for employment who has complied with 
        the applicable procedures of subsection (d), for equitable 
        relief that is authorized under this section. In such a suit 
        the court may award to the prevailing party those costs 
        authorized by section 722 of the Revised Statutes (42 U.S.C. 
        1988).
            (4) Remedies against the united states and the states.--
        Notwithstanding any other provision of this title, in an action 
        or administrative proceeding against the United States or a 
        State for a violation of this section, remedies (including 
        remedies at law and in equity, and interest) are available for 
        the violation to the same extent as the remedies are available 
        for a violation of title VII of the Civil Rights Act of 1964 
        (42 U.S.C. 2000e et seq.) by a private entity, except that--
                    (A) punitive damages are not available; and
                    (B) compensatory damages are available to the 
                extent specified in section 1977A(b) of the Revised 
                Statutes (42 U.S.C. 1981a(b)).

SEC. 104. SEC FILINGS AND MATERIAL DISCLOSURES AT PUBLIC COMPANIES.

    (a) Definitions.--In this section--
            (1) the term ``Form 10-K'' means the form described in 
        section 249.310 of title 17, Code of Federal Regulations, or 
        any successor regulation; and
            (2) the term ``issuer'' has the meaning given the term in 
        section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
        78c(a)).
    (b) Findings.--Congress finds that--
            (1) shareholders and the public should know whether 
        corporations--
                    (A) are expending company funds to resolve, settle, 
                or litigate claims of workplace harassment, including 
                sexual harassment; and
                    (B) along with the executives and managers of those 
                corporations--
                            (i) are complying with prohibitions against 
                        workplace harassment, including sexual 
                        harassment; and
                            (ii) facilitate a culture of silence, 
                        disrespect, intimidation, and abuse that 
                        negatively impacts the health and safety of the 
                        workers of those corporations and the value of 
                        those corporations; and
            (2) the requirements of this section will--
                    (A) establish necessary transparency and 
                accountability; and
                    (B) provide an incentive for corporations to--
                            (i) promptly address workplace harassment, 
                        including sexual harassment, as that misconduct 
                        occurs; and
                            (ii) foster a culture in which workplace 
                        harassment is not protected and does not occur.
    (c) Information Required.--Not later than 1 year after the date of 
enactment of this Act, the Securities and Exchange Commission shall 
promulgate a regulation that requires any issuer that is required to 
submit annually a report using Form 10-K to include in any such 
submission--
            (1) during the then most recent 5-year period covered by 
        the submission--
                    (A) with respect to workplace harassment, including 
                sexual harassment, and retaliation for reporting, 
                resisting, opposing, assisting, or otherwise 
                participating in a workplace harassment proceeding--
                            (i) the number of settlements reached by 
                        the issuer as a signatory or when the issuer is 
                        a beneficiary of a release of claims; and
                            (ii) whether any judgments or awards 
                        (including awards through arbitration or 
                        administrative proceedings) were entered 
                        against the issuer in part or in whole, or any 
                        payments made in connection with a release of 
                        claims; and
                    (B) the total amount paid by the issuer or another 
                party as a result of--
                            (i) the settlements described in 
                        subparagraph (A)(i); and
                            (ii) the judgments described in 
                        subparagraph (A)(ii); and
            (2) information regarding whether, in the aggregate, 
        including the period covered by the submission, there have been 
        three or more settlements reached by, or judgments against, the 
        issuer with respect to workplace harassment, including sexual 
        harassment, or retaliation for reporting, resisting, opposing, 
        assisting, or otherwise participating in a workplace harassment 
        proceeding that relate to a particular individual employed by 
        the issuer, without identifying that individual by name.

SEC. 105. PROFESSIONAL TRAINING, INCLUDING BYSTANDER TRAINING, AND 
              PUBLIC EDUCATION CAMPAIGNS.

    (a) Commission Authority.--The Commission shall have the authority 
to--
            (1) reasonably adjust the fees the Commission charges for 
        any education, technical assistance, or training the Commission 
        offers in accordance with section 705(j)(1) of the Civil Rights 
        Act of 1964 (42 U.S.C. 2000e-4(j)(1));
            (2) use the materials developed by the Commission for any 
        education, technical assistance, or training offered by the 
        Commission in accordance with section 705(j)(1) of the Civil 
        Rights Act of 1964 in any education and outreach activities 
        carried out by the Commission; and
            (3) use funds from the EEOC Education, Technical 
        Assistance, and Training Revolving Fund, established under 
        section 705(k) of the Civil Rights Act of 1964, to pay the full 
        salaries of any Commission employees that develop and 
        administer any education, technical assistance, or training 
        programs offered by the Commission.
    (b) Workplace Training.--
            (1) In general.--The Commission shall provide for the 
        development and dissemination of workplace training programs 
        and information regarding workplace harassment, including 
        sexual harassment.
            (2) Contents of training.--The training provided by the 
        Commission under this subsection to managers and nonmanagers 
        shall be consistent with the findings of the Commission, on 
        matters including--
                    (A) what constitutes workplace harassment, 
                including sexual harassment;
                    (B) the rights of individuals with respect to 
                workplace harassment and how to report workplace 
                harassment;
                    (C) how individuals, including bystanders, who 
                encounter workplace harassment can intervene or report 
                the harassment; and
                    (D) how employers and managers can prevent 
                workplace harassment, including sexual harassment, from 
                occurring in the workplace.
            (3) Contents of information.--In providing information 
        under this subsection, the Commission shall--
                    (A) prepare and distribute information that is 
                consistent with the findings of the Commission; and
                    (B) develop and disseminate a public service 
                advertisement campaign that distributes information 
                with respect to the matters described in paragraph (2).
    (c) Effective Date.--This section shall not take effect in any 
fiscal year for which less than $1,500,000 is appropriated to carry out 
this section.

     TITLE II--MODIFICATION OF TAX TREATMENT OF AMOUNTS RELATED TO 
           EMPLOYMENT DISCRIMINATION AND WORKPLACE HARASSMENT

SEC. 201. TAX TREATMENT OF AMOUNTS RELATED TO JUDGMENTS.

    (a) Denial of Deduction.--
            (1) In general.--Part IX of subchapter B of chapter 1 of 
        the Internal Revenue Code of 1986 is amended by adding at the 
        end the following new section:

``SEC. 280I. AMOUNTS RELATED TO JUDGMENTS WITH RESPECT TO WORKPLACE 
              HARASSMENT, INCLUDING SEXUAL HARASSMENT.

    ``No deduction shall be allowed under this chapter for amounts paid 
or incurred by the taxpayer--
            ``(1) pursuant to any judgment or award in litigation 
        related to workplace harassment, including sexual harassment, 
        or
            ``(2) for expenses and attorney's fees in connection with 
        the litigation resulting in the judgment or award described in 
        paragraph (1) (other than expenses or attorney's fees paid by 
        the workplace harassment plaintiff or claimant), or for any 
        insurance covering the defense or liability of the underlying 
        claims with respect to such litigation.''.
            (2) Clerical amendment.--The table of sections for part IX 
        of subchapter B of chapter 1 of such Code is amended by adding 
        at the end the following new item:

``Sec. 280I. Amounts related to judgments with respect to workplace 
                            harassment, including sexual harassment.''.
            (3) Conforming amendment.--Section 162 of such Code is 
        amended by striking subsection (q).
            (4) Effective date.--The amendments made by this subsection 
        shall apply to amounts paid or incurred in taxable years 
        beginning after the date of the enactment of this Act.
    (b) Exclusion From Income.--
            (1) In general.--Part III of subchapter B of chapter 1 of 
        the Internal Revenue Code of 1986 is amended by inserting after 
        section 139G the following new section:

``SEC. 139H. AMOUNTS RECEIVED IN CONNECTION WITH JUDGMENTS, AWARDS, AND 
              SETTLEMENTS WITH RESPECT TO WORKPLACE HARASSMENT.

    ``Gross income shall not include any amount received in connection 
with a judgment or award in, or a settlement of--
            ``(1) a claim related to workplace harassment, including 
        sexual harassment or other unlawful discrimination, or
            ``(2) any other claim of unlawful discrimination (as 
        defined by section 62(e)).
The preceding sentence shall not include any employment discrimination 
compensation to which section 1302 applies.''.
            (2) Clerical amendment.--The table of sections for part III 
        of subchapter B of chapter 1 of such Code is amended by 
        inserting after the item relating to section 139G the following 
        new item:

``Sec. 139H. Amounts received in connection with judgments, awards, and 
                            settlements with respect to workplace 
                            harassment.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to amounts received in taxable years beginning 
        after the date of the enactment of this Act.

SEC. 202. LIMITATION ON TAX BASED ON INCOME AVERAGING FOR COMPENSATION 
              RECEIVED ON ACCOUNT OF CERTAIN UNLAWFUL EMPLOYMENT 
              DISCRIMINATION.

    (a) In General.--Part I of subchapter Q of chapter 1 of the 
Internal Revenue Code of 1986 (relating to income averaging) is amended 
by adding at the end the following new section:

``SEC. 1302. INCOME FROM BACKPAY AND FRONTPAY RECEIVED ON ACCOUNT OF 
              CERTAIN UNLAWFUL EMPLOYMENT DISCRIMINATION.

    ``(a) General Rule.--If employment discrimination backpay or 
frontpay is received by a taxpayer during a taxable year, the tax 
imposed by this chapter for such taxable year shall not exceed the sum 
of--
            ``(1) the tax which would be so imposed if--
                    ``(A) no amount of such backpay or frontpay were 
                included in gross income for such year, and
                    ``(B) no deduction were allowed for such year for 
                expenses (otherwise allowable as a deduction to the 
                taxpayer for such year) in connection with making or 
                prosecuting any claim of unlawful employment 
                discrimination by or on behalf of the taxpayer, plus
            ``(2) the product of--
                    ``(A) the number of years in the backpay period and 
                frontpay period, and
                    ``(B) the amount by which the tax determined under 
                paragraph (1) would increase if the amount on which 
                such tax is determined were increased by the average 
                annual net backpay and frontpay amount.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Employment discrimination backpay or frontpay.--The 
        term `employment discrimination backpay or frontpay' means 
        backpay or frontpay receivable (whether as lump sums or 
        periodic payments) on account of a claim of unlawful employment 
        discrimination.
            ``(2) Unlawful employment discrimination.--The term 
        `unlawful employment discrimination' has the meaning provided 
        the term `unlawful discrimination' in section 62(e).
            ``(3) Backpay and frontpay.--The terms `backpay' and 
        `frontpay' mean amounts--
                    ``(A) which are includible in gross income in the 
                taxable year as compensation which is attributable--
                            ``(i) in the case of backpay, to services 
                        performed, or that would have been performed 
                        but for a claimed violation of law, as an 
                        employee, former employee, or prospective 
                        employee before such taxable year for the 
                        taxpayer's employer, former employer, or 
                        prospective employer, and
                            ``(ii) in the case of frontpay, to 
                        employment that would have been performed but 
                        for a claimed violation of law, in a taxable 
                        year or taxable years following the taxable 
                        year, and
                    ``(B) which are received on account of a judgment 
                or settlement resulting from a claim for a violation of 
                law.
            ``(4) Backpay period.--The term `backpay period' means the 
        period during which services are performed (or would have been 
        performed) to which backpay is attributable. If such period is 
        not equal to a whole number of taxable years, such period shall 
        be increased to the next highest number of whole taxable years.
            ``(5) Frontpay period.--The term `frontpay period' means 
        the period of foregone employment to which frontpay is 
        attributable. If such period is not equal to a whole number of 
        taxable years, such period shall be increased to the next 
        highest number of whole taxable years.
            ``(6) Average annual net backpay and frontpay amount.--The 
        term `average annual net backpay and frontpay amount' means the 
        amount equal to--
                    ``(A) the excess of--
                            ``(i) employment discrimination backpay and 
                        frontpay, over
                            ``(ii) the amount of deductions that would 
                        have been allowable but for subsection 
                        (a)(1)(B), divided by
                    ``(B) the number of years in the backpay period and 
                frontpay period.''.
    (b) Clerical Amendment.--The table of sections for part I of 
subchapter Q of chapter 1 of the Internal Revenue Code of 1986 is 
amended by inserting after section 1301 the following new item:

``Sec. 1302. Income from compensation received on account of certain 
                            unlawful employment discrimination.''.
    (c) Income Averaging Not To Increase Alternative Minimum Tax 
Liability.--Section 55(c) of the Internal Revenue Code of 1986 is 
amended by redesignating paragraph (3) as paragraph (4) and by 
inserting after paragraph (2) the following new paragraph:
            ``(3) Coordination with income averaging for amounts 
        received on account of employment discrimination.--Solely for 
        purposes of this section, section 1302 shall not apply in 
        computing the regular tax liability.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after the 
date of the enactment of this Act.
                                 <all>