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By: Michelle T. Harrington
California Governor Gavin Newsom signed legislation that expands existing law prohibiting confidentiality provisions in settlement agreements and expands restrictions on the use of non-disparagement clauses in employment agreements. The new law – known as the “Silenced No More Act” (SB 331 or the “Act”) – also imposes new time and notice requirements for separation agreements. What do employers need to know about the Act?
The Act builds on SB 820, also known as the STAND (Stand Together Against Nondisclosure) Act, which was passed in response to the #MeToo movement. The STAND Act prohibited the use of confidentiality provisions in settlement agreements for employment (civil or administrative) actions involving claims based on sex (assault, discrimination, retaliation, and harassment). The Act broadens those restrictions to now include harassment and discrimination claims on the basis of any characteristic protected under the Fair Employment and Housing Act (FEHA), not merely those pertaining to sex.
SB 331 preserves the confidentiality of the identity of the claimant when requested by the claimant. Settlement agreements may still incorporate provisions preventing disclosure of the amount paid to resolve the claims.
Currently, employers are prohibited from requiring an employee to sign a non-disparagement clause denying the employee’s right to disclose information about “unlawful acts in the workplace,” including, but not limited to sexual harassment, in exchange for a raise or bonus, or as a condition of employment or continued employment. The Act expands the definition of “unlawful acts in the workplace” to include any harassment or discrimination, not solely those based on sex, and “any other conduct that the employee has reasonable cause to believe is unlawful.”
The Act also prohibits the use of non-disparagement provisions in other types of employment agreements, including separation agreements. However, the limitations on non-disparagement clauses do not apply to “negotiated” settlement agreements to resolve pending litigation filed in court, before an administrative agency, or in an alternate dispute resolution forum, or to resolve a complaint filed through an employer’s internal complaint process. Under the Act, “negotiated” means that the agreement: (1) is voluntary, deliberate, and informed, (2) provides consideration to the employee, and (3) gives the employee notice and opportunity to retain counsel.
Employers may still use non-disparagement provisions in separation agreements and other documents to restrict an employee’s ability to disclose information related to lawful conditions in the workplace. However, in that circumstance, the following disclaimer must be included: “Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination, or any other conduct that you have reason to believe is unlawful.”
As well, the Act does not prohibit an employer from protecting its trade secrets, proprietary or confidential information that does not involve unlawful acts in the workplace. Nor does SB 331 prohibit inclusion of a general release or waiver of all claims in a separation agreement.
The Act requires employers to: (1) inform employees (current and former) of their right to consult with any attorney regarding any separation agreement, and (2) provide at least five business days for employees to do so. Employees may choose to sign the agreement prior to the end of the five days, so long as the employee’s decision to shorten the review period is knowing and voluntary, and not induced through fraud, misrepresentation, or threats to withdraw or alter the offer prior to the expiration of the five days, or by a promise to provide different terms for those who sign earlier.
Employers should take immediate steps to comply with the Act, which becomes effective on January 1, 2022. Specifically, employers should: