When can business owners keep settlements confidential?

On Behalf of | Jan 8, 2021 | business litigation, employment law

Most business owners take great care to prevent legal disputes. However, it is almost impossible to totally eliminate all their risk; it’s simply the reality of running a business.

Even so, there are ways that business owners can protect themselves while resolving legal disputes. For example, one critical factor to protect the business is to secure a confidential settlement agreement.

WHO IS SUBJECT TO CONFIDENTIALITY IN THESE CASES?

There are often many parties involved in the process of resolving a business dispute. This can make it challenging to keep certain matters confidential from the public – including their consumer base and other business affiliates.

So, business owners often wonder how they can protect their business when settling damaging disputes or claims. In many cases, making a settlement agreement confidential can help. The confidentiality clause applies to all parties involved in the case, including:

  • Plaintiffs;
  • Defendants; and
  • Attorneys or counsel.

With such a clause in place, none of the parties listed above can discuss either the dispute or the settlement of the matter. This not only keeps the details of this case between the relevant parties, but it can also protect businesses from landslide of similar claims.

CONFIDENTIALITY IS NOT ALWAYS A POSSIBILITY

In 2018, California lawmakers and Gov. Jerry Brown passed a law that bans the use of such agreements in employment disputes involving:

  • Sexual harassment or assault;
  • Discrimination based on sex; or
  • Retaliation for reporting sexual harassment.

This ban applies in all these cases, regardless of whether the parties resolved the dispute in or outside of court.

Understanding the benefits – as well as the limitations – of a confidential settlement agreement is critical, especially when business owners face the risk of a legal dispute.