Employers: Watch for changes to NDA rules

On Behalf of | Apr 9, 2021 | business litigation

It can never be said enough – employers must always make sure they stay on top of any changes to labor laws. When they are up to date, they face a lower risk of non-compliance.

Unfortunately, this can be a complicated task, as changes and revisions are frequent in this area of law. And California lawmakers recently made yet another proposal that could have a serious impact on employers and businesses.

Senate bill calls NDAs into question

In February, state lawmakers introduced SB 331, or the Silenced No More Act. This bill aims to prevent employers from including nondisclosure agreements (NDAs) in any settlements or agreements with employees who experienced any form of discrimination.

While this suggested change is still a bill, there is a precedent for this ban on NDAs, as MarketWatch points out. In response to the Me Too movement, California lawmakers passed a bill that banned NDAs particularly in cases of sexual harassment, allowing survivors to speak out.

Confidentiality protects the business, but strategy is essential

Generally, if employers deal with disputes or complaints regarding discrimination, they attempt to use confidentiality agreements or NDAs to safeguard the business’s best interests. As we have discussed in previous blog posts, issues like this in the workplace can quickly spiral and cause significant damage to the business – regardless of how the employer handles the complaint.

However, the intent of using them may not always match the effect they have. Employers must be strategic when it comes to using NDAs, including:

  • Determining when they will use them, such as specifically protecting intellectual property
  • When embarking on a new venture or partnership
  • When working with third parties in consulting

Whether or not SB 331 passes, employers must be mindful of any updates or changes to the rules surrounding NDAs. Even if this particular rendition of the bill does not pass, the objective of it will likely not disappear anytime soon.