It can never be said enough – employers must always make sure they stay on top of any changes to employment 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 a couple of changes to the law that will greatly affect the manner in which employee disputes are resolved.
TWO RECENT BILLS THAT CHANGED THE LAWS
In 2018, California passed Senate Bill 820, the STAND Act (Stand Together Against Non-Disclosure Act), in response to the #MeToo movement. SB 820 prohibited the use of confidentiality provisions in settlement agreements where the underlying claims were based upon sexual assault, sexual harassment, and workplace harassment or discrimination based on sex. The law did not extend to claims based upon other protected characteristics.
Therefore, a confidentiality provision in a settlement agreement could not prevent an individual from discussing the factual information related to sexual harassment or sex discrimination allegedly experienced in the workplace, but could preclude an individual from discussing factual information related to harassment or discrimination based upon any other protected characteristic (e.g., race, age, gender, etc.).
Last year, Governor Newsom signed Senate Bill 331, known as the “Silenced No More Act” into law which expands Civil Procedure Code Section 1001. The Act went into effect on January 1, 2022 and applies to agreements entered into beginning on January 1, 2022, and is designed to prevent employers from including nondisclosure agreements (NDAs) in any settlements or agreements with employees who experienced any form of discrimination.
The Silenced No More Act expands the provisions in the 2018 STAND Act to broadly prohibit confidentiality provisions in settlement and separation agreements involving workplace harassment or discrimination on any protected basis (i.e., harassment or discrimination based on race, religion, color, national origin, ancestry, disability, medical condition, familial status, gender, age, and all other protected characteristics), not just sexual harassment or sex. It also requires non-disparagement agreements to contain specific language advising the individual of those rights.
Confidentiality in Settlement Agreements
SB 331 leaves in place the prior law’s provisions protecting the identity of the claimant. Specifically, if the claimant requests a provision protecting the claimant’s identity and any facts that could reveal the claimant’s identity, a confidentiality provision is lawful so long as a government agency or a public official is not a party to the settlement agreement.
SB 331 also expands Government Code Section 12964.5, which now makes it unlawful to include any provision that prohibits an employee from disclosing information about any type of harassment or discrimination or other conduct that an employee reasonably believes is unlawful in the workplace unless the agreement includes the following carve-out language in substantial form: “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.”
SB 331 also expands these requirements to any agreement related to a current or former employee’s separation from employment. Any such separation agreement must provide: (1) notice about an employee’s right to consult an attorney, and (2) reasonable time (at least 5 business days) for the consultation with an attorney. If an employee wishes to accept the agreement before the end of the 5-business-day period, it must be “knowing and voluntary” and not a result of improper inducement by the employer. This requirement does not apply to a negotiated agreement to resolve an underlying claim filed by an employee in court, before an administrative agency, in arbitration, or through an employer’s internal complaint process.
Like SB 820, SB 331 allows the settlement or severance amount paid to remain confidential. It also permits confidentiality provisions in releases and agreements that aim to protect the employer’s trade secrets, proprietary information, or other confidential information that does not involve unlawful acts in the workplace.
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