Employers – Get ready to revise your settlement, separation, and nondisclosure agreements in 2022.
California employers will soon need to make changes to their settlement agreements, separation agreements, and other agreements containing nondisclosure or nondisparagement provisions as the “Silenced No More Act” (SB 331) takes effect on January 1, 2022.
In 2018, following the #MeToo movement, California passed the Stand Together Against NonDisclosure Act or STAND Act, which prohibits the use of confidentiality provisions in settlement agreements for claims based on sex. This has allowed employees to more openly discuss sexual harassment and sexual harassment allegations in the workplace. Seeking to expand these protections to other types of claims in the workplace, the California legislature passed SB 331 to amend Section 1001 of the Code of Civil Procedure and Section 12964.5 of the Government Code.
Changes Under SB 331
In October 2021, California passed SB 331 – or the “Silenced No More Act” – which extends confidentiality prohibitions for other forms of discrimination, harassment, or retaliation, not just sex-based claims. Specifically, SB 331 amends Code of Civil Procedure Section 1001 (previously enacted by the STAND Act) to expand the prohibition of provisions in settlement agreements which prevent or restrict the disclosure of factual information related to a claim filed in a civil action or a complaint filed in an administrative action. Section 1001 was expanded to included acts based on race, religion, color, national origin, ancestry, disability, medical condition, familial status, sex, gender, age and other protected characteristics as described in Sections 12940 and 12955 of the Government Code.
SB 331 also amended Government Code Section 12964.5 to expand nondisclosure and nondisparagement prohibitions to separation agreements. Previously, Section 12964.5 had banned restrictive provisions about sharing unlawful acts in the workplace from agreements made in exchange for a bonus or raise or as a condition of employment. The amended Section 12964.5 expands this prohibition to separation agreements as well, and specifically defines “unlawful acts in the workplace” to include harassment, discrimination, or any other conduct the employee has reasonable cause to believe is unlawful. This provision does not apply to a negotiated settlement agreement to resolve an underlying claim filed in court, before an administrative agency, in an ADR forum, or through the employer’s internal complaint process.
Section 12964.5(b)(1)(B) adds that any separation agreement that restricts an employee’s ability to disclose information related to conditions in the workplace must include, in substantial form, the following language: “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.” There is also the added requirement that employers offering such an agreement must notify the employee about their right to consult an attorney about the agreement, and provide at least five business days for them to do so.
What protections to do employers still have?
SB 331 does not prohibit the enforcement of any provision that prevents disclosure of the amount paid in a settlement or severance agreement. Therefore, employers can still insist that employees not disclose the money paid to them in resolving the dispute. Employers are also permitted to have provisions that protect trade secrets, confidential information, or other proprietary information that does not involve unlawful acts in the workplace.
In addition, employers can have nondisparagement type clauses in separation agreements if there is specific language carving out the employee’s right to disclose information about unlawful acts in the workplace. Section 12964.5(b)(1)(B) provides the specific language for employers to use.
Of particular note is the fact that Section 1001 only applies to pending civil actions or administrative charges, which means it does not apply to pre-litigation claims. Therefore, employers may be able to include nondisclosure provisions in a settlement reached after a demand letter from an employee’s attorney. Furthermore, Section 12964.5 does not apply to “a negotiated settlement agreement” or an agreement that is voluntary and informed where the employee is given notice and an opportunity to retain counsel or has retained counsel.
Conclusion
If you have agreements containing nondisparagement and/or nondisclosure provisions in your workplace, make sure to review them before January 1, 2022, to bring them into compliance with SB 331. A violation of these new provisions exposes employers to potential liability and penalties under the California Labor Code. Employers are highly encouraged to seek employment counsel when negotiating these types of agreements.
The full bill can be read on the California Legislative Information Page.
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The information provided herein does not, and is not intended to, constitute legal advice; instead all information, content, and materials are for general informational purposes only.
If you have any questions, please contact employment attorney, Devin Mikulka, and for more details, read our full disclaimer.
