A proposed bill in California seeks to protect workers against nondisclosure agreements and empower them to speak out about alleged acts of discrimination, including racism. Senate Bill 331, known as the Silenced No More Act, was introduced in February 2021 and seeks to expand protections against confidential settlements to cover all forms of harassment or discrimination under California law, including on the basis of race, ancestry, religion or gender identity. If passed, the law will impose greater restrictions on companies’ freedom to contract settlement and non-disparagement agreements.
New Obligations if SB 331 Passes
- SB 331 will expand the existing prohibition of provisions that prohibit discussing sexual harassment in the workplace to discussing any type of harassment (i.e., race, age, religious harassment). (See discussion of SB 820 below.)
- The law will prohibit non-disparagement agreements that prohibit the disclosure of information about unlawful acts in the workplace.
- The law also will create new obligations, such as the requirement to notify the employee that the employee has a right to consult an attorney regarding the agreement and giving the employee “a reasonable time period of not less than five business days” in which to do so.
Several Employer-Friendly Changes to Observe
- The law clarifies that including a general release or waiver of all claims in an agreement related to an employee’s separation from employment does not violate the statute.
- It verifies that the law does not prohibit a provision that precludes the disclosure of the amount paid in settlement of a claim.
- It confirms that employers may protect trade secrets, proprietary information, or confidential information that does not involve unlawful acts in the workplace.
State of the Law | Current Limits on Contractual Confidentiality
Current law, passed in the wake of the #MeToo movement, allows California workers to speak out about sex-based discrimination cases, but do not mention other types of discrimination.
- SB 820 prohibits confidentiality clauses in settlements relating to sexual harassment, sex discrimination and retaliation claims. Effective January 1, 2019, any provision in a settlement agreement that prevents the disclosure of factual information relating to certain claims of sexual assault, sexual harassment, or harassment or discrimination based on sex, that are filed in a civil or administrative action is void as a matter of law. The law does not appear to apply to clauses used in settlements in the pre-litigation phase (that is, before filing an administrative charge or judicial complaint). Also, the law expressly does not limit the parties’ ability to require the settlement amount to be private.
Existing law restricts employer releases and non-disparagement agreements as described below, but the provisions do not apply to negotiated settlement agreements to resolve an underlying claim in court, before an administrative agency or alternative dispute resolution forum, or through an employer’s internal complaint process.
- Among other things, SB 1300 limits employers’ ability to obtain non-disparagement agreements or a release of claims from employees. SB 1300 makes it an unlawful employment practice under the California Government Code for an employer, in exchange for a raise or bonus or as a condition of employment or continued employment, to do the following:
- Require an employee to sign a release stating the employee does not possess any claim or injury against the employer or other covered entity, and include the release of a right to file and pursue a civil action or complaint with, or otherwise notify, a state agency, law enforcement agency, court, or other governmental entity; or
- Require an employee to sign a non-disparagement agreement or other document that purports to deny the employee the right to disclose information about unlawful acts in the workplace, including, but not limited to, sexual harassment
Current law voids contractual provisions that would prevent a party from testifying about alleged criminal conduct or sexual harassment when the party has been compelled or requested to do so by lawful process.
- AB 3109 voids any provision in a contract or settlement agreement entered into on or after January 1, 2019, that waives a party’s right to testify regarding criminal conduct or sexual harassment on the part of the other party to the contract or settlement agreement, on the part of the other party’s agents or employees.
Few companies are proactively pulling confidentiality provisions in anticipation of the SB 331. While that is an option to get ahead in case the Silenced No More Act is passed, most are taking the wait and see approach. (Note that the bill is not retroactive.) We will continue to monitor this and report back.