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California has once again reined in the use of confidentiality provisions in the employment context with its recent enactment of the Silenced No More Act (SB 331), which goes into effect January 1, 2022.
California has once again reined in the use of confidentiality
provisions in the employment context with its recent enactment of
the Silenced No More Act (SB 331), which goes
into effect January 1, 2022.
California currently bans employers from using confidentiality
provisions in agreements involving claims for sexual assault,
sexual harassment, and sex discrimination. SB 331 extends the ban
further. Beginning next year, employers cannot use confidentiality
provisions in agreements involving any protected
characteristic under the Fair Employment and Housing Act (FEHA),
including race, religion, color, national origin, ancestry,
physical disability, mental disability, medical condition, genetic
information, familial status, sex, gender, gender identity, gender
expression, age, sexual orientation, and veteran or military
status. Any agreement entered into on or after January 1, 2022 that
violates SB 331 is void as a matter of law and against public
policy.
Below we address how the passage of this new law impacts
litigation settlement agreements, separation agreements, and other
employment agreements, and how businesses can ensure
compliance.
Impact of SB 331 on Litigation Settlement
Agreements
Under SB 331 (amending California Code of Civil Procedure
section 1001), a litigation settlement agreement may not
prevent the disclosure of factual information relating to any form
of FEHA discrimination in connection with FEHA claims asserted by
an employee in civil court or before an administrative agency. SB
331 does not prevent employers from insisting that the claim's
settlement amount be kept confidential. And, if the employee
so requests, SB 331 still allows for the employee's identity
and all facts that could lead to the discovery of the
employee's identity to remain confidential.
Impact of SB 331 on Separation Agreements
SB 331 also expands FEHA section 12964.5 to prevent the use of
confidentiality and non-disparagement provisions in separation
agreements to limit a current or former employee's ability to
disclose "unlawful acts in the workplace." It defines
these acts as including "harassment or discrimination or other
conduct that the employee has reasonable cause to believe is
unlawful." If an employer includes a confidentiality or
non-disparagement provision in a separation agreement, that
agreement must state:
"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."
Notably, SB 331 does not apply to separation agreements when
there is a "negotiated settlement" to resolve a FEHA
claim through an employer's internal complaint process (e.g.,
pre-litigation). A "negotiated" settlement occurs
when:
The separation agreement is voluntary, deliberate, and
informed;
The separation agreement provides consideration of value to the
employee; and
The employee is given notice and an opportunity to retain an
attorney (at least 5 business days) or is represented by an
attorney. Note that an employee may sign a separation agreement
before the end of the 5 business days as long as the employee's
decision to do so is knowing and voluntary and not induced by the
employer.
While a "negotiated settlement" of an internal
complaint does not require the statutorily required notice
language, employers should consider consulting counsel to discuss
whether it is appropriate for inclusion if the specific facts of
the separation do not clearly exempt the separation from the
statute's purview.
Impact of SB 331 on other Employment
Agreements
Along with litigation settlement agreements and separation
agreements, SB 331 prevents the use of confidentiality-type
provisions to prevent an employee from disclosing FEHA-based
unlawful acts in the workplace in exchange for a raise or bonus, or
as a condition of employment or continued employment. Much like
separation agreements, SB 331 also does not apply to these type of
agreements when a "negotiated settlement" is reached.
Ensuring Compliance with SB 331
Below is a side-by-side comparison of the current law and SB
331, including what employers need to consider for compliant
litigation settlement agreements, separation agreements, and other
employment-based agreements.
Types of Agreements
Current law (until December 31, 2021)
SB 331 (January 1, 2022)
Litigation Settlements: Code of Civil
Procedure Section 1001
A provision within a settlement agreement cannot prevent the
disclosure of factual information related
to discrimination claims based on sex
filed in a civil action or a complaint filed in an administrative
action.
A provision that shields the identity of the claimant and all
facts that could lead to the discovery of the claimant's
identity, including pleadings filed in court, may be included
within a settlement agreement at the request of the
claimant.
Amount of any settlement can remain confidential.
Does not apply
to pre-litigation settlement.
A provision that violates the amendment is void as a matter of
law and against public policy.
A provision within a settlement agreement cannot
prevent or restrict the disclosure of
factual information related to all types of
discrimination-based claims filed in a civil action
or a complaint filed in an administrative action.
Remaining portions substantially unchanged.
Separation Agreements: Section 12964.5 of
the Government Code (FEHA)
Separation Agreements. Not explicitly
addressed in current version of Section 12964.5.
Separation Agreements. It is an unlawful
employment practice for an employer or former employer to include
in any agreement related to an employee's separation from
employment any provision that prohibits the disclosure of
information about "unlawful acts in the
workplace" including, but not limited to, information
pertaining to harassment or discrimination or any other conduct
that the employee has reasonable cause to believe is
unlawful.
Mandatory Language. A
non-disparagement or other contractual provision that restricts an
employee's ability to disclose information related to
conditions in the workplace shall 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."
General release OK. This subdivision does
not prohibit the inclusion of a general release or waiver of all
claims in an agreement related to an employee's separation from
employment, provided that the release or waiver is otherwise lawful
and valid.
Notice to employee of right to consult attorney and at
least 5 business days to do so. Employer must notify
the employee that the employee has a right to consult an attorney
regarding the agreement and shall provide the employee with a
reasonable time period of not less than five business days in which
to do so. An employee may sign such an agreement prior to the end
of the reasonable time period as long as the employee's
decision to accept such shortening of time is knowing and voluntary
and is not induced by the employer through fraud,
misrepresentation, or a threat to withdraw or alter the offer prior
to the expiration of the reasonable time period, or by providing
different terms to employees who sign such an agreement prior to
the expiration of such time period.
Section 12964.5 does not apply to a
"negotiated settlement" of an existing
dispute. Section 12964.5 does not apply to a
negotiated agreement to resolve an underlying claim under FEHA
that has been filed by an employee in court, before an
administrative agency, in an alternative dispute resolution forum,
or through an employer's internal complaint
process. "Negotiated" means that the agreement is
voluntary, deliberate, and informed, the agreement provides
consideration of value to the employee, and that the employee is
given notice and an opportunity to retain an attorney or is
represented by an attorney.
Amount paid for Separation can remain
confidential. This section does not prohibit the
entry or enforcement of a provision in any agreement that precludes
the disclosure of the amount paid in a severance agreement.
Trade secret/proprietary
information. This section does not prohibit an
employer from protecting the employer's trade secrets,
proprietary information, or confidential information that does not
involve unlawful acts in the workplace.
Other Employment Agreements: Section
12964.5 of the Government Code (FEHA)
Other employment agreements. It is an
unlawful employment practice for an employer, in exchange for a
raise or bonus, or as a condition of employment or continued
employment, to do either of the following:
Require an employee to sign a release of a claim or right under
FEHA; or
For an employer to require an employee to sign a
non-disparagement agreement or other document to the extent it has
the purpose or effect of denying the employee the right to disclose
information about unlawful acts in the
workplace including, but not limited to, sexual
harassment.
Mandatory Language. None.
Section 12964.5 does not apply to a
"negotiated settlement" of an existing
dispute. Section 12964.5 does not apply to a
negotiated agreement to resolve an underlying claim under FEHA that
has been filed by an employee in court, before an administrative
agency, in an alternative dispute resolution forum, or through an
employer's internal complaint process. "Negotiated"
means that the agreement is voluntary, deliberate, and informed,
the agreement provides consideration of value to the employee, and
that the employee is given notice and an opportunity to retain an
attorney or is represented by an attorney.
Other employment agreements. It is an unlawful
employment practice for an employer, in exchange for a raise or
bonus, or as a condition of employment or continued employment, to
do either of the following:
Require an employee to sign a release of a claim or right under
FEHA; or
For an employer to require an employee to sign a
non-disparagement agreement or other document to the extent it has
the purpose or effect of denying the employee the right to disclose
information about unlawful acts in the
workplace related to any FEHA protected
characteristic.
Mandatory Language. A non-disparagement or other contractual
provision that restricts an employee's ability to disclose
information related to conditions in the workplace shall 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."
Section 12964.5 does not apply to a
"negotiated settlement" of an existing
dispute. Same.
Practical Takeaways for Employers
SB 331's passage should remind employers to audit their
anti-discrimination and anti-harassment policies and conduct
further training. Employers should also revisit their
settlement/separation agreement templates and the content of the
training materials and programs to ensure they are up-to-date. The
Mintz ELB group in California is available to assist your business
in its SB 331 compliance efforts.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
