California Passes the “Silenced No More Act,” Further Limiting the Use of Nondisclosure Agreements
A link to SB-331 can be found here. SB-331 builds upon previous legislation, SB-820, also known as the STAND (Stand Together Against Non-Disclosure) Act, which California passed in response to the #MeToo movement in 2018. SB-820 prohibited NDAs that prevented the disclosure of factual information related to claims of sexual assault or harassment, or acts of workplace discrimination, harassment, or related retaliation based on sex.
Under SB-331, NDAs are now prohibited for all alleged claims of workplace harassment, discrimination, or retaliation, including those based on race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, sexual orientation or veteran or military status. The new law will take effect on January 1, 2022.
SB-331 makes several other key changes as well:
- Right to Consult an Attorney: An employer offering a current or former employee a settlement agreement related to the employee’s employment shall notify the employee that the employee has a right to consult an attorney.
- Five-Day Period to Consider Agreement: An employer must provide the employee five business days to consider the agreement, though an employee may sign the agreement prior to the end of this 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.”
- Non-Disparagement Provisions: Employers may continue to use non-disparagement provisions as a condition of employment or in settlement agreements. However, a non-disparagement provision that restricts an employee’s ability to disclose information related to conditions in the workplace must include 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.”
- Exemptions: SB-331 does not apply where a “negotiated settlement agreement” that resolves an underlying claim 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, provided that “the employee is given notice and opportunity to retain an attorney or is represented by an attorney.” Thus, there are still instances where employers can utilize NDAs in settlement agreements.
SB-331 also offers several clarifications:
- Settlement agreements may include “a general release or waiver of all claims”;
- An employer is not prohibited from protecting its “trade secrets, proprietary information, or confidential information that does not involve unlawful acts in the workplace”;
- Settlement agreements may require that the amount paid in severance be confidential.
Employers should update their employment settlement agreement forms to ensure compliance with SB-331. Any provision in a settlement agreement entered into on or after January 1, 2022, that does not conform to SB-331 is void as a matter of law and against public policy.