California Further Limits Confidentiality Clauses in Employee Settlement and Separation Agreements

On Behalf of | Apr 1, 2022 | Current Events |

In response to the growing #MeToo movement throughout the United States, in 2018, the California legislature passed legislation designed to limit the non-disclosure provisions in settlement agreements to resolve lawsuits involving allegations of sexual harassment in the workplace. In 2019, California Code of Civil Procedure Section 1001 was enacted to prohibit any settlement or separation agreement from preventing the disclosure of factual information related to any civil claim involving an act of sexual assault, sexual or other sex-based workplace harassment or discrimination, or retaliation for reporting the same. Specifically, Section 1001 prohibits a provision within a settlement agreement that prevents or restricts the disclosure of factual information related to a claim filed in a civil action or a complaint filed in an administrative action, regarding claims of sexual assault, sexual harassment, workplace harassment or discrimination based on sex, or retaliation for reporting harassment or discrimination based on sex

SB331, known as the “Silenced No More Act” expands Section 1001 to now prohibit settlement agreement provisions that restrict or prevent the disclosure of factual information related to a civil or administrative claim involving all forms of workplace harassment, discrimination and retaliation based on any protected class, not just those that are sex-based. Under the new law, which went into effect on January 1, 2022, claims based on all protected categories including, but not limited to, race, religion, national origin, ancestry, disability, medical condition, familial status, gender, and age are now subject to the limit on confidentiality clauses. It should be noted, however, that SB331 still allows for the settlement amount to be subject to confidentiality.

Employees who have been asked to sign a separation agreement with their employer should take particular note of SB331 which imposes certain requirements on separation agreements. Specifically, the new law provides that it is illegal for a current or former employer to include in a separation agreement any provision that prohibits the disclosure of information about unlawful acts in the workplace and that any separation agreement must include language informing the employee that (1) they may consult an attorney, and (2) have at least five business days to do so. Of course, an employee is free to execute the separation agreement prior to the expiration of the five business-day period. However, the employee’s execution must be knowing and voluntary, and not induced by the employer through fraud, misrepresentation, or a threat to withdraw or alter the offer before the end of the five-business-day period. Similar to settlement agreements above, under the new law, employers may still require that the amount of consideration paid for the separation be subject to confidentiality.