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.
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Types of Agreements
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Current law (until December 31, 2021)
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SB 331 (January 1, 2022)
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Litigation Settlements: Code of Civil Procedure Section 1001
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- 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.
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- 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.
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Separation Agreements: Section 12964.5 of the Government Code (FEHA)
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- Separation Agreements. Not explicitly addressed in current version of Section 12964.5.
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- 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.
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Other Employment Agreements: Section 12964.5 of the Government Code (FEHA)
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- 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.
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- 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.
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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.
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