Los Angeles, Calif. (February 23, 2022) - Taking effect on January 1, 2022, California's Senate Bill 331, known as the Silenced No More Act, expands existing law aimed at preventing or restricting the disclosure of certain factual information in settlement agreements to apply to all claims of harassment, discrimination, or retaliation under the California Fair Employment and Housing Act (FEHA). It also places strict limits on employers' use of non-disparagement agreements with current employees and sets out additional requirements for separation or severance agreements.

Settlement Agreements

Existing law under California's Code of Civil Procedure section 1001 prohibits a provision in a settlement agreement from preventing the disclosure of factual information regarding the following acts, as defined in the statute: sexual assault; sexual harassment; an act of, failure to prevent an act of, or retaliation for reporting an act of, workplace harassment or discrimination based on sex; an act of, or retaliation against a person for reporting an act of harassment or discrimination based on sex by the owner of a housing accommodation. Any settlement agreement containing such a provision entered into on or after January 1, 2019, is void as a matter of law and against public policy.

Importantly, SB 331 expands the prohibition to include acts of workplace harassment or discrimination not based on sex, and acts of harassment or discrimination not based on sex by the owner of a housing accommodation. In short, SB 331 expands the prohibition to apply to all claims of discrimination, harassment, or retaliation arising under the FEHA. These amendments only apply to agreements entered into on or after January 1, 2022.

While the agreement cannot include language restricting or preventing the disclosure of factual information concerning the underlying allegations or claims, the section permits claimants to request a provision that shields the claimant's identity and any facts that could lead to the discovery of the claimant's identity.

As with the prior version of this law, companies are expressly permitted to keep confidential the amount paid in settlement of a claim. SB 331 does not prohibit language that keeps the terms or existence of the settlement agreement confidential.

Non-Disparagement Agreements with Current Employees & Separation Agreements

The FEHA makes it an unlawful employment practice for an employer to, in exchange for a raise or bonus, or as a condition of employment or continued employment, require an employee to (1) sign a release of a claim or right, or (2) sign a non-disparagement agreement or other document denying the employee the right to disclose information about unlawful acts in the workplace.

SB 331 expands the definition of "information about unlawful acts in the workplace" to include information pertaining to any harassment or discrimination or conduct the employee has reasonable cause to believe is unlawful.

Non-Disparagement Agreements

SB 331 expands the scope of this section to include non-disparagement agreements or other documents to the extent the document has the purpose or effect of denying the employee the right to disclose information about unlawful acts in the workplace. If a non-disparagement agreement or other document limiting disclosure related to conditions in the workplace exists, the agreement must include a statement substantially similar to "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." Any agreement or document in violation is contrary to public policy and will be unenforceable.

Agreements Related to an Employee's Separation from Employment

This bill adds two significant procedural requirements when executing separation agreements with employees who are not represented by legal counsel:

  1. The employer must notify the employee of the employee's right to consult an attorney regarding the separation agreement; and
  2. The employer must provide a reasonable time period, no less than five business days, for the employee to do so. The employee may sign the separation agreement prior to the end of the reasonable time period, so long as the employee's decision to do so is knowing and voluntary, and not induced through fraud, misrepresentation, or threats.

Unlike non-disparagement agreements in exchange for a raise or bonus, or as a condition of employment or continued employment, separation agreements may contain a general release or waiver of all claims, so long as that release or waiver is otherwise lawful.

The bill also specifically prohibits an employer or former employer from including in any separation agreement any provision that prohibits the disclosure of information about unlawful acts in the workplace. Again, if such a separation agreement limiting an employee's ability to disclose information related to conditions in the workplace does exist, it must include a statement substantially similar to "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." Any provision in violation is contrary to public policy and unenforceable.

Exceptions

Significantly, this bill contains important exceptions:

  • A provision in any agreement precluding the disclosure of the amount paid in a severance agreement is not prohibited.
  • Employers are not prohibited from protecting their trade secrets, proprietary information, or confidential information that does not involve unlawful acts in the workplace.
  • The provisions in this section do not apply to a negotiated settlement agreement to resolve an underlying FEHA 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. "Negotiated" means the agreement is voluntary, deliberate, and informed, the agreement provides consideration of value to the employee, and the employee was given notice and opportunity to retain an attorney or is represented by an attorney.

Conclusion

SB 331 makes significant changes to the scope of and language within settlement agreements, non-disparagement agreements, and separation agreements. Employers should work with counsel to review such agreements for compliance with this new law, paying special attention to any provisions limiting disclosures by employees and incorporating new required language as needed.

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.