Increased Restrictions on ‘Secret Workplace Settlements’ for California Employers

The #MeToo movement resulted in sweeping laws that prohibited California employers from preventing claimants who have experienced sexual assault, sexual harassment, or ‘an act of workplace harassment or discrimination based on sex’ (amongst other things) from speaking out. A proposed expansion of these laws came in the form of SB 331, also known as the ‘Silenced No More Act’. The new bill further limits employers from precluding workers who have experienced discrimination from speaking out about their experiences.

SB 331 was signed into law by Governor Newsom on October 7, 2021, and comes into effect on January 1, 2022.

New Law Prohibits Certain ‘Secret’ Workplace Settlements

SB 331 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” when those actions are in relation to (amongst other things):

• Sexual assault.
• Sexual harassment.
• An act of workplace harassment or discrimination, failure to prevent an act of workplace harassment or discrimination, or an act of retaliation against a person for reporting or opposing harassment or discrimination.

SB 331 also allows the claimant to include provisions that ‘[shield] the identity of the claimant and all facts that could lead to the discovery of the claimant’s identity, including pleadings filed in court…”.

Provisions that restrict parties from disclosing the settlement amount are still permitted.

SB 331 Also Limits The Use of Non-Disparagement Agreements For Current and Departing Employees

The Bill also amends section 12964.5 of the Government Code to limit the practice of requiring current and departing employees to sign a nondisparagement agreement “in exchange for a raise or bonus, or as a condition of employment or continued employment”. Specifically, any provision that “has the purpose or effect of denying the employee the right to disclose information about unlawful acts in the workplace” is unenforceable.

SB 331 requires employers to include specific language in the following agreements, where those agreements restrict an employee’s ability to disclose information related to conditions in the workplace:

• Any non-disparagement agreement.
• Any other contractual provision.
• Any agreement related to an employee’s separation from an employer.

Required Language under SB 331

The required language is as follows:

Employers are also required to provide all employees or former employees with at least five business days to consider the agreement and consult with an attorney before signing any agreement related to the employee’s separation from employment. This means that all employees, regardless of their ages, offered a separation agreement (or severance agreement) on or after January 1, 2022 must be provided with 5 days to consider the offer – regardless of whether it contains a non-disparagement provision.

Employers should already be accustomed to a longer time frame when seeking a release of age discrimination claims for employees who are 40 years or older. For employees who are 40 years or older, employers must provide 21 days for the employee to consider the agreement and consult with an attorney. There is also a 7 day revocation period.

If you need assistance navigating these new laws – or if you have a topic you’d like us to cover in a future mailout, reach out. We’re here to help!

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