On October 7, 2021, California Governor Gavin Newsom signed into law Senate Bill 331 (SB 331), which, in relevant part, further restricts the use of non-disclosure and non-disparagement provisions in the employment context. Additionally, the law creates new drafting obligations for employers with California operations when entering into settlement and separation agreements with employees. The new law went into effect on January 1st of this year.
History of California’s Restrictions on Non-disclosure and Non-disparagement Provisions
In 2018, California passed SB 820 in the wake of the #metoo movement. The law prohibits the use of confidentiality provisions in settlement agreements to the extent they prevent the disclosure of factual information relating to claims of sexual assault, sexual harassment, or harassment or discrimination based on sex, in each case, filed in a civil or administrative action. Any such provision is deemed void as a matter of law.
SB 331 Expands the Limitations Imposed by SB 820
SB 331 expands California’s limitation on non-disclosure and non-disparagement provisions from its predecessor law in four key ways:
One important note is that while the law prohibits confidentiality provisions that prevent disclosure of the factual information underlying the unlawful act(s) that constitute the basis of the employee’s claim, the law expressly provides that it does not prohibit provisions in any agreement that “precludes the disclosure of the amount paid in a severance agreement.” Therefore, an employer may still prevent disclosure of at least the financial terms of a settlement or severance agreement.
Given the expanded limitations placed on non-disclosure and non-disparagement provisions ushered in by SB 331, employers with operations in California should review their form separation agreements and settlement agreements and make any revisions necessary to ensure compliance with SB 331’s new mandates.
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