Dental and Medical Counsel Blog

CA Law Prohibits Confidentiality Provisions in Settlement Agreements

January 3, 2022
CA Law Prohibits Confidentiality Provisions in Settlement Agreements

Terminating an employee, no matter what the circumstances, is never a pleasant task. The discomfort you may feel as an employer is slightly eased by offering the employee a severance package.

On January 1, 2022, a California law, Senate Bill 331, referred to some as the “Silenced No More Act” went into effect. The new law applies to employment agreements including:

  • Severance agreements.
  • Settlement agreements.
  • Releases of claims.

All employers must be aware of the mandatory language that must be included in these agreements. It is also important for employers to be familiar with any exceptions to the law that might apply.

Changes to the Current Law

In 2018, in response to the "Me Too" movement, the California Senate passed a law that prohibited employers from using settlement agreements to prevent employees from revealing claims of sexual assault, sexual harassment, and other workplace harassment based on sex. The prohibition was limited to sexual harassment or assault. Employers could still prevent employees from revealing other factual information related to other harassment or discrimination claims.

The new law goes further. No longer can employers prevent current and past employees from disclosing any type of workplace discrimination or harassment.

In general, current or former employees cannot be prohibited from disclosing any information about an unlawful act in the workplace, or any act the employee believes may be unlawful. This means there can be no prohibition on disclosure of:

  • Claims alleging sexual harassment.
  • Claims alleging any type of workplace harassment.
  • Claims of discrimination.
  • Claims of retaliation.
  • Any other claims that are based on a protected characteristic under California law. This includes claims of discrimination due to race, religion, color, national origin, ancestry, disability, age, gender, medical condition, familial status, and all other protected characteristics.

SB 331 states that any provision of a separation, settlement or non-disparagement agreement is “against public policy and unenforceable” if it prohibits an employee or former employee from revealing unlawful acts, or acts the employee believes are unlawful is “against public policy and unenforceable.”

The law also requires employers to make certain disclosures in the separation, settlement, or release of claims agreements.

Required Disclosures

SB 331 requires employers to make certain disclosures in every separation agreement. Those disclosures are as follows:

The agreement cannot restrict an employee from disclosing information related to workplace conditions.

The statute itself instructs employers to include the following language in all separation agreements: “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.” So, even if the conduct the terminated employee complains about is not unlawful, the former employee is protected from any repercussions if the employee had a “reason to believe” the complained about conduct was unlawful.

Right to consult an attorney.

The statute states that the employer “shall” inform employees they have the “right to consult an attorney regarding the agreement” and “provide the employee with a reasonable time period of not less than five business days in which to do so.” The use of the word “shall” in statutory language means this is not a suggestion but is a requirement.

Language to use if employees opt to sign the agreement in less than five business days.

Employees may sign the agreement in fewer than five business days if the signing employee makes it clear that the decision to sign earlier 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.”

SB 331 Applies to Continuing Employment Contracts

The law also makes it an unlawful employment practice for an employer to condition a raise, bonus, or continued employment, on the employee signing a release of a claim or a right stating the “individual does not possess any claim or injury against the employer… and includes the right to file and pursue a civil action or complaint with… a state agency, other public prosecutors, law enforcement agency, or any court or other government entity.”

In everyday language, if none of the exceptions to the application of AB 331 apply, an employer cannot require an employee to sign an agreement that the employee will not disclose any unlawful or suspected unlawful acts.

Negotiated Settlement Agreements Are Exempt From Requirements of Terms of SB 331

The language of SB 331 states that the law applies to “any agreement” related to an employee’s separation from employment. This could be construed to mean that it applies to all settlement agreements. It seems like every rule in life has an exception. SB 331 is no different.

According to the statute, when there is a negotiated settlement agreement, the agreement is exempt from the application of the terms of SB 331. For the agreement to be exempt, it must be negotiated to resolve a claim that has been “filed by the employee in court, before an administrative agency, in an alternative dispute resolution forum, or through an employer’s internal complaint process.”

In this context, “negotiated” means that the agreement is voluntary, deliberate, and informed. The employee must be informed he or she has the right to have an attorney or the employee is represented by an attorney during the negotiation process.

Terms Not Prohibited by SB 331

The statute itself makes it clear that “any agreement” can still have certain prohibitions. For example:

  • An employer may preclude an employee from revealing “the amount paid in a severance agreement.”
  • In any agreement, an employer may include prohibitions against revealing the employer’s “trade secrets, proprietary information, or confidential information that does not involve unlawful acts in the workplace.

Dental & Medical Counsel Will Review Your Employment Contracts

This is a good time for all employers including practice owners of dental, medical, optometric, and veterinary practices to reevaluate all their employment-focused contracts to be sure they comply with the new law. This includes their terms of employment contracts and any termination and severance contracts they have in place.

Contact us at Dental & Medical Counsel to see how we can help. We will review your employment contracts for compliance and accuracy. We offer a complimentary consultation with employment attorney Ali Oromchian, so contact us ASAP to get started.

Need Help with Employment Law? Contact Us Today for a Complimentary  Consultation!


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