By Eric Gelber
Non-disclosure agreements (NDAs) are provisions in a contract that bind the parties to secrecy regarding information specified in the contract. The case of U.S. Olympic gold medalist McKayla Maroney is frequently cited as an example. Maroney was among the more than 200 victims sexually abused by former USA Gymnastics team doctor Larry Nasser. The agreement she reached to settle her claims against Nasser contained a non-disclosure provision. By the reported terms of the agreement, if Maroney spoke publicly about what happened to her, she faced a $100,000 penalty. Similar NDAs reportedly bound many of Harvey Weinstein’s victims to silence.
Initially, NDAs were primarily intended to protect trade secrets. However, the #Me Too movement revealed the role of secret settlements in shielding perpetrators of sexual harassment or sexual assault. Such secret settlements were helping to preserve hostile work environments by allowing complaints to be hidden from public view. In response, State Senator Connie Leyva authored SB 820, which was signed into law in 2018. SB 820 made provisions in a settlement agreement that prevent the disclosure of factual information related to a claim of sexual assault or harassment void as a matter of law and against public policy.
Another #Me Too inspired bill, SB 1300 (Jackson 2018) made it an unlawful employment practice for an employer to require an employee, in exchange for a raise or bonus, or as a condition of employment or continued employment, to sign any document denying the employee the right to disclose information about unlawful acts in the workplace, unless that agreement was reached under certain conditions meant to safeguard the worker’s right. Because of the phrase “as a condition of employment or continued employment,” however, SB 1300 did not apply to severance agreements reached when employment ends.
What problem/issue would the bill address?
SB 820’s prohibition on NDAs focused exclusively on sexual harassment and sex discrimination. Thus, SB 820 left a large loophole. Companies can still require such agreements in settlements of discrimination claims as long as they don’t involve gender discrimination or sexual harassment. SB 331 (Leyva)—dubbed the “Silenced No More Act”—would extend SB 820’s provisions to all other forms of harassment and discrimination under the State Fair Employment and Housing Act—based on race, religion, color, national origin, ancestry, physical or mental 
disability, medical condition, genetic information, familial status, sex, gender, gender identity, gender expression, age, sexual orientation, or veteran or military status.
While confidentiality agreements and NDAs that prevent workers from disclosing information about unlawful acts in settlement agreements or as a condition of employment are now banned, many employers still force workers to sign these types of provisions as part of severance packages when a worker leaves a job. SB 331 would fill that gap by applying to non-disparagement provisions in severance agreements the same set of rules that apply to the inclusion of non-disparagement agreements at the outset or during the regular course of employment.
What would the bill do?
SB 331 would prohibit provisions in settlement agreements that prevent or restrict the disclosure of factual information relating to all claims involving discrimination, harassment, or retaliation for reporting or opposing harassment or discrimination pursuant to the Fair Employment and Housing Act, regardless of the protected class on which the claim is based, unless that agreement is reached under certain conditions meant to safeguard the worker’s right.
SB 331 would also prohibit provisions in employment severance agreements that prohibit the separated employee from disclosing information about unlawful acts in the workplace, with specified exceptions.
SB 331 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.
Comments
According to the author, SB 331 “will prevent workers from being forced to sign non-disclosure and non-disparagement agreements that would limit their ability to speak out about harassment and discrimination in the workplace. It is unacceptable for any employer to try to silence a worker because he or she was a victim of any type of harassment or discrimination—whether due to race, sexual orientation, religion, age or any other characteristic. SB 331 will empower survivors to speak out—if they so wish—so they can hold perpetrators accountable and hopefully prevent abusers from continuing to torment and abuse other workers.”
Highlighting the need for SB 331, the author cites the cases of two Black women who recently raised gender and race discrimination claims against a company where “they were underpaid, faced racist comments from their manager and were subject to retaliation. While the company initially dismissed their claims, the women’s stories generated tremendous media interest and inspired other women to speak openly about their own experiences. The women eventually settled their claims and were protected by SB 820, but only for their gender-based claims. In other words, though they can speak about their experience involving gender discrimination, they cannot speak about their experience involving race discrimination.
As harassment or discrimination claims are oftentimes based on more than one factor (e.g., gender and race or age and sexual orientation), SB 331 will resolve a situation where the NDA covers only one aspect of the workers’ experience and claim.
“Combatting systemic racism and other forms of discrimination and harassment in the workplace cannot succeed unless workers’ voices are heard. Yet employers have increasingly been allowed to use silencing agreements to strip workers of their right to speak out about their experience in the workplace,” noted Mariko Yoshihara, Legislative Counsel and Policy Director at California Employment Lawyers Association. “This bill is critically important to ensure that workers never have to sign away their ability to speak out about harassment or discrimination as a condition of their employment or to settle a claim.”
The California Employment Lawyers Association, Earthseed, and Equal Rights Advocates, sponsors of the bill, argue that: “secret settlements’ play as much a role in perpetuating workplace discrimination, harassment and bias based on race, ethnicity, sexual orientation, age, disability, religion, etc., because here too, complaints are kept secret and those who raise the complaints are effectively silenced. … Whether a worker is taking a job or leaving a job, they should never have to give up their right to speak out about harassment or discrimination.”
In opposition to SB 331, a coalition of thirteen business and trade organizations led by the Chamber of Commerce argue that SB 331 serves to benefit trial attorneys who want a portion of any recovery out of a settlement, rather than employees. The coalition points out that the bill still allows non-disparagement agreements if the employee has been given the opportunity to consult an attorney before signing.
The coalition also contends that SB 331 removes employers’ incentive to offer severance payments to the detriment of employees. They note that severance payments “are not automatic or required” Unless there is sufficient incentive for employers to offer severance payments, therefore, all but the most generous employers are unlikely to do so.
Finally, the coalition argues that this bill will invite costly litigation against employers because it enables workers to enforce their rights in court and potentially obtain civil penalties, punitive damages, and attorney’s fees if they prevail.
SB 331 was passed by the Senate on May 6th on a 29-8 vote and is now in the Assembly.
Eric Gelber, now retired, is a 1980 graduate of UC Davis School of Law (King Hall). He has nearly four decades of experience monitoring, analyzing, and crafting legislation through positions as a disability rights attorney, Chief Consultant with the Assembly Human Services Committee, and Legislative Director of the California Department of Developmental Services.
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Wow, my dear friend in his or her race discrimination case was pressured to settle this week and this may have been a factor. Great article. Now they need to add whistleblowing of improper government activities as invalid non disclosure agreements. It would be in the public’s interest. In at least one of the state retirement ent systems (tend to be similar ) its null and void to have a settlement agreement on retirement contributions or credits.