California Expands Bans on Confidentiality Agreements

California Expands Bans on Confidentiality Agreements

Governor Gavin Newsom signed Senate Bill 331 on October 7, 2021, making it the law starting on January 1, 2022. This law is an expansion of Senate Bill 820, the Stand Together Against Non-Disclosure Act( the Stand Act), which was passed in 2018. This bill banned confidentiality provisions in which the claims involved sexual harassment, sexual assault, and discrimination or workplace harassment based on sex. But, this law did not ban confidentiality agreements involving claims related to other protected characteristics, such as age, gender, or race. Therefore, these agreements could prevent someone from discussing the facts concerning incidents of harassment or discrimination if they were based on protected characteristics other than sex.

However, the new law, Senate Bill 331, expands the bans on confidentiality provisions that were in the Stand Act to include other protected characteristics. This bill also requires non-disparagement agreements to inform workers of their rights.

Confidentiality Agreements 

Senate Bill 331 also extends Section 1001 of the Civil Procedure Code, which bans settlement agreements from including confidentiality provisions if they are based on allegations of sexual harassment, sexual assault, or involve discrimination or workplace harassment based on sex. Once SB 331 takes effect, the ban on confidentiality provisions will be extended to include protected characteristics beyond those based on sex. This means characteristics, such as gender, disability, color, national origin, religion, medical condition, race, age, familial status, ancestry, as well as any other protected characteristics will be covered by this section of the code.

SB 331 also contains the provision from the previous law that protects the claimant’s identity. Claimants can request a provision that protects their identity and any facts that might disclose their identity. This provision is legal if the party requesting the provision is not a party official or government agency.

Non-Disparagement Agreements

Government Code Section 12964.5 bans employers from putting non-disparagement clauses in agreements if they prohibit employees from revealing information concerning sexual harassment or similar illegal acts that took place in the workplace in order to obtain a bonus, continued employment, or a promotion. SB 331 will extend these protections to cover provisions that ban employees from revealing information about any form of discrimination, harassment, or any behavior that an employee would have reason to believe is illegal. Any non-disparagement agreement must include this statement or a substantially similar one “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.”

Separation Agreements

SB 331 also applies to separation agreements for current or former employees. All of these separation agreements must inform the employee of their right to consult an attorney and give the employee a minimum of five business days to do so. An employee can choose to accept the agreement before the five days are up, but this must be done voluntarily. 

Severance or settlement agreements are permitted to be confidential, according to SB 331. Employers may also include confidentiality provisions that are intended to keep proprietary information, trade secrets, or other confidential information secret if it does not involve illegal activity.

Employer Takeaways

SB 331 will go into effect for agreements entered into from January 1st, 2022 onwards. This means employers should review and update their forms appropriately and consider the possibility of resolving any ongoing litigation prior to this date.