HB 331: Employers' Separation and Settlement Agreements with Employees

June 28, 2022

California has experienced an influx of legislation designed to protect employees who enter separation and settlement agreements with employers and those facing nondisclosure agreements (NDAs) at work. As an employee in the Golden State, you should familiarize yourself with new and amended laws impacting your workplace.

One such law is Senate Bill 331, signed by Gov. Gavin Newsom on October 7, 2021. The "Silenced No More Act" (SB 331) took effect on January 1, 2022, expanding the provisions of California's Fair Employment and Housing Act (FEHA), which further prevents and restricts disclosure of certain facts in settlement agreements covering complaints of harassment, discrimination, and retaliation. In addition, SB 331 also amends and expands upon California's Stand Together Against Non-Disclosures Act (STAND or SB 820) of 2018. It's no secret that California has always been at the forefront of cultivating laws to ensure all employees are protected at work. But why did these laws manifest and are they beneficial for employees?

#MeToo; a catalyst for employee protection from nondisclosure agreements and settlements

Current legislation concerning employer separation and settlement agreements originated from the grassroots "#MeToo" movement, which led to a widescale evaluation of workplace and employee policies. #MeToo brought awareness and amplified the voices of survivors facing sexual harassment, abuse, assault, and misconduct in the workplace. As a result of the movement, California's SB 820 banned confidentiality provisions in instances of harassment, discrimination, and assault in the workplace based on sex. The law did not address many other protected characteristics (including race, religion, disability, and medical conditions). Those who signed NDAs could voice claims based on sex but not race or other characteristics, creating a huge disparity.

SB 331; Employers' Separation and Settlement Agreements with Employees

Protected Characteristics, Harassment, Discrimination, and Retaliation:

  • Contrary to SB 820, under SB 331, all types of harassment, discrimination, retaliation, and the complete list of protected characteristics are covered.
  • Retaliation when filing a complaint about sexual harassment in the workplace could look like an employer threatening to discharge you (the employee) or discriminating against you.

Shielding Your Identity:

  • Under SB 331, it remains possible for parties to agree not to disclose amounts of the settlement agreements in addition to honoring requests to keep a claimant's identity private.
  • Note: Request to shield an identity within a settlement agreement does not apply to agreements or clauses between government agencies or public officials.

Right to an Attorney:

  • SB 331 specifies when offering separation or severance agreements, employers must notify employees of their right to seek legal counsel. Furthermore, the law requires employers to give employees at least five days to consult with lawyers.
  • If the employee's decision was informed, voluntary, and not the result of employer deception, fraud, or misrepresentation, an agreement may be signed before the reasonable period's end.
  • Before the reasonable period expires, employers cannot withdraw their offer or alter it.

Financial Incentives and Unlawful Requirements:

  • An employer is prohibited from offering an employee "a raise or bonus," in other words, a financial incentive, in exchange for the employee to sign a "release of a claim or right."
  • As a condition of further or future employment, an employer may not offer bonuses or pay raises to sway an employee to sign a non-disparagement agreement.
  • Employees cannot be mandated to sign a non-disparagement agreement or document that denies them the right to report unlawful acts at work.

Agreements and Disclosure of Unlawful Acts:

  • A former employer or employer who requires an employee to divulge information about unlawful acts in the workplace in any agreement related to separation is violating the law.
  • Any provision that violates the above would be against public policy.
  • An employee's non-disparagement clause or another contractual clause that restricts disclosures related to workplace conditions should include language specifying the right of the employee to disclose unlawful acts in the workplace.

Note: A negotiated agreement to satisfy an employee's underlying complaint filed in court, before an administrative agency, in arbitration, or through an employer's internal complaint procedure by an employee is not subject to SB 331's requirements.

Before you sign or if you are a victim of workplace discrimination or harassment

Before signing an employer’s separation or settlement agreement for employees or an NDA, you should always consult with an experienced employment lawyer. Additionally, you can seek justice if you are the victim of or witnessed an unlawful act such as sexual or workplace harassment, assault, racism, or other discrimination at your present or former workplace. An employer cannot pressure you into signing a confidentiality agreement, NDA, severance agreement, or settlement agreement. If any of these violations have happened to you, please contact our offices for a free consultation with a knowledgeable and proficient attorney.

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