New California Law Prohibits Employers From Requiring Employees to Sign Release of Claims and Non-Disparagement in Exchange for Bonus, Raise, or to Get/Keep Job
Last year, California legislators substantially rewrote the state’s laws governing sexual harassment in the workplace. Part of the nationwide response to the #MeToo movement, California Senate Bill 1300 amended the state’s Fair Employment and Housing Act (FEHA) to expand protections from workers who have been subject to illegal harassment. Among these changes are new rules restricting the use of releases and so-called non-disparagement agreements to keep harassment allegations secret.
Nondisclosure Provisions Still Permissible in Certain Settlements
Specifically, SB 1300 added a new section to the California Government Code. The new Section 12964.5, which took effect on January 1 of this year, states that it is an “unlawful employment practice” for an employer to offer employment in exchange for signing a “release or claim” that would prevent the employee from publicly disclosing “information about unlawful acts in the workplace.” The law also bans the use of such releases in exchange for offering an existing employee a “raise or bonus.” An unlawful act in this context may refer to sexual harassment or any other “potentially unlawful conduct.”
Section 12964.5 also prohibits the use of non-disparagement agreements for similar purposes. But the law carves out an important exception for a “negotiated settlement agreement” designed to resolve an existing claim brought by an employee in court or before an administrative agency, arbitrator, or the employer’s own “internal complaint process.”
In other words, while an employer cannot demand an employee sign a nondisclosure or non-disparagement agreement before they take any formal legal action, the parties may later resolve a filed complaint by negotiating a settlement that includes nondisclosure or non-disparagement language. However, such a settlement is only enforceable if the following conditions are met:
- the agreement is “voluntary, deliberate, and informed”;
- the agreement provides compensation or similar “consideration of value to the employee”; and
- the employee receives notice of the agreement had is represented by an attorney, or at least has “an opportunity to retain an attorney.”
Understanding How the New Law Applies to You as an Employer or Employee
According to a state Senate floor analysis prepared in connection with SB 1300, supporters of the new Section 12964.5 maintained these provisions were necessary to prevent “creative legal tactics” used by some employers “as a way to silence victims, escape liability, or minimize public scrutiny.” Opponents of the rule, however, argued that “without the ability to use general releases” in these cases, many employers “will not provide severance agreements.” And in many cases, employees are offered compensation in exchange for signing a release, even if there is no claim of sexual harassment or illegal conduct that is pending or even contemplated.
Nevertheless, Section 12964.5 is now law. So all employers and employees need to understand their rights and responsibility when it comes to the use of nondisclosure or non-disparagement agreements in connection with sexual harassment complaints. If you need additional advice or legal guidance on this subject, you should consult with a qualified California employment law attorney as soon as possible.