SB 331—What Does it Mean for California Employers?

In 2018, the #MeToo movement was shining a light on sexual harassment in the workplace. The California legislature produced one of the nation’s strongest legislative responses. The law, which is now codified in the California Code of Civil Procedure, forbids employers from including confidentiality provisions in separation agreements with respect to certain employee claims. 

The 2018 law, however, only applied to claims of sexual harassment, sexual assault, discrimination based on an employee’s sex, and employer retaliation. Recently, California lawmakers took the blueprint of that 2018 law and applied it to all protected classes under the state Fair Employment and Housing Act (FEHA). That means employees can no longer be compelled to stay silent about workplace harassment or discrimination committed on the basis of age, race, religion, disability, sexual orientation, and other protected classes.

Gov. Gavin Newsom signed the law on Oct. 7, 2021. SB 331 applies to any separation agreement signed on or after Jan. 1, 2022. Starting next year, employers will no longer be able to rely on non-disclosure or non-disparagement agreements to keep a lid on workplace discrimination. 

Duty to Inform Employees

The prohibition of these clauses in separation agreements is not the only notable effect of SB 331. When presenting employees with a separation agreement, employers must inform the employee of their right to consult an attorney before signing the agreement. Additionally, the employer must give the employee a minimum of five days to consider the separation agreement.

Effect on Non-Disparagement Clauses

SB 331 also allows employees to disclose acts by their employer that they regard as unlawful. This means that the non-disparagement clauses often used in separation agreements do not apply in such circumstances. Employers are still allowed to insist on having their employees sign non-disparagement agreements, but the agreement must clearly state the “unlawful conduct” carve-out.

Some Things Can Still Be Kept Under Wraps

California employers are still well within their rights to include confidentiality clauses about certain items. Trade secrets and other proprietary information can still be included in a separation agreement’s confidentiality clause. Employers may also insist that the dollar amount of any settlements related to discrimination or retaliation be kept secret.

An Attorney’s Help Is Crucial

Trying to stay compliant with California’s numerous and ever-changing employment laws is a challenge for any employer, but not doing so can cost you your business (for example, see our recent post about the growing threat of PAGA claims). An experienced business & employment attorney can help you keep current with these changing times and compliant with the new laws as they come into effect. Let us know how we can help your business today.