Settlement Negotiations After SB 331: What it Means for Employers and Employees

JOHN HAGAN
Certified Law Clerk
KC Law Group

California enacted the Silenced No More Act (SB 331), effective January 1, 2022. This landmark law restricts the use of confidentiality and nondisparagement agreements in harassment, discrimination and retaliation claims.

Before SB 331, California employers used confidentiality agreements, also known as nondisclosure agreements (NDAs), to silence employees from disclosing workplace harassment, discrimination or retaliation. These agreements often kept settlements secret, preventing victims from speaking out and creating a culture of fear and impunity for perpetrators.

The #MeToo movement highlighted workplace sexual harassment and silencing tactics. SB 331 expanded protections for unlawful acts protected by the California Fair Employment and Housing Act (FEHA) beyond existing limitations on NDAs in sexual harassment cases.

Occasionally, subsequent to professional standards investigations, police officer clients and their department/city may decide to separate. This can be by virtue of a resignation or an early retirement. The language in these settlement agreements is designed to put both parties on notice related to their rights, obligations and releases. Often, a “big-ticket item” in these resolutions is a nondisparagement clause, whereby the parties are restrained from recklessly speaking falsehoods about each other. California Senate Bill 331 introduced significant restrictions on nondisparagement clauses in separation agreements. Here’s a detailed breakdown:

Prohibition on Restricting Disclosure of Unlawful Acts

SB 331 prohibits nondisparagement clauses in separation agreements that have the purpose or effect of preventing employees from disclosing information about unlawful acts in the workplace. This includes harassment, discrimination or retaliation under the Fair Employment and Housing Act (FEHA). Previously, such restrictions were limited to cases involving sexual harassment or discrimination, but SB 331 broadens the scope to cover all forms of unlawful workplace conduct.

Mandatory Language in Agreements

To ensure compliance, separation agreements must include specific language clarifying that employees are not restricted from discussing or disclosing information about unlawful acts in the workplace. For example, agreements must state: “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.”

Applicability to Separation Agreements

The law extends these restrictions to agreements offered in exchange for a raise, bonus or continued employment. Employers can no longer require employees to sign nondisparagement clauses as a condition of receiving these benefits.

The Pros of These Limitations

• Empowers employees to speak out. By prohibiting NDAs in cases of workplace harassment or discrimination, SB 331 ensures that employees can share their experiences without fear of legal consequences. This can help expose systemic issues within organizations and foster a culture of accountability.
• Encourages transparency and accountability. The law prevents employers from using NDAs to conceal patterns of misconduct. This transparency can deter repeat offenses and encourage companies to address workplace issues proactively.
• Supports informed decision-making.
  The requirement for employers to provide employees with at least five business days to review separation agreements allows individuals to seek legal counsel and fully understand the terms before signing. This levels the playing field in negotiations.
• Broadens protections. Unlike previous laws that focused solely on sexual harassment, SB 331 extends protections to all forms of harassment and discrimination based on protected categories, such as race, age, disability and more.

The Cons of These Limitations

• Increased risk of litigation. With fewer restrictions on what employees can disclose, employers may face a higher likelihood of lawsuits. This could lead to increased legal costs and a more contentious workplace environment.
• Potential for reputational harm. Public disclosure of workplace disputes, even if claims are unsubstantiated, could damage the reputation of individuals or organizations. This might discourage employers from settling disputes amicably.
• Administrative and financial burden. Employers must revise their settlement and separation agreements to comply with the new law. This process can be time-consuming and costly, particularly for smaller businesses with limited resources.
• Challenges in maintaining confidentiality. While the law allows claimants to request confidentiality for their identity, the broader prohibition on NDAs might make it harder for both parties to resolve disputes privately.

If you are in the process of negotiating a settlement agreement with mutual releases with your agency, speak to your PORAC LDF counsel about nondisparagement clauses and if they are appropriate in your case.

About the Author

John Hagan is a certified law clerk at KC Law Group, assigned to the administrative and criminal defense practice groups. He is a third-year law student at Trinity Law School in Orange County, California. KC Law Group is a PORAC LDF law firm located in southwest Riverside County, California. The firm handles administrative and criminal defense, restraining orders, general counsel matters, law enforcement training and SB 2 defense.