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California passes law addressing non-disclosure agreements

A bill was recently signed into law in California that bans non-disclosure agreements in settlements involving workers who allegedly faced workplace discrimination or harassment. Known as the “Silenced No More Act” the law will go into effect on January 1, 2022. Under the law, workers who are leaving their employer and are engaged in settlement negotiations can disclose facts regarding the alleged harassment or discrimination they experienced in the workplace. In addition, settlement agreements cannot include non-disparagement clauses.

Why is this new law important?

With this law in place, workers can address what they claim is harassment or discrimination without the threat of losing their severance package. It is hoped that in turn, this law would help end systemic racism in certain sectors of the workforce. Three years ago, California passed a bill that banned employers from requiring non-disclosure agreements in instances of alleged sexual harassment, sexual assault or sex discrimination. The new law extends these protections to other forms of discrimination and harassment, such as racial discrimination or disability harassment.

What does this mean for employers?

This law will affect what employers can do to protect their own interests and reputation in separation agreements. Allegations of discrimination and harassment can be incredibly damaging to a company, especially if the company believes they are unfounded. Non-disclosure agreements are meant to protect an employer’s valuable name and reputation in the community. It remains to be seen how this new law will play out once enacted, but in the meantime employers can make sure they understand their rights and options when executing a settlement agreement, so they do not violate any employment laws.