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Workplace Policies and Processes

California Further Restricts Non-Disparagement and Confidentiality in Severance and Settlement Agreements

By October 26, 2021No Comments
California Further Restricts Non-Disparagement and Confidentiality in Severance and Settlement Agreements - sherman law corporation

On 10/7/21 Governor Newsom enacted SB 331 that places additional restrictions on California employers offering severance agreements and settling claims alleging harassment, discrimination or retaliation based on alleged violations of California’s Fair Employment and Housing Act.

Effective January 1, 2022, this new law expands California’s current legal restrictions against a settlement agreement preventing disclosure of information regarding sexual assault, sexual harassment, workplace harassment or discrimination based on sex, or retaliation against a person for reporting such acts.

Any California employers that prevent disclosure of information about unlawful acts of harassment, discrimination or retaliation in the workplace in severance agreements will be unenforceable.  

Further, non-disparagement agreements must, effective 1/1/22, include language relating to the employee’s right to disclose information about unlawful acts in the workplace such as,“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.”

While confidentiality of the settlement amount remains permitted, the amendment to Government Code Section 12964.5 requires employers offering severance agreements with general releases to advise employees to consult with counsel and to provide a reasonable period of time of not less than five days, to allow them to do so.  

Employees will have the right to sign a severance agreement in less than five days as long as the shortened period is knowing and voluntary and not induced by a threat to withdraw the offer in less than five days. 

Feel free to contact Lisa Sherman at (424) 249-3631 or [email protected] to discuss updates to form severance and settlement agreements before the new year.