The California Civil Rights Department (CRD, formerly the Department of Fair Employment and Housing) just issued guidance about an employer must, may, and may not include in employment, severance, and settlement agreements. The guidance answers questions raised by such recently enacted state laws as SB 331, the “Silenced No More Act,” which was effective this past January.
Employment agreements
Under Government Code section 12964.5, an employer may not require an applicant or employee, to get or keep a job, to sign a non-disparagement agreement or any other document that “has the purpose or effect of denying the employee the right to disclose information about unlawful acts in the workplace.”
Any document restraining an employee from saying negative things about their employer must include language substantially like the following: “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.”
CRD says the following clause would be unlawful and unenforceable: “Employee agrees that she will not make any statement, directly or indirectly, verbally or in writing, that would cause harm or embarrassment to the Company.”
The law also prohibits an employer from conditioning employment or an employment benefit on an applicant or employee giving up their rights or claims against the employer or on an employee or applicant asserting they have no injuries or claims against the employer. CRD gives an example of such a prohibited statement.
Severance agreements
As with current employees, departing employees may not be barred from discussing unlawful workplace acts, or acts an employee reasonably believes are unlawful. A severance agreement must include the same kind of provision addressing this as employers must include in an employment agreement. And a clause that bars a former employee from generally making any statement that would embarrass or harm the employer similarly would be unenforceable.
The federal Older Workers Benefit Protection Act prohibits an employer from requiring a departing employee who is 40 or over to sign an agreement relinquishing their right to sue the employer for age discrimination without giving the employee at least 21 days to review the agreement, 45 days if a group of employees is being terminated. Now, though, California law prohibits an employer from requiring any departing employee to sign a severance agreement on the same day it is given to the employee. Instead, under section 12964.5(b), an employer must notify the employee of the employee’s right to consult an attorney regarding the agreement and must give the employee at least five business days to do so.
An employer may prohibit a current or departing employee from disclosing “the employer’s trade secrets, proprietary information, or confidential information that does not involve unlawful acts in the workplace.” The employer also may bar a departing employee from disclosing the amount of money the employer paid in a severance agreement.
Settlement agreements
CRD instructs that Code of Civil Procedure section 1001 prohibits an employer from restricting an employee or job applicant from disclosing facts about an act of unlawful discrimination, harassment, or retaliation related to the employee’s complaint to a court or government agency based on race, gender, or other protected characteristic under the Fair Employment and Housing Act.
Even under these circumstances, a settlement agreement may bar the employee from disclosing the amount the employer paid to settle the dispute. Such a settlement may prohibit disclosure of the complaining individual’s identity, but only if: (1) the complainant requests such a non-disclosure provision; and (2) no government agency or public official is a party to the agreement.
Code of Civil Procedure section 1002.5 bars a settlement term that restricts the rehiring of an employee who has asserted a claim against the employer — including “through an employer’s internal complaint process” — unless the employer: (1) has determined in good faith and documented that the individual engaged in sexual harassment or sexual assault; or (2) has a legitimate, non-discriminatory reason for terminating and refusing to hire the individual.
Other state and federal laws prohibit an employer from barring an employee from discussing their compensation and from communicating with co-workers about improving their working conditions.
Happy Holidays!
Dan Eaton is a partner with the San Diego law firm of Seltzer Caplan McMahon Vitek where his practice focuses on defending and advising employers. He also is an instructor at the San Diego State University Fowler College of Business where he teaches classes in business ethics and employment law. He may be reached at [email protected]. His Twitter handle is @DanEatonlaw
