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Confidentiality and nondisparagement clauses in employment contracts: do I have to sign?

Updated: Apr 7




Q: I am negotiating a severance agreement with my employer. Can they insist as part of the settlement that I agree to nondisparagement or confidentiality? I had a terrible experience there. I don't feel like I owe them anything.


A: First, congratulations on getting out of an unpleasant working experience. The short answer is, if you’re receiving some type of financial or in-kind benefit from the agreement, they can probably insist that you sign confidentiality and/or nondisparagement agreements that limit your rights of speech. They can definitely insist upon confidentiality of settlement amount. But good news: as the result of a recent change in California law:


  1. Nondisparagement and confidentiality clauses cannot include a prohibition against disclosing unlawful acts in the workplace;

  2. Any confidentiality or nondisparagement employment-related clause signed in California must include language clarifying that the agreement doesn’t prohibit disclosing information about harassment or discrimination (See below);

  3. Courts may not approve or enter an agreement that violates the new law; and

  4. Employers must notify the employee or former employee that he or she has the right to consult with an attorney regarding the agreement; and provide the employee with at least five business days to do so.


It's too soon to know exactly what this will mean, but it seems like a big, important change that will free up all kinds of conversations about workplace toxicity.


Discussion: A longstanding staple of severance agreements, nondisparagement and confidentiality clauses -- sometimes referred to as “NDA’s” -- provide an employer with an insurance policy that a terminated employee won’t bash the company, its people, product, service, or reputation by talking or writing about a negative experience. Such agreements typically include a liquidated damages clause that holds the employee liable for a specified amount of money for every breach of the agreement. (Never agree to a liquidated damages clause without language about how the alleged breach is to be proven.) Although useful to an employer, the dark side of nondisparagement and confidentiality clauses has been to silence victims from speaking about traumatizing events in the workplace for fear of triggering the liquidated damages clause, or worse. See Ronan Farrow’s 2017 account of how Harvey Weinstein’s attorneys purchased the silence of multiple women, which led to additional women falling prey: From Aggressive Overtures to Sexual Assault: Harvey Weinstein’s Accusers Tell Their Stories | The New Yorker


Thanks in part to the floodlight of attention focused on the collateral damage of nondisparagement agreements in the wake of the Weinstein scandal, California (and now Washington State as of March 4th -- Silenced No More Act: Washington passes the bill - Protocol) limits the reach of nondisparagement and confidentiality agreements. It has been law for years that a settlement agreement cannot prevent the disclosure of factual information regarding specified acts related to a claim filed in a civil action or as an administrative action. Now under SB 331 an agreement related to an employee’s separation from employment may not include any provision that prohibits the disclosure of information about unlawful acts in the workplace. And here's the important part: Information about unlawful acts in the workplace” includes information pertaining to harassment or discrimination or any other conduct that the employee has reasonable cause to believe is unlawful.


Nondisparagement agreements must include language to the effect that “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.”


An employer must notify the employee s/he has the right to consult with an attorney regarding the agreement, and provide the employee with at least five business days to do so. This new provision provides a mandatory cooling off period for employees to consider options and consult with counsel, rather than be forced to sign an agreement on a “take it or it’s off the table” basis. [Employees over 40 still have at least 21 days to consider an agreement, in accordance with the Age Discrimination in Employment Act of 1967. See The Age Discrimination in Employment Act of 1967 | U.S. Equal Employment Opportunity Commission (eeoc.gov)]


The language of SB 331 centers around sexual harassment and discrimination and appears to have been designed primarily to address silencing of victims of sexual assault and harassment. However, the “or any other conduct you have reason to believe is unlawful” suggests that current or departing employees should feel secure talking or writing about their reasonably held beliefs that the employer engaged in other unlawful acts such as wage, health, and safety violations, to name a few. Case law will undoubtedly test the reach and boundaries of the “Silenced No More” Act.

Q: Why should I care?


A: Because your reason for leaving your last employer is probably going to come up the next time you interview for a job, and I want you to go in there feeling confident about what you can say. Having signed a confidentiality agreement, many people puzzle over what they can (and can’t) say to a prospective employer about reasons for leaving their last position. The law is now clear in California that it will not be considered a violation of a severance agreement if a statement is made to the effect that you made a claim for (fill in the unlawful conduct) and negotiated a severance agreement. [Whether you should say something like to a prospective employer, who may hear it as a warning, is debatable, but in my opinion that sounds more candid than "I can't talk about."] I’m perhaps reading the statute more broadly than an attorney who represents employers, but it seems clear to me by its language that a severance agreement probably cannot prevent you from writing or speaking publicly about your valid experience with unlawful conduct in the workplace, thanks to SB 331 --although you should definitely consult with an attorney first if that is your intent. The former employer can prohibit you from disclosing how much you resolved your claim for, but they probably can’t prevent you from sharing your fact-based experience with unlawful conduct.


See SB 331 here: Bill Text - SB-331 Settlement and nondisparagement agreements. (ca.gov)


Call or email me with your employment concerns: judithcwolff@legalemploymentsolutions.com

The consultation is always free.





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