Several states have enacted a broad ban on nondisclosure agreements | Blogs | Labor and Employment Law Perspectives

When drafting separation or termination agreements, it is relatively common to include non-disclosure and non-disparagement provisions in the documents. The idea is that in return for a payment to the former employee, the company receives an assurance that the individual will not “disparage” the company or publicly discuss the circumstances of their termination. .

Recently, however, a number of states have enacted laws that limit the use of these provisions. Effective June 9, 2022, the state of Washington enacted what is likely the broadest ban on companies’ use of non-disclosure and non-disparagement (NDA) provisions. Washington’s new law, called the “Silence No More” law, prohibits NDAs related to all forms of workplace discrimination as well as wage and hour violations and conduct “known to violate a clear mandate.” of public policy”. The law specifically prohibits agreements containing non-disclosure and non-disparagement provisions that prevent applicants, employees, and independent contractors from openly discussing conduct or a legal settlement involving conduct that the applicant, l employee or contractor “reasonably believed” to be unlawful discrimination or harassment. , retaliation, wage and hour violation, sexual assault, or conduct that goes “against a clear public policy mandate.”

Although the Washington law contains these broad restrictions, note that it does not prohibit employers from requiring the amount paid in settlement of any claims to be kept confidential. Essentially, this means that any settlement of a claim can only preclude discussing the amount of the settlement, not the facts that led to the settlement. Additionally, employers can still protect trade secrets, proprietary information, or confidential information that does not involve illegal conduct.

The Washington law applies retroactively and invalidates nondisclosure and nondisparagement provisions in employment contracts created before the law’s effective date that otherwise violate the new law. Despite this retroactive provision, retroactivity in the statute only applies to employment contracts and does not invalidate non-disclosure and non-disparagement provisions in settlement agreements signed prior to the effective date. of the law. Employers who violate the new law will be liable for damages of up to $10,000 or actual damages.

Maine enacted a similar law in May 2022 that prohibits employers from requiring agreements, including settlement agreements, that prevent an employee or potential employee from disclosing or discussing discrimination, including harassment, occurring between employees or between an employer and an employee.

Similar to its northern neighbor, Oregon enacted a law in March 2022 that imposes prohibitions on employee nondisclosure agreements. The Oregon law, which will take effect in January 2023, prohibits employers from seeking confidentiality on both the amount and the fact of any settlement. Confidentiality would be permitted at the request of the employee, but employers cannot condition the settlement on confidentiality. The new law also requires employers to provide employees with a copy of the employer’s anti-discrimination policy as part of any settlement or separation agreement. The new law does not affect nondisclosure agreements that are separate from a settlement or compromise of claims.

Employers should ensure they have reviewed applicable state law each time they enter into a settlement or termination agreement with an employee and ensure they are not using standard confidentiality clauses that might violate these increasingly common prohibitions.

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