Several States have Enacted Broad Ban on Non-disclosure Agreements
When drafting employment separation or severance agreements, it is relatively common to include non-disclosure and non-disparagement provisions in the documents. The notion is that in return for payment to the former employee, the company receives assurances that the individual will not “bad-mouth” the company or publicly discuss the circumstances of their employment separation.
Recently, however, a number of states have enacted laws that limit the use of such provisions. Effective June 9, 2022, Washington State enacted what is likely the broadest ban on company use of non-disclosure and non-disparagement (NDA) provisions. The new Washington statute called the “Silence No More” Act, bans NDAs related to all forms of workplace discrimination as well as wage and hour violations and conduct that is “recognized as against a clear mandate of public policy.” The Act specifically prohibits agreements containing non-disclosure and non-disparagement provisions that restrict applicants, employees, and independent contractors from openly discussing conduct or a legal settlement involving conduct that the applicant, employee, or contractor “reasonably believed” was illegal discrimination, harassment, retaliation, a wage and hour violation, a sexual assault, or conduct that is “against a clear mandate of public policy.
While the Washington law contains these broad restrictions, note that it does not prohibit employers from requiring the amount paid in settlement of any claim to be kept confidential. Essentially, this means that any settlement of a claim can only prohibit discussion of the amount of settlement, not the facts that lead to the settlement. Additionally, employers can still protect trade secrets, proprietary information, or confidential information that does not involve illegal conduct.
Washington’s law applies retroactively and invalidates non-disclosure and non-disparagement provisions in employment agreements created before the Act’s effective date that otherwise violate the new law. Despite this retroactive provision, the retroactivity in statute only applies to employment agreements and does not invalidate non-disclosure and non-disparagement provisions in settlement agreements executed prior to the Act’s effective date. Employers in violation of the new law will be subject to damages of the greater of $10,000 or actual damages.
Maine enacted a similar statute in May 2022 that prohibits employers from requiring agreements, including settlement agreements, that prevent an employee or prospective employee from disclosing or discussing discrimination, including harassment, occurring between employees or between an employer and an employee.
Similar to its neighbor to the north, Oregon enacted a statute in March 2022 that imposes prohibitions on employee non-disclosure agreements. The Oregon law, which becomes effective in January 2023, prohibits employers from requesting confidentiality about both the amount and fact of any settlement. Confidentiality would be permitted upon the employee’s request, but employers cannot condition settlement upon confidentiality. The new statute also requires employers to provide employees a copy of the employer’s anti-discrimination policy as part of any settlement or separation agreement. The new law does not impact non-disclosure agreements that are separate from a settlement or compromise of claims.
Employers should make sure they have reviewed applicable state law whenever entering into a settlement or severance agreement with an employee and ensure that they are not using boilerplate confidentiality provisions that may violate these increasingly common prohibitions.