California Settlement Agreement Templates Will Need a Refresh for January 1, 2022

Fox Rothschild LLP

Fox Rothschild LLP

Have you been re-using the same old settlement agreement template that was drafted many years ago?  Well, if you are in California, it is time for another refresh before year end (effective January 1, 2022).

The law currently prevents an employer from requiring victims of sexual assault or sexual harassment to agree to confidentiality regarding the underlying facts of their claims, SB 331 (recently signed by Governor Newsom) expands this prohibition to include other acts of workplace harassment or discrimination beyond those based on sex.  Accordingly, a settlement agreement can still keep the amount of the payment confidential, but can’t impose non-disclosure obligations on the employee about the underlying facts related to a discrimination, harassment, or retaliation claim (on any protected basis, such as race, age or disability, not just sex).  No doubt this is intended to prevent hush money type payments that are often touted in the press, and that arguably allow serial harassers to continue their malfeasance.

In addition, any non-disparagement language in settlement agreements must clarify the employee’s right to disclose information related to unlawful acts in the workplace.  Again, if your agreement contains a non-disparagement clause, then you will have to add a caveat to it.

Keep in mind these requirements apply only to settlement agreements when a claim has been filed (either in court or with an administrative agency).  They do not apply to separation agreements, such as upon layoff, or a negotiated exit, when there is no official claim or lawsuit.

If your template agreement is more than a few years old, then you may want to take a look at some other updates from recent years that we blogged about, including this post (about the original prohibition relating to harassment claims and updated Civil Code 1542 language), and this post regarding provisions limiting rehire (aka “no future employment”).

If you are paying to resolve claims, you might as well make sure the agreement documenting those terms is enforceable.  Otherwise you could pay without the protection you thought you were buying!

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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