Almost a decade ago, in September 2014, California was the first state in the nation to enact legislation prohibiting non-disparagement clauses that aimed to prevent consumers from writing negative reviews of a business. Popularly referred to as the “Yelp Bill,” AB 2365 was codified at California Civil Code Section 1670.8, which prohibits businesses from threatening or otherwise requiring consumers, in a contract or proposed contract for sale or lease of consumer goods, to waive their right to make any statement—positive or negative—regarding the business or concerning the goods or services.
Since then, California has effectively eliminated the use of non-disparagement provisions in many types of agreements, not only in consumer agreements, but also in the employment context. A recent class action alleging violations of Section 1670.8 is not only a reminder to businesses to review their “Terms of Use” agreements, but may also be an indication that consumers and employees alike are increasingly exercising their right to gripe. As evident from its popular name, the “Yelp Law,” consumers and employees are using online platforms and social media as a vehicle to memorialize their displeasure regarding products, services, agents, and/or employees of the business more than ever.
California Civil Code 1670.8 (the “Yelp Law”)
Section 1670.8(a) provides:
- A contract or proposed contract for the sale or lease of consumer goods or services may not include a provision waiving the consumer’s right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.
- It shall be unlawful to threaten or to seek to enforce a provision made unlawful under this section, or to otherwise penalize a consumer for making any statement protected under this section.
There is a civil penalty of up to $2,500 for the first violation and $5,000 for each subsequent violation. In addition, there is a penalty of up to $10,000 for a willful, intentional, or reckless violations.
A decision issued in 2019 in a matter before the American Arbitration Association[1] addressed whether Section 1670.8 could apply to prohibit confidentiality provisions in consumer transactions and dispute resolution proceedings. The claimant consumer had booked an accommodation through the respondent, a company that provides online accommodation reservation services. The claimant agreed to the Terms and Conditions on the respondent’s website, which contained an arbitration clause. The claimant’s demand for arbitration alleged, among other things, that the respondent violated Section 1670.8 by proposing and entering a consumer contract with the claimant that waived the claimant’s right to make public statements regarding the fact that she filed an arbitration against the respondent. The arbitrator found that the dispute resolution process was part of the respondent’s services agreement, and that Section 1670.8 broadly allows consumers to speak not only as to services but also as to the service provider. The issue was whether an arbitration confidentiality clause constituted restricted speech under Section 1670.8. Ultimately, the arbitrator concluded that the claimant had not presented sufficient evidence that the legislature intended such a result. But this is not to say that a court could not one day reach a different conclusion. The analysis in the court’s decision on the pending Section 1670.8 class action may be instructive.
Similar Prohibition Against Non-Disparagement and Confidentiality Provisions in Agreements and Policies in the Employment Context
Many California employers are becoming more familiar with the trend toward protecting individuals’ use of social media. For example, California Government Code Section 12964.5 prohibits employers from requiring an applicant or employee, as a condition of employment or continued employment, to sign a non-disparagement agreement or any other document that prevents applicants or employees from discussing or disclosing information about unlawful acts in the workplace. In addition, Labor Code Section 980 prohibits employers, with limited exceptions, from requesting that employees or job candidates provide the employer with access to their social media. And most recently, last year, the National Labor Relations Board (“NLRB”) announced in its decision in McLaren Macomb that employers are prohibited from offering employees severance agreements that require employees to broadly waive their rights under the National Labor Relations Act (“NLRA”), including confidentiality and non-disparagement provisions. In its subsequent decision in Stericycle, the NLRB adopted a new legal standard deeming an employer’s workplace policy presumptively unlawful if it could be reasonably interpreted to chill employees’ rights under Section 7 of the NLRA to engage in protected concerted activity. We previously wrote about the Stericycle decision here.
Workplace Considerations
The best course of action for employers when crafting a non-disparagement provision in an employment agreement, handbook, or workplace policy is to consult with counsel to ensure that any provision directed at employees’ disparaging comments or criticisms does not run afoul of current laws. As McLaren Macomb and Stericycle remind us, Section 7 of the NLRA applies in both unionized and nonunionized settings, as does California’s non-disparagement legislation. Of course, while removing non-disparagement provisions in Terms of Use agreements may be more straightforward because consumers are free to leave negative reviews of businesses and services, there are different concerns in the workplace context. These concerns require a nuanced approach to crafting employment agreements and workplace policies that balance the so-called “right to gripe” with the constraints of the law while fostering and maintaining a collegial working environment.
[1] This decision, which has redacted the parties’ names, is available on Westlaw at In the Matter of the Arbitration Between [Claimant], [Respondent], 2019 WL 3978505 (July 26, 2019).
[View source.]
