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Hey CA, Do You Know About the New Rules Regarding Non-Disparagement Clauses in Settlement Agreements

With the new year come new laws, one of which is likely to change the way that employers and employees settle their workplace disputes.

When a legal dispute between an employer and employee gets to the point of settlement, the employer often requires the employee to agree to a non-disparagement clause, especially if the employee no longer works for the employer. The employer, of course, doesn’t want the employee saying anything negative about the employer—and that’s doubly the case when the settlement calls for the employer to pay some sort of settlement sum to the employee.

As of January 1, 2022, an employer’s ability to require an employee to agree to a non-disparagement clause in a settlement agreement won’t be what it used to. That’s because SB 331 went into effect. SB 331, among other things, amends section 12964.5 of the California Government Code by making it “an unlawful employment practice for an employer or former employer to include in any agreement related to an employee’s separation from employment any provision that prohibits the disclosure of information about unlawful acts in the workplace,” so long as the dispute hasn’t been “filed by [the] employee in court, before an administrative agency, in an alternative dispute resolution forum, or through [the] employer’s internal complaint process.” Cal. Gov’t Code § 12964.5(b)–(c). Employers should check their template settlement agreements to make sure that they don’t run afoul of section 12964.5.

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