How Does California Senate Bill 331 Affect Silicon Valley Businesses?

Non-disclosure agreements are a tool often utilized by an employer to prevent an employee from unauthorized release of trade secret information. In combination with a non-compete agreement (to prevent an ex-employee from poaching clients should they venture out on their own), these agreements offer the employer a basic level of protection of confidential information crucial to the survival of their business. Recently, however, Governor Newsom signed Senate Bill 331 into law in California, which directly speaks to the use of non-disclosure and non-disparagement agreements. The new law goes into effect on January 1, 2022. How will Senate Bill 331 affect Silicon Valley businesses and their employees?

Senate Bill 331, the Silenced No More Act, is a further enumeration of Senate Bill 820, the Stand Together Against Non-Disclosures Act. The new law makes it illegal for companies to restrict a current or former employee from speaking about harassment, discrimination, or retaliation in the workplace. It also voids current or future non-disparagement agreements stemming from incidents of harassment, intimidation, or discrimination. Senate Bill 820 only addressed incidents of sexual harassment or misconduct in the workplace.

The new act expands upon 820 to prevent employers from asking an employee or former employee from discussing any form of workplace bullying or harassment after a settlement has been made. Many employers are concerned because NDAs are not meant to hush a former employee but rather were a tool to achieve expedited settlements and resolve issues early on. The issue with voiding NDAs means that even if the employer was not in the wrong, an employee can speak publicly about perceived transgressions, and if an employer truly wants to protect their brand and integrity, they may now have to pursue an issue in litigation as opposed to settlement.

Bear in mind that California businesses and employers may use non-disclosure agreements for any other business purpose so long as an NDA is not tied to a settlement stemming from misconduct, abuse or harassment. For example, an NDA is an appropriate tool to prevent unlawful or unauthorized dissemination of trade secrets or confidential information that is the proprietary interest of the company.

However, SB 331 propels employers to examine their standard onboarding and employee forms to ensure that new and current employees do not have to sign a generic NDA as a condition of their continued employment. An employee also cannot be forced to sign an NDA as part of a severance package. The NDA must specifically be tied to an express purpose (such as protection of a trade secret or confidential client information). An NDA signed for the intent of keeping an employee from disclosing the terms of a workplace dispute or settlement is no longer valid.

The Silenced No More Act has changed the landscape for many employers and businesses large and small. Now is the time to review your standard employment agreements and contracts to determine your business remains in compliance with the new act. Employers should also stress to employees that violence, intimidation, abuse and harassment are not tolerated and are grounds for expulsion. If you have questions about how the new law will affect your standard use of NDAs or how you can better prepare in the event of an employer-employee dispute, contact our business lawyers at SAC Attorneys. We handle every aspect of business and employment law and serve clients throughout Silicon Valley. Call today to schedule a consultation.