Employers commonly require employees to sign agreements containing nondisclosure and/or non-disparagement provisions. These provisions are most often found in employment contracts or severance agreements. However, due to recent changes in the law, employers will want to immediately review their provisions to make sure they are compliant with the new law.
Non-disparagement and nondisclosure provisions are similar, but somewhat different, in their purpose and effect. A non-disparagement provision prohibits an employee from speaking negatively about the employer to third parties. A nondisclosure agreement, by contrast, requires the employee to keep certain information regarding the employer as confidential.
These types of provisions are rarely enforced when violated, primarily because the damage has already been done when the employer discovers that a violation has occurred. Yet, many employers like to include them because they believe the threat of a lawsuit will most often discourage employees from breaching them in the first place.
With new legislation having taken effect June 9, 2022, employers need to immediately review their employment related agreements and work with legal counsel to provide necessary revisions. Essentially, the law prohibits any non-disclosure or non-disparagement provisions that would prevent an employee or contractor from disclosing or discussing conduct the individual reasonably believes to be illegal acts of discrimination, harassment, retaliation, wage and hour violations, sexual assault, or other conduct recognized as being against a clear mandate of public policy. Any such provisions are now void.
The law imposes a penalty for violation of actual or statutory damages of $10,000, whichever is greater, plus attorneys’ fees and costs for violation. The legislature also provided that the statute would retroactively invalidate existing nondisclosure and non-disparagement provisions in an agreement executed at the outset of employment or during employment.
Finally, it is significant that this new legislation does not contain an outright prohibition on nondisclosure and non-disparagement provisions. They can continue to be used. But, they must have an appropriate carve out in order to satisfy the requirements of the new law