Legislation: Ca Settlement Agreements

Summary of California’s Limitations on Restrictions in Settlement Agreements

SUMMARY: The California Legislature changed what parties can include in agreements that settle claims involving sexual misconduct.  A settlement agreement may not prevent a person from disclosing “factual information” related to “a claim, regarding an act of (i) sexual assault (under Code of Civil Procedure section 1002); (ii) sexual harassment (under Civil Code section 51.9); and (iii) workplace harassment or discrimination based on sex (under Government Code section 12940(h), (i), (j) and (k)).” In addition, a settlement agreement may not waive a party’s right to “testify in an administrative, legislative, or judicial proceeding concerning alleged criminal conduct or alleged sexual harassment” by the person, or business, or both, against which the person filed the complaint.  Finally, an employer may not condition a raise, bonus or condition of continued employment by requiring the employee to release claims, or to admit he/she has no claims against the employer.  Similarly, the business may not require the worker to agree not to disparage the employer if it prohibits the person from disclosing information about unlawful acts in the workplace. 

TAKEAWAYS: Confidentiality provisions are difficult to enforce, and anti-disparagement agreements can sometimes spawn next-generation lawsuits involving allegations that are difficult to prove.   Businesses may wish to review all forms used for settlement and severance agreements to ensure compliance.