Senate Bill 331 (SB 331, also called the “Silenced No More Act”) went into effect at the hand of California Governor Gavin Newsom, who signed it into effect during the latter half of 2021. The Bill furthered and substantiated expansions for restrictions (based on prior bills and their gaps) related to nondisclosure and non-disparagement provisions in many separation and severance agreements, business relationships, and settlements
What Steered Senate Bill 331 into Law?
2019’s Senate Bill 820 (SB 820)is also known as the “STAND Act” which stands for “Stand Together Against Nondisclosure” and ascended in California during the #MeToo movement. The Bill called for restrictions and even banning the use of nondisclosure agreements (NDAs) primarily in instances concerning allegations and claims of sexual assault, discrimination (and harassment) based on sex, and claims of retaliation. Still, the Bill failed to cover many other forms of discrimination, including but not limited to race discrimination. SB 331 was born due to gaps within SB820 and other limitations.
What Expansions are introduced in SB 331?
Aside from SB331’s new expansions, it also brought significant impact, sparking several legal concerns about the validity of NDAs in the present and future, mainly regarding their enforceability in California.
SB 331 prohibits confidentiality clauses in settlement agreements for all forms of workplace discrimination, not just sex-based discrimination and bias. Extending protections applies to acts based on race and ethnicity, religious beliefs and practices, nationality, heritage, disabilities, health conditions, family and marital status, sex, gender, generation (agism), and other variables.
A firm understanding of an NDA’s fundamentals is crucial to grasp, comprehend, and follow the expansions under SB331.
What is a Nondisclosure Agreement?
A nondisclosure agreement is sometimes called a confidentiality agreement; however, the two are not identical in nature. An NDA is a legal document created to assure that any information shared between two parties, typically when forming a new partnership or relationship, will not be disclosed to outside or third parties that could threaten, damage, or harm the person initiating the disclosure. The NDA prohibits a signatory from releasing the information and related details stemming from the relationship with others. Therefore the NDA may include consequences for leaking information or breaking the NDA. The NDA will likely not stand up in court if it is vaguely worded, particularly when pursuing legal recourse against a signatory who disclosed information. Additionally, certain elements included in an NDA may not stand up to scrutiny if they are not aligned with California laws or prohibit the signatory from divulging information related to sexual discrimination, as mentioned above.
Is there a difference between NDAs and Confidentiality Agreements?
While both a CDA (confidentiality agreement) and an NDA perform similar functions, there are some distinctions.
A confidentiality agreement is a contract signed between two or more entities in which the participants agree to keep any information exchanged confidentially. An NDA protects the communication of nonpublic or privileged data with another party.
A key concept behind their design is the protection of private information (data, knowledge, proprietary information, content, and other details) from leaking into the public sphere. However, a CDA is generally a portion of a clause in a much larger legal agreement or contract. A properly constructed NDA may have more elaborate descriptions and details than a CDA clause. Yet, most entities who use either will use the terms interchangeably and claim the difference is only in the title’s wording.
Are NDA’s still enforceable; SB 331
In California today, NDAs still carry validity and soundness in court so long as they are executed precisely, legally, and firmly; however, there are some circumstances in which an NDA may not be upheld due to SB820 and the expansions formed in SB331 (discussed above). For an NDA to be enforceable in California, it must not be too abstract or vague (no time limit established). Additionally, using a generic copy of an NDA form from the internet typically lacks specificity and does not hold much legal worth. In these instances, courts will likely disregard the NDA with any issues mentioned above.
A California NDA should include the following provisions:
- A description of the purpose and the parties involved in the NDA
- Should specify the information that cannot be disclosed
- Notice of destruction of sensitive information should information the NDA was intended to protect has been exposed to outside sources or persons or is no longer secure.
- Describe the measures the signatory must take to protect confidential information (examples include: never divulging it, reverting its source, destruction of any copies; shredding related documents)
- Clearly state what is and is not considered “confidential.”
- A statement identifying who owns confidential information
- Describe the measures the signatory must take to protect private information (examples include: never divulging it, reverting its source, destruction of any copies; shredding related documents)
- The NDA is valid for or, in effect, establishes a set timeline.
- Listing consequences of violating the NDA
Common ways an NDA can be legally terminated, voided, or not stand in a court of law
It is critical to note that NDAs cannot be used to safeguard material or knowledge already accessible or known by the public. It is possible to void an NDA if the party signing it had access to the information before formally becoming a signatory. One of the most compelling instances in which an NDA is revocable or “null and void” is when a court order is imposed or a government regulation requires its disclosure. Additionally, if an individual or entity can conduct any form of decrypting, decoding, or reverse engineering on the data or product, the NDA can also be rendered essentially powerless. Suppose an NDA asks the signatory to commit a criminal act or attempts to silence them from coming forward about criminal or illegal activities and actions. In that case, this is also an instance in which an NDA loses its standing.
If you have signed an NDA you wish to break free from, or an NDA pressed upon you has violated any of the expansions under SB 331 and related laws, Consult with an experienced and compassionate attorney today.
An experienced employment lawyer like those at SANFORD A. KASSEL, A Professional Law Corporation have years of experience, a comprehensive understanding of the law, and can help you successfully navigate your case.
