Seyfarth Synopsis: For certain employment-related contracts, California legislation effective January 1, 2019, will limit efforts to prevent disclosure of information relating to claims of unlawful acts and sexual harassment in the workplace. Read on for the devilish details.

California employers will soon have to heed a new crop of laws, born of the #MeToo movement, which will limit the terms permitted in employment-related contracts. What types of contracts, and what kinds of terms, you may ask? The answer, involving discussion of three separate bills adding three new California Code provisions, is a mouthful. But here goes.

  • Affected contracts include employment contracts, settlement agreements, and any other kind of contract that would try to prevent someone from testifying about alleged criminal conduct or sexual harassment.
  • The limitations include prohibiting waivers of the right to testify about alleged criminal conduct, including sexual harassment, as well as outlawing provisions that would prevent disclosure of information about sexual harassment and other illegal conduct in the workplace. The exact types of prohibitions depend on the kind of contract we are talking about.

The devil, of course, is in the details—and here the details are complex. Because prohibitions and permissions for certain kinds of contracts overlap somewhat, each case calls for careful analysis. The three bills in question, applying to agreements made on or after January 1, 2019, provide as follows:

  • AB 3109 (adding Civil Code § 1670.11) addresses contracts generally, and voids contractual provisions that would prevent a party from testifying about alleged criminal conduct or sexual harassment when the party has been compelled or requested to do so by lawful process.
  • SB 820 (adding Code of Civil Procedure § 1001) addresses agreements settling lawsuits or administrative complaints (as opposed to claims asserted in an internal complaint or demand letter), and voids contractual provisions that would prevent a party from disclosing “factual information” about sexual harassment or related retaliatory conduct.
  • SB 1300 (adding Gov’t Code § 12964.5) amends the FEHA to address agreements required as a condition of employment, and makes it an unlawful employment practice to require employees to release FEHA claims or to keep mum about “unlawful acts in the workplace,” unless the agreement is a negotiated resolution of a lawsuit, an agency complaint, or an internal complaint brought by an employee, in which case the employer can still get a release and require confidentiality concerning allegedly unlawful acts (to the extent the confidentiality provisions are not otherwise unlawful by means of the two new provisions discussed above).

Meanwhile, an amendment to the federal tax code, 26 U.S.C. §162(q), affects payments made or incurred with respect to sexual harassment settlements made after December 22, 2017. This federal development is beyond the scope of this post, but we mention it as a “heads up” item and refer you to our previous blog post here.

Contracts Generally

New Civil Code § 1670.11 is straightforward: the law frowns upon contracts by which employees agree not to testify about alleged criminal conduct or sexual harassment if they are officially requested to do so. This new statute seems a solution in search of a problem in that few employers have ever been so bold as to have employees agree to defy official requests to testify on these subject matters. But there it is.

Settlement Agreements

New Code of Civil Procedure § 1001, by contrast, can require significant changes in existing settlement practices. The law states that no provision in an agreement to settle a lawsuit or administrative complaint can prohibit the disclosure of “factual information” related to a claim filed in that proceeding if the information is “regarding” (1) sexual assault, (2) sexual harassment, (3) workplace harassment or discrimination based on sex, (4) failure to prevent sex discrimination or harassment in the workplace, or (5) retaliation for reporting sexual harassment or discrimination in the workplace.

But are some non-disclosure provisions still permitted in settlement agreements? Yes.

  • The “amount paid” to resolve any claim lawsuit or administrative complaint may still be kept confidential. The new California law is silent on whether non-monetary settlement terms may also be kept confidential.
  • If the claimant in the settled lawsuit or administrative complaint requests confidentiality, the parties may agree to prevent the disclosure of “all facts” regarding alleged sexual harassment or discrimination (including court filings) that would lead to the discovery of the claimant’s identity.

NOTE: This carve-out does not apply where a government agency or public official is a party. In those instances, agreements cannot contain provisions keeping the claimant’s identity confidential.

  • If an employee has merely filed an internal complaint or sent a demand letter regarding sexual harassment, discrimination, or retaliation—and has not filed a lawsuit or administrative charge—a settlement agreement may still contain standard confidentiality provisions.

Agreements for Raises, Bonuses, or New or Continued Employment

New Government Code § 12964.5—which expressly does not apply to negotiated settlement agreements—provides:

  • It is an unlawful employment practice to require employees—either as a condition of employment or in exchange for a raise or bonus—to sign any of the following provisions:
    • A statement that the employee does not have any FEHA claim against the employer or other covered entity.
    • A release of the right to pursue a FEHA claim or to notify a governmental entity of the claim.
    • Any agreement that prohibits disclosure of “information about unlawful acts in the workplace, including, but not limited to, sexual harassment.”
    • This new FEHA provision carries more bite than the other new provisions, because a contract unlawful under the new FEHA provision is not only unenforceable but also can enable an aggrieved employee to sue for damages and other relief.

Workplace solution: Taken together, these new California laws should prompt a thorough review of employee agreements, release agreements, severance agreements, settlement agreements, contracts for continued employment, and even some Employee Handbook provisions. Some language may need to be added to certain agreements. Meanwhile, where the employer is settling a case that does not allege sexual harassment or assault or discrimination or retaliation, broader confidentiality and non-disparagement clauses remain as permissible as ever.

By Ann Marie Zaletel and Casey McCoy

Leaves are turning, days are shortening—the classic signs that winter is on its way.  With winter comes cold and flu season.  Much like flu shots often protect us from coming down with the flu, when done right employee handbooks can help protect employers legally.  

Here are some common symptoms that your California handbook is due for a checkup this flu season:

Symptom No. 1:  Overly Broad Handbook Disclaimers 

Employers attempt to shield themselves from implied contract claims by including a handbook disclaimer that “this handbook is not a contract.”  This language actually may have the opposite effect.  In one California case, a statement in an employment application that employment was at will failed to preclude a contract claim because the application also included broad “no contract” language. 

Similarly, a broad disclaimer that the employer has the right to unilaterally change policies can undermine the at-will employment relationship if the employer does not carve out its at-will employment policy from its right to revise.

Prescription:    Revise the disclaimer to provide that nothing in the handbook is intended to create a contract of continued employment, employment for a specified term, or any contractual or legally enforceable obligations on the part of the company.  Additionally, specifically exclude the at-will employment policy from any reservation of the employer’s right to revise handbook policies.

Symptom No. 2:  A Too Narrow Anti-Harassment Policy

An anti-harassment policy is a must-have for all employee handbooks.  It helps employers defend against harassment claims when an employee fails to follow the employer’s internal processes for reporting potentially harassing conduct.  But anti-harassment policies may have the opposite effect if focused exclusively on sexual harassment.  An even more common mistake is to prohibit only unlawful harassment.  An employer will want to be informed of any unwelcome conduct based on a protected status (even if that conduct is not sufficiently severe or pervasive to constitute unlawful harassment), so that it promptly can stop the conduct before it rises to the level of unlawful harassment.

Prescription:    Your anti-harassment policy should prohibit all unwelcome conduct based on a protected status, such as race, national origin, religion, and disability.  Such a policy also should undermine a plaintiff’s argument that any conclusion you might reach that an employee violated your policy amounts to an admission of unlawful conduct.

Symptom No. 3:  A Rigid Dress and Grooming Policy

A rigid dress and grooming policy may subject an employer to discrimination and failure to accommodate claims.  For example, as we’ve recently blogged, amendments to the FEHA have clarified that religious beliefs, observances and practices extend to religious clothing, dress, and standards of grooming, including head coverings, facial and body hair, and religious jewelry.  Thus, employees may be entitled to religious accommodations from their employers’ official dress code policies.

Prescription:  Include a provision in your policy that provides that reasonable accommodations will be considered in accordance with the ADA, Title VII, the FEHA, and any other applicable laws requiring reasonable accommodation for medical, religious, and/or other reasons.

Symptom No. 4:  A Maximum Leave Policy

A  maximum leave policy that purports to limit the total amount of leave to which an employee is entitled (e.g., a one-year cap) is a common handbook problem.  The EEOC continues to devote significant resources to litigating systemic cases attacking maximum leave policies.  Under the FEHA (and under the ADA), a disabled employee may be entitled to additional leave as a reasonable accommodation if the additional leave will allow the employee to recover and return to work.

Prescription:  Maintain a flexible leave policy that provides that each situation will be evaluated individually.  Talk to your trusted legal advisor for assistance in revising or replacing any maximum leave policy.  

Symptom No. 5: A General Promise To Comply With Meal And Rest Period Laws

Despite the California Supreme Court’s Brinker decision, California class action lawsuits alleging meal and rest period violations are alive and well.  And California courts continue to certify meal period classes based on the facial invalidity of the employer’s meal and rest period policy.  In this environment, a general policy statement that the company will comply with California’s meal and rest period requirements is woefully inadequate.

Prescription:  Adopt a meal and rest break policy that accurately explains California meal and rest break laws.  Such a policy should take into account the California Supreme Court’s Brinker decision and address (among other things) the number, timing, and duration of meal and rest periods as well as steps that employees must take if they are not permitted to take a rest period or provided with a meal period as set forth in the policy.  And, make sure rest period policy language accurately sets forth the California requirement that employees be able to take a ten minute rest break every four hours of work “or major fraction thereof.”

By Kristina Launey 

Since the 2013 portion of this California Legislative session concluded in mid-September, a number of employment-related bills have gone to Governor Brown for consideration.  As of today, the Governor has signed 8 of those bills into law, covering:

 

✓   Minimum wage increase, from $8 to $10/hour, over two years

✓   Criminal background checks for youth sports leaders

✓   Employment contracts for minor actors

✓   New penalty for violation of posting requirements for garment manufacturers

✓   Change in definition of sexual harassment

✓   Recovery of defense attorney’s fees in wage claims only if bad faith

✓   Expansion of coverage of Paid Family Leave

✓   Mandatory overtime for domestic workers who work over 9 hours/day or 45 hours/week. 

For a complete roundup of the (1) signed bills, (2) passed bills awaiting Governor’s action, and (3) failed bills, click here.  We will be updating this information as the pending bills are either signed or rejected by the Governor, who has until October 13 to act.