From JDSupra, Elisabeth Koloup Hall writes about a recent law that bans nondisclosure and nondisparagement provisions in employment and independent contractor agreements. Elisabeth writes:
On March 24, 2022, Washington’s Silenced No More Act (formally known as Engrossed Substitute House Bill 1795) was signed into law by Governor Jay Inslee. As a result, Washington has become the second state to declare certain nondisclosure and nondisparagement provisions in employment and independent contractor agreements illegal. California passed its own version of the Silenced No More Act last year.
The Washington Silenced No More Act is scheduled to take effect on June 9, 2022. Once enacted, the law will effectively bar Washington employers from using nondisclosure and nondisparagement provisions – including those contained in employment agreements, independent contractor agreements, agreements to pay compensation in exchange for the release of a legal claim, or any other agreement between an employer and a current, former or prospective employee or independent contractor – to prevent such workers from disclosing certain violations of law. Specifically, the Act makes void and unenforceable any “provision in an agreement by an employer and an employee not to disclose or discuss conduct, or the existence of a settlement involving conduct, that the employee reasonably believed under Washington state, federal, or common law to be illegal discrimination, illegal harassment, illegal retaliation, a wage and hour violation, or sexual assault, or that is recognized as against a clear mandate of public policy,” where the conduct occurred “at the workplace, at work-related events coordinated by or through the employer, between employees, or between an employer and an employee, whether on or off the employment premises.” In effect, blanket NDAs and nondisparagement clauses which fail to carve out such unlawful acts in the workplace will be void, no matter when they were signed. Click HERE for the full text of the Act.
Importantly, Washington employers will violate the Silenced No More Act by requiring or even just requesting that an employee enter into any such agreement provision. Employers who discharge or otherwise discriminate or retaliate against an employee for disclosing or discussing conduct that is recognized as illegal under state, federal, or common law, or that is recognized as against a clear mandate of public policy will also be in violation of the Act. Additionally, the Act prohibits employers from attempting to enforce a provision of any agreement prohibited by the law, whether through a lawsuit, a threat to enforce, or any other attempt to influence a party to comply with a provision in any agreement that is prohibited by the law. Employers who violate the Act will face a potential $10,000 fine or actual damages.
Employers should also note that the Act has retroactive applicability for certain agreements. In particular, the Act will “invalidate nondisclosure or nondisparagement provisions in agreements created before the effective date” of the Act, that “were agreed to at the outset of employment or during the course of employment.” However, the Act’s retroactive application does not apply to nondisclosure or nondisparagement provisions contained in settlement agreements. Furthermore, the Act does not prohibit the enforcement of a provision in any agreement that prohibits the disclosure of the amount paid in settlement of a claim, nor does it prohibit an employer from protecting trade secrets, proprietary information, or confidential information that does not involve illegal acts. Accordingly, Washington employers may (and in many cases should) still require employees to sign confidentiality agreements that are strictly tailored to those interests, as long as they contain carve outs for unlawful acts in the workplace with respect to any nondisclosure or nondisparagement terms.
Prior to the Act’s enactment on June 9th, employers with workers in the state of Washington should examine and revise any violating nondisclosure and nondisparagement provisions in their existing employment, independent contractor and settlement template agreements to ensure that all future such agreements comply with the Act. Employers outside of Washington and California, while not currently subject to these rules, should watch for similar laws emerging in their respective jurisdictions as the trend of limiting NDAs catches on in more and more states.
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.
Source: Washington Becomes Second State to Declare Nondisclosure and Nondisparagement Provisions Unlawful in Employment and Independent Contractor Agreements | Miles & Stockbridge P.C. – JDSupra