Are non-disclosure agreements enforceable in California after recent labor law changes?

Are Non-Disclosure Agreements Enforceable in California?

Yes, non-disclosure agreements (NDAs) remain enforceable in California for protecting trade secrets and proprietary business information. However, recent legislation, specifically the Silenced No More Act (SB 331), strictly prohibits NDAs that prevent employees from disclosing factual information regarding unlawful acts in the workplace, including harassment and discrimination.

Key takeaway: Any NDA provision that attempts to silence an employee regarding illegal workplace conduct is void as a matter of public policy and may expose the employer to significant legal liability.

The Impact of SB 331 (The Silenced No More Act)

Effective January 1, 2022, SB 331 significantly altered the landscape for employment contracts. It expanded the scope of the prior 'STAND Act' (which focused on sexual harassment) to cover all forms of workplace harassment and discrimination based on any protected characteristic under the Fair Employment and Housing Act (FEHA).

What is Now Prohibited

• Provisions that prevent an employee from disclosing factual information about unlawful acts in the workplace.
• Non-disparagement clauses that do not include specific, required carve-out language.
• Agreements that require an employee to waive their right to testify in administrative or judicial proceedings.

Required Carve-Out Language

If you include a non-disparagement clause in a separation agreement, it must explicitly state: 'Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.'

Comparison: Enforceable vs. Unenforceable Provisions

Action Item: Audit your current separation and settlement templates to ensure the mandatory SB 331 language is present. If it is missing, the entire provision may be deemed unenforceable.

Best Practices for Drafting Compliant NDAs

To maintain enforceability, your agreements must be narrowly tailored. Overly broad NDAs that attempt to cover 'any and all information' are increasingly viewed with suspicion by California courts.

1. Define 'Confidential Information' Narrowly: Focus on specific technical data, client lists, or proprietary algorithms rather than general workplace knowledge.
2. Include Explicit Carve-Outs: Always include the statutory language required by SB 331 in any agreement involving a separation or settlement.
3. Avoid 'Catch-All' Clauses: Remove language that could be interpreted as preventing an employee from reporting illegal activity to government agencies like the EEOC or DFEH.
4. Severability Clauses: Ensure your contract includes a robust severability clause so that if one provision is found to be overbroad, the remainder of the agreement survives.

Key takeaway: Precision is your best defense. A narrowly defined NDA is far more likely to survive a legal challenge than a broad, 'blanket' confidentiality agreement.

The Role of TermScore in Compliance

Navigating California's evolving labor laws requires constant vigilance. TermScore uses advanced AI to automatically analyze your existing contract templates, flagging non-compliant clauses and suggesting the exact language needed to meet current California statutory requirements. By integrating TermScore into your workflow, you can ensure your NDAs are both protective of your business and fully compliant with state law.