Can an NDA override state-mandated employee nondisclosure rights in California?

Can an NDA override state-mandated employee nondisclosure rights in California?

No. Under California law, specifically the Silenced No More Act and related statutes, an NDA cannot legally prevent an employee from disclosing information about unlawful workplace acts, including harassment, discrimination, or wage theft. Contractual provisions attempting to do so are void and unenforceable.

The Legal Landscape of California NDAs

California maintains some of the most aggressive employee-protective laws in the United States. While many states allow broad confidentiality agreements, California has systematically dismantled the ability of employers to use NDAs as a shield for illegal conduct. The primary legislative pillars include SB 331 (the Silenced No More Act) and the Fair Employment and Housing Act (FEHA).

Key Statutes Governing NDAs

• SB 331 (Silenced No More Act): Prohibits employers from requiring employees to sign agreements that prevent the disclosure of factual information regarding unlawful acts in the workplace.
• California Labor Code Section 432.5: Prohibits employers from requiring employees to sign an agreement that the employer knows to be prohibited by law.
• Business and Professions Code Section 16600: Generally voids contracts that restrain anyone from engaging in a lawful profession, trade, or business.

Key takeaway: Any contract clause that attempts to restrict an employee's right to discuss illegal workplace conduct is void as a matter of public policy in California. You cannot contract away statutory rights.

Action Item: Review your current employment agreements for "catch-all" confidentiality clauses that do not explicitly carve out exceptions for reporting unlawful activities.

What Information Cannot Be Restricted?

California law draws a hard line between legitimate trade secrets and protected speech. Employers often attempt to overreach by labeling standard workplace complaints as "confidential."

Identifying Red Flags in Your NDA

If you are reviewing a contract, look for these specific red flags that suggest an overbroad or illegal NDA:

• Lack of Carve-outs: The agreement fails to explicitly state that the employee may report illegal acts to government agencies.
• Broad Definitions of "Confidential Information": The definition includes "all information learned during employment," which is legally unenforceable in California.
• Non-Disparagement Overlap: The agreement uses non-disparagement clauses to effectively silence reports of discrimination or harassment.

Action Item: If you encounter these red flags, request an addendum that explicitly references the Silenced No More Act and clarifies that the NDA does not apply to protected disclosures.

The Consequences of Overbroad NDAs

Employers who insist on including illegal provisions face significant risks. Under California law, the inclusion of a prohibited provision can render the entire agreement void. Furthermore, attempting to enforce such a provision can trigger:

1. Civil Litigation: Employees may sue for declaratory relief to have the contract declared void.
2. Retaliation Claims: Attempting to enforce an illegal NDA against an employee who reported misconduct is a textbook case of unlawful retaliation.
3. Regulatory Scrutiny: The California Civil Rights Department (CRD) may investigate companies that systematically use illegal NDAs to suppress employee complaints.

Key takeaway: An unenforceable NDA is not just a useless piece of paper; it is a liability that can be used against the employer in court to demonstrate bad faith.

Action Item: If you are an employer, audit your standard employment templates annually to ensure compliance with the latest California legislative updates.

How to Ensure Compliance

Compliance requires more than just good intentions; it requires precise language. Every NDA in California should include a "savings clause" that explicitly acknowledges the employee's right to discuss unlawful acts. This language should be clear, conspicuous, and easily understood by a layperson.

TermScore can automatically analyze your employment contracts to identify overbroad confidentiality clauses and ensure they align with California's strict legal standards. By flagging non-compliant language before you sign, TermScore helps you avoid the pitfalls of unenforceable agreements and protects your rights in the workplace.