Employment Law Attorneys
An Employment Severance Agreement Explained in Detail

An Employment Severance Agreement Explained in Detail

By Mark Carey

Whether or not you use an employment attorney to review and negotiate your employment severance agreement, you need to know the mechanics of the agreement.  The following discussion will go in depth and explain the legal terms in an understandable way.  If you need further information on severance negotiations, we have written about severance agreements and negotiations in previous articles, read HERE and HERE.

Generally, all severance agreements accomplish one task, paying employees to release their claims against the company in exchange for money and confidentiality.  I have seen thousands of these agreements in my twenty-five years of practicing employment law for employees and executives.  They are all relatively the same in the terms, but differ in their layout.  Most law firms use the same template, so I see the same agreement used over and over again.

The Intro Paragraphs

The initial paragraphs of every severance agreement identify the parties to the agreement and include a couple of “Whereas” paragraphs. The “Whereas” paragraphs are prefatory and not required in any agreement. I usually strike them as irrelevant.

The Non-Admission Provision

Every severance agreement includes a provision that the employer is not making an admission of wrongdoing, even though the employer’s actions were objectively discriminatory or wrongful. A non-admission provision is standard, but to the newly terminated employee, this provision seems awkwardly strange given the employee’s experience leading up to the termination.

The “Show Me the Money” Consideration Provision

Consideration or aka the payment provision. Well, for employees this is the most important provision in the agreement—what they will be paid to release their valid claims against their employer. It is important to consider the following structure when drafting the consideration or payment provision.  First, all money paid to an employee to settle an employment case is taxable as income.  Second, you can split the settlement payment into parts to take advantage of tax planning.  The employer will also like this option too, as they pay less in FICA.  We normally allocate 60% as 1099 income and 40% as W-2 income. This allows you to receive a larger lump sum as less taxes are deducted.  The employer will require you to indemnify the employer if and when the IRS challenges the settlement agreement Form 1099 payments.  In reality, I have never seen nor heard of the IRS conducting audits on client settlement agreements.

Attorneys’ Fees are Tax Deductible Against Gross Income

Remember, if you spent hard earned income on attorneys’ fees pursuing employment discrimination claims only and you received a judgment or a settlement in your favor, you can deduct the total amount of the attorneys’ fees against your gross income on your Form 1040.  You can only take this deduction for the year in which the case settled or judgment occurred.  See the attached link below.  This is a crucial element to your decision to accept settlement, as most employers refuse to pay for your legal fees to get to a settlement.  You are not alone if you never knew about this important IRS regulation. We regularly advise clients about this deduction, but it is recommended you speak to an accountant for tax advice.  https://turbotax.intuit.com/tax-tips/tax-deductions-and-credits/can-i-deduct-legal-fees-on-my-taxes/L98fUeOrM

General Release of All Claims

When employers pay severance in exchange for a signed release, the general release provision is the primary provision most employers are concerned about.  This provision effectively identifies every conceivable claim, known or unknown, that the employee has and then causes the employee to waive all such claims.  Most severance agreements set forth a long laundry list of state and federal statutes the employee is agreeing to waive claims under.  However, some claims can never be released in a written severance agreement, as state and federal laws prohibit such waiver of claims.  For example, you cannot waive and release the following claims: (1) workers compensation; (2) unemployment insurance claims and (3) claims made to any self-regulatory government agency such as the Securities & Exchange Commission (SEC).

Challenge to Agreement or Enforceability

Most severance agreements contain a provision that if you seek to challenge the enforceability of the agreement, you have to return the money.  That seems fair and it is. But some employers also sneak in penalty provisions in case the employee breaches the agreement for speaking out about the settlement etc.  Employers often seek the total value of the settlement or some six figure amount to protect the employers in case the departing employee goes rogue and publicly denounces the employer on social media platforms.  This penalty provision often shows up in cases where there is a lot of bad blood spilt between the parties, particularly after a lawsuit is filed.  We strongly advise clients against these draconian provisions and inform employers they are overreaching and are already protected by non-disparagement clauses and employee confidentiality agreements previously signed at the start of employment.

No Other Amounts Are Due

Employers often place a redundant provision in the agreement that the company does not owe the employee anything more.  I say redundant because the release provision should have covered every claim under the sun.

Non-disparagement Clause

Every severance agreement contains a non-disparagement clause, but one only applicable to the employee and not the employer. We advise clients to include a mutual non-disparagement  clause to be signed by the employer so it does not engage in blacklisting, which is a very real phenomenon.  You will need to name specific individuals and managers when negotiating a mutual provision, as employers object to having to police their entire workforce.  I personally never liked that response, but hey, these are called negotiations for a reason—you don’t get all the things you want and must compromise or litigate.

References and Employment Verification

Contrary to urban legend, employers do not provide references to departing employees. What they do provide is a 1-800 number to confirm your employment and title, but nothing more. If you have a good reference still within the company, I suggest you get that in writing or have the person contact your new employer directly.

No Future Employment

Most if not all severance agreements contain a provision that bars you from obtaining employment with the company, or its’ subsidiaries, in the future. Yes, this is perfectly legal.  What the provision really accomplishes is that it prevents future liability by the company in the event you re-apply for a position and claim you were somehow discriminated against for a failure to hire.   If you asserted claims against the company prior to termination or thereafter, be reasonable with yourself and do not expect the company will want to rehire you. Consider yourself “canceled” by your old employer.

Return of Company Property

Severance agreements require you to return company property upon your termination or before you receive your severance payment. You would be surprised by the number of times I have had to explain what is and is not company property to former or departing employees.  I often use the example of company email; you know the one containing your corporate email address.  Well, the email and the piece of paper it is printed on do not belong to you. So if an email does not belong to you, everything else the employer gave you to do your job also does not belong to you.  My biggest concern arises when the employee tells me he wants to hold onto the hard drive he purchased that contains the company email list, client list, power point presentations and any other corporate proprietary information.  All of the above company property must be returned to the employer or you risk getting sued for theft, conversion of property etc. and risk breaching your severance agreement and returning the money paid to you under that agreement.

Entire Agreement or Full Integration Provision

This is a standard term in all well drafted employment agreements, including severance agreements.  Essentially, the only terms of the agreement are those terms set forth in the severance agreement.  Any oral or written agreements made prior to the full execution of the severance agreement are nonbinding and unenforceable.  So be careful in your review of your case so that you do not hold expectations that are not realistic.  You would need to have an employment attorney evaluate a prior oral agreement to determine if it is viable prior to signing the severance agreement. Some employers have promised severance prior to the severance agreement but then walked back those promises.  Again, an employment attorney can help you dissect this important legal issue. You may discover that your employer created a severance plan of one person—you.

Non-competition and Non-solicitation Provisions

We often see employers sneaking into severance agreements brand new non-competition and non-solicitation provisions where none previously existed during the employee’s employment.  We advise clients to strike these provisions and most employers do not raise the subject again.  As employment lawyers, we see this tactic used every day, but you do not.  This is one example where you should involve an employment attorney to review your agreement, whether helping to negotiate it with the employer or from behind the scenes.  We also see employers reaffirming the prior noncompetition and non-solicitation provision signed at the start of employment into the severance agreement. Again, we advise clients to challenge the inclusion and enforceability of these restrictive covenants.  Most employers will back away once they are met with a good argument as to why the prior agreements are unenforceable.

Agreement Signed In Counterparts

It is common to include a provision that the parties to a severance agreement can sign in separate counterpart copies, each of which will be considered one fully executed agreement. Counterparts are exchanged via email and facsimile, as well as in person.

21 Days to Sign or Else

Don’t panic if you have not signed your agreement within the 21 days, as spelled out in the “proposed” agreement.  There is no state or federal law that states you have 21 days or 45 days to sign the severance agreement.  If the agreement is not signed by you, do you think you have an enforceable contract?  No.  So, ignore the 21 or 45 day threat and just speak with an employment attorney to discover what claims or leverage you have to increase the severance amount.  Often times, consulting with an employment attorney will pay off in huge dividends to you in the form of a much higher settlement value at the conclusion of the negotiations.  The difference or delta here is the employment attorney.  She or he has the professional experience you lack, and it is that experience and knowledge of the law that is applied to your narrative to develop claims that stick against your employer.  As you read above, your legal fees are 100% tax deductible, so why wouldn’t you explore your potential claims with an employment attorney?

Confidentiality Provision

I saved the best for last. Of course everyone knows that you give up your legal rights in a severance agreement, but many do not know you also agree to a “lifetime” of silence.  No, you cannot write a book about your horrible employer if you agree to take their blood money!  But the reason why I saved this topic for last is because of recent social and legal developments.  The #metoo event and the aftermath that followed brought with it a new understanding about confidentiality agreements, also called nondisclosure agreements (NDAs).  The social issue that has arisen is that we are no longer comfortable letting the bad actors of the world get away with their misdeeds, in particular any misdeed of a sexual nature—regardless of gender or sexual orientation, by covering them up with confidential settlement agreements. Think of Harvey Weinstein or the former Met Opera conductor James Levine. For decades and continuing today, every single employer requires the departing employee sign a confidentiality provision in a severance agreement in exchange for severance payments.  This is the default rule followed by all employers.  This default rule has only caused more employees to be harmed by the same bad actors who caused the previous cases that eventually settled.

Many states like New York have created statutes requiring a voluntary confidentiality agreement, separate and apart from the settlement agreement. While this sounds like a good idea, it has already been abused by employers.  Most employers will now apportion a part of the settlement payment to be exchanged for a signed confidentiality agreement.  Simply, the legislators were lobbied by employers and should have banned the use of settlement dollars in exchange for signed confidentiality agreements.

The bottom line for you is this.  We are just not at the social pivot point for you to resist the use of confidentiality provisions in settlement agreements, so don’t waste your time arguing about this issue with your former employer.  But one day confidentiality provisions in employee severance agreements will be banned as a matter of statute and public policy.  This is a nonpolitical issues, as both liberals and conservatives use confidentiality agreements to conceal the illegal misdeeds of their managers and employees.

If you need more information about this article or want to discuss your severance agreement with an employment attorney, please call Carey & Associates, P.C. at call (203) 255-4150 or email to info@capclaw.com.  Thank you and be safe and well.

Podcast: C’mon, Man! Employees Continue to Get Screwed Over

Podcast: C’mon, Man! Employees Continue to Get Screwed Over

In this episode of the Employee Survival Guide Mark confronts systemic barriers created by employers that promote inequality of gender, age, race, sex, sexual orientation etc. and protects  bad actors and bad companies from public exposure of their illegal actions and public shaming.   Mark examines the current social equality movement (#metoo and BLM) to find system barriers thrown in their faces of employees by the very employers who publicly denounce sexism and racism.  Employers should be banned from using confidentiality agreements in employment discrimination settlements. We should ban the employment-at will rule because it only promotes biased discrimination in the workplace.  And finally, every case should be made public instead of being forced into the black hole of arbitration.  We need to know how our employers are treating our coworkers and ultimately ourselves.

The Employee Survival Guide is a podcast only for employees. We will share with you all the information your employer does not want you to know about and guide you through various important employment law issues. The goal of the Employee Survival Guide podcast is to provide you with critical insights about your employment and give you the confidence to protect your job and career, especially during difficult times.

YOUR HOST MARK CAREY

The Employee Survival Guide podcast is hosted by seasoned Employment Law Attorney Mark Carey, who has only practiced in the area of Employment Law for the past 25 years.  Mark has seen just about every type of employment dispute there is and has filed several hundred lawsuits in state and federal courts around the country, including class action suits.  He has a no frills and blunt approach to employment issues faced by millions of workers nationwide. Mark endeavors to provide both sides to each and every issue discussed on the podcast so you can make an informed decision.

EMPLOYEE SURVIVAL GUIDE PODCAST IS LIKE NO OTHERS

The Employee Survival Guide podcast is just different than other lawyer podcasts! How?  Mark hates “lawyer speak” used by lawyers and just prefers to talk using normal everyday language understandable to everyone, not just a few.  This podcast is for employees only because no one has considered conveying employment information directly to employees, especially information their employers do not want them to know about.  Mark is not interested in the gross distortion and default systems propagated by all employers, but targets the employers intentions, including discriminatory animus, designed to make employees feel helpless and underrepresented within each company.  Company’s have human resource departments which only serve to protect the employer. You as an employee have nothing!  Well, now you have the Employee Survival Guide to deal with your employer.

Through the use of quick discussions about individual employment law topics, Mark easily provides the immediate insight you need to make important decisions.  Mark also uses dramatizations based on real cases he has litigated to explore important employment issues from the employee’s perspective.  Both forms used in the podcast allow the listener to access employment law issues without all the fluff used by many lawyers.

If you enjoyed this episode of the Employee Survival Guide please like us on FacebookTwitter and LinkedIn.  We would really appreciate if you could leave a review of this podcast on your favorite podcast player such as Apple Podcasts.

For more information, please contact Carey & Associates, P.C. at 203-255-4150, www.capclaw.com or email at info@capclaw.com.

The content of this website is provided for information purposes only and does not constitute legal advice nor create an attorney-client relationship.  Carey & Associates, P.C. makes no warranty, express or implied, regarding the accuracy of the information contained on this website or to any website to which it is linked to.

Podcast: C’mon, Man! Employees Continue to Get Screwed Over

C’mon, Man! Employees Continue to Get Screwed Over

As we await the dawn on this purported new era of social change in America, I can promise you that your employment rights will not improve. I am unapologetic.  In fact, your employment rights have been so eroded by your employers that we are collectively veering toward ever more systemic inequality and racism in the workplace.  Now that I have your attention, what are YOU going to do about it?

You have sat on the sidelines watching others do the heavy lifting, but when are you going to start questioning your employer regarding your employment and the selfish one-sided employment practices you are somehow required to follow, such as the employment at will rule, confidentiality of settlement agreements, and forced arbitration of employment disputes. Can you say “No”?  Maybe?

A majority of you, may never question or oppose your employer because of fear – of losing your job,  income and benefits. I get the financial insecurity issue faced by all, but that’s the employer’s only leverage!   “Come on Man”, as President Biden is often quoted as saying. But really, come on men, women and other, how much pain and suffering has to occur before the collective “YOU” says enough?  If we are in the midst of a new social revolution in support of diversity and equality where big corporations have piled on diversity support initiatives, solely for marketing purposes in my opinion, then we should be seeing signs of dramatic changes to reverse racial inequality at work, promote pay equality and the end of firing older workers (55 and above) just because they cost too much.

Wait, pause, listen- what’s that?  Is that the sound of my meditation music playing in the background?   If #metoo and BLM are real long lasting social movements to correct the injustices at work, I should not be able to hear anything over the gigantic thunder of public outrage toward racial, sexual and age inequality hurtling at my office windows, internet, television, etc.  I have not heard nor read anything after the recent election that indicates real changes beyond political hyperbole.  And as far as I can see, employers continue to default into the same old management practices of yesterday.  Nothing has changed, nor will it change. Employers will continue to screw YOU (collectively) for the near future.  I am writing this article in order to make you understand what your employer does not want you to know about; “default management practices” are real and designed to suppress the collective YOU literally.

Here is why. Employers continue to require the following chains of servitude and secrecy solely to promote their default “control at all costs” position at your expense.  You did know your current employment system stems from the centuries old practices of Master and Servant, right?  The following employment practices are inherently racial, sexist, ageist, homophobic and just downright undemocratic, but you will not hear anyone else dare to say these truths.  I will because I do not care what management or corporations say.  Why don’t you feel the same way?

NDA’s and Confidentiality Agreements Conceal Bad Actors and Bad Companies

Shame and more shame.  If you statutorily ban the use of confidentiality provisions in settlements of employment discrimination cases, bad actors and bad companies will stop discriminating. Why?  Companies will seek to avoid public shaming if we all knew – that a CEO attempted to rape a subordinate, that a billionaire hedge fund manager fired a woman with young children and recently diagnosed with two forms of aggressive cancer, that a Black man was immediately fired after being asked and gave an internal talk regarding the BLM movement, that an older man was fired for losing his voice box due to cancer and told he did not have a physical disability, that a pregnant woman was fired from a large public company because her brain allegedly changed as a result of her pregnancy.  Need I go on?

Some states have decided to ban confidentiality provisions in employment settlement agreements, but they have not gone far enough because employer lobby groups temper down the statutory language and create gaping loopholes for employers to slither through. For example, some employers have conditioned part of the settlement payment requiring the employee (victim) to sign a separate confidentiality agreement.  I brought this to the attention of the relevant state Attorneys General’s Office without even a response.  The statutes are worthless because employers always seek the default to control you and control their self-interest.

Here is the bottom line, remove all confidentiality provisions from every employment settlement agreement and you will directly and substantially decrease all forms of racial, ethnic, sex, sexual orientation, disability, religious and age discrimination. Think about the millions of dollars saved by companies that could be used to train more employees and managers about the Golden Rule.  The money saved by not having to pay attorneys’ fees to employment lawyers like myself.  Please, I beg you to put me out of business, I would be glad to retire.  But employer’s cannot seem to give up this “confidentiality” drug.  There is absolutely no contrary rational argument in favor of the continued use of confidentiality provisions to shield bad actors and bad employers; if there is one let me know.  So why does this nonsense continue?  That’s how powerful employers are, always seeking to maintain this “default” management practice.  And worse yet, companies controlled by progressive liberals and conservatives follow this default management practice.  It’s a bipartisan effort to screw you! As I continue to say, employment law is not political- but NELA says it is (Disclaimer: I am a NELA member, but a registered republican doing the peoples’ work).

Employment At-Will Conceals Discriminatory Behavior and Must Be Banned

I will beat this drum till the end of time.  Most employees, except those in Montana, are capable of being fired for no reason at all and at any moment – this is the employment at-will rule.  The rule should be banned nationwide and replaced with a termination for cause rule.  The at-will rule arose out of the Master and Servant context and is still the current management default rule adversely impacting – everyone, except those employees in Montana and executives with the clout to demand employment contracts with severance and termination for cause.

Why is the at-will rule so dangerous?  When employers do not have to give a reason for termination, employers and managers, who hold a discriminatory bias of any kind, can quietly terminate employees they do not like.  Yes, the at-will rule promotes racism, sexism, disability discrimination, ageism etc.  But again, employers are so addicted to this rule, they can’t give it up.  This issue is equivalent to the opioid crisis and more companies and management counsel continue to prescribe this drug of choice.  That’s how powerful employers are, always seeking to maintain this the most coveted of all “default” management practices.  And worse yet, companies controlled by progressive liberals and conservatives follow this default management practice.

Instituting the termination for cause rule would result in decreased discriminatory practices, as employers would be required to demonstrate an objective factual basis to support the decision to terminate, not one that was arbitrary and capricious – which is what discrimination is.

Forced Arbitration Conceals Everything Bad That Your Employer Does Not Want You To Know About

What is forced arbitration? Simply, your employer says it is a quicker and cheaper way to resolve employment disputes.  It’s not quicker and it’s not cheaper – for you!  It’s called “forced arbitration” because your employer mandated your job offer or your continued employment on your signing the agreement.  You could not negotiate it away and it never benefits you at all.  It is a management default rule and more than 50% of employees in the United States are adversely impacted by this one sided practice.

What is it really?  The sole purpose of arbitration agreements in the employment context is to “conceal” bad actors and bad companies. The adverse effect on all employees is identical to the default use of confidentiality agreements. This default rule is so entrenched in our work culture that courts overwhelmingly compel arbitration in nearly all cases; concealing your claims of discrimination to a nonpublic black hole. There is absolutely no way to publicly discover what types of claims were sent to arbitration, as google cannot crawl it and Westlaw (lawyer research database) can’t search it. It is as if those claims never happened at all, i.e. the woman who was almost raped by the CEO, the Black man fired after being asked to give a BLM explanation etc.   Worse, you cannot shame the corporations for what they did- that’s the point!   It will take an act of Congress to overturn the Federal Arbitration Act, and this current Congress won’t touch this with a 100 mile pole.  That’s how powerful employers really are, always seeking to maintain this “default” management practice at every level.  And worse yet, companies controlled by progressive liberals and conservatives follow this default management practice.

You now know what I would propose, but what will you do to effect real change?

If you would like more information about this topic or would like to hire an employment attorney, please contact Carey & Associates, P.C. at info@capclaw.com or call (203) 255-4150.

The Long Overdue Death Of Non-Disclosure Agreements: Uncovering The Hidden Truth Of Employment Settlements

The Long Overdue Death Of Non-Disclosure Agreements: Uncovering The Hidden Truth Of Employment Settlements

In this episode of the Employee Survival Guide, Mark explores The Long Overdue Death Of Non-Disclosure Agreements: Uncovering The Hidden Truth Of Employment Settlements– the use of nondisclosure or confidentiality provisions in settlement agreements.  In essence, employers seek to hide their bad acts behind confidentiality agreements and shield them from public disclosure.  Mark explores a new California statute being proposed that will further provide transparency to unlawful employer conduct. Finally, Mark provides a solution to creating more equality in the work place by banning nondisclosure agreements and two other initiatives he has been raising for several years.

The Employee Survival Guide is a podcast only for employees. We will share with you all the information your employer does not want you to know about and guide you through various important employment law issues. The goal of the Employee Survival Guide podcast is to provide you with critical insights about your employment and give you the confidence to protect your job and career, especially during difficult times.

YOUR HOST MARK CAREY

The Employee Survival Guide podcast is hosted by seasoned Employment Law Attorney Mark Carey, who has only practiced in the area of Employment Law for the past 25 years.  Mark has seen just about every type of employment dispute there is and has filed several hundred lawsuits in state and federal courts around the country, including class action suits.  He has a no frills and blunt approach to employment issues faced by millions of workers nationwide. Mark endeavors to provide both sides to each and every issue discussed on the podcast so you can make an informed decision.

EMPLOYEE SURVIVAL GUIDE PODCAST IS LIKE NO OTHERS

The Employee Survival Guide podcast is just different than other lawyer podcasts! How?  Mark hates “lawyer speak” used by lawyers and just prefers to talk using normal everyday language understandable to everyone, not just a few.  This podcast is for employees only because no one has considered conveying employment information directly to employees, especially information their employers do not want them to know about.  Mark is not interested in the gross distortion and default systems propagated by all employers, but targets the employers intentions, including discriminatory animus, designed to make employees feel helpless and underrepresented within each company.  Company’s have human resource departments which only serve to protect the employer. You as an employee have nothing!  Well, now you have the Employee Survival Guide to deal with your employer.

Through the use of quick discussions about individual employment law topics, Mark easily provides the immediate insight you need to make important decisions.  Mark also uses dramatizations based on real cases he has litigated to explore important employment issues from the employee’s perspective.  Both forms used in the podcast allow the listener to access employment law issues without all the fluff used by many lawyers.

If you enjoyed this episode of the Employee Survival Guide please like us on FacebookTwitter and LinkedIn.  We would really appreciate if you could leave a review of this podcast on your favorite podcast player such as Apple Podcasts.

For more information, please contact Carey & Associates, P.C. at 203-255-4150, www.capclaw.com or email at info@capclaw.com.

The content of this website is provided for information purposes only and does not constitute legal advice nor create an attorney-client relationship.  Carey & Associates, P.C. makes no warranty, express or implied, regarding the accuracy of the information contained on this website or to any website to which it is linked to.

The Long Overdue Death Of Non-Disclosure Agreements: Uncovering The Hidden Truth Of Employment Settlements

The Long Overdue Death Of Non-Disclosure Agreements: Uncovering The Hidden Truth Of Employment Settlements…

By Chris Avcollie,

In an often-quoted line from the hit TV series Dexter, actor Michael C. Hall, who plays the title character said: “There are no secrets in life; just hidden truths that lie beneath the surface.” For those of us involved in the resolution of employment claims on behalf of employees, this quote has special meaning. Beneath the surface of most employment settlement agreements lie the undisclosed facts that led to the conflict and which often result in the messy end of an employment relationship. Recently proposed legislation in California seeks to ensure that those “hidden truths” do not remain hidden.

California Proposes New Law – Silence No More Act (SNM Act)

A new law proposed in California this week called the Silenced No More Act (SNM Act) is intended to prevent the enforcement of non-disclosure provisions in a wide variety of employment settlement agreements. The legislation, proposed by California State Senator Connie M. Leyva, will expand upon the 2018 STAND Act (Stand Together Against Non Disclosure) and will protect plaintiffs in cases of employment discrimination and harassment of all kinds who choose to speak out publicly about their experiences. Under the current provisions of the STAND Act, only plaintiffs in cases of gender discrimination or sexual harassment may avoid non-disclosure provisions. The new law will expand the STAND Act to prevent the use of non-disclosure provisions in employee severance agreements. Under the SNM Act, targets of discrimination based on race, national origin, religion, or gender identity will also now be free to ignore the contractual gag orders companies negotiate into their settlement agreements.

This legislation has been supported by employee rights groups in California including the California Employment Lawyer’s Association and the Equal Rights Advocates.  The new laws are seen as an end to the days when employer misconduct can be hidden from public view. Workers who have been targeted with harassment and discrimination will be free to speak their truth publicly. The perpetrators of this type of misconduct can no longer hide behind the veil of secrecy provided by their company. Non-disclosure and non-disparagement agreements will no longer be used to silence employees.  The hope is that the public disclosure of the details of these abusive work environments will prevent perpetrators from targeting other workers in the future.

STAND and SNM Could Influence Other States to Pass Similar Laws

Although STAND and SNM (if it is enacted) are or would be exclusively California laws, these statutes could ultimately have a broad national impact. Other states often follow California’s lead in employment matters. Further, the fact that so many large technology companies are headquartered in California gives these laws an outsized influence on the national conversation about non-disclosure agreements. In the wake of the STAND Act, a number of states have enacted some limitations on non-disclosure enforcement including Washington, New York, New Jersey, Vermont and Tennessee. Many more states are likely to see some version of this legislation in the future.

More Cow Bell – More Corporate Disclosure and Shaming = More Equality in the Workplace

As am employment attorney, I was very curious about how this new legislation might impact the ability of plaintiff’s lawyers to negotiate settlements for clients in employment discrimination cases. Often the best leverage plaintiffs have in the early stages of an employment case is the prospect of public disclosure of misconduct on the part of a company employee or manager. The reason many companies offer settlements to claimants is to avoid embarrassing public disclosures of uncomfortable truths about their corporate culture or work environment. Companies also have an interest in keeping settlements secret to avoid what they see as “encouraging” other claimants looking to “cash in” on potential claims. In other words, the concern is that the non-disclosure and non-disparagement provisions outlawed by the STAND Act and the SNM Act are the best tools to obtain fair settlements for employees who have been targeted with harassment or discrimination.

The STAND Caveat

Further examination of the proposed statute reveals that its scope is more limited than I had anticipated. These statutes are actually structured to encourage and not to discourage early settlement of discrimination cases. The STAND Act allows for use and enforcement of NDAs (non-disclosure agreements) in cases where there has not yet been any court or agency filings. So during the initial stage of the claim, when a demand letter has been issued but where claims have not yet been filed with state or federal human rights agencies (such as the Equal Employment Opportunities Commission or “EEOC” in federal discrimination cases or the Connecticut Commission on Human Rights and Opportunities or “CHRO” in Connecticut state discrimination cases) and no lawsuit had been filed, the companies may include NDAs in settlement agreements and they are enforceable.

This exception to the ban on NDAs is highly significant. Far from discouraging early settlements of discrimination claims, this feature of the proposed law offers employers a powerful incentive to settle employment discrimination and harassment claims early. If an early settlement is not reached then the agency filings will occur and the employer will lose the right to demand an NDA as part of the settlement agreement. In order to keep employee misconduct secret, employers will have to settle employment discrimination cases early and often. While some cases can be kept secret by early settlement negotiations, targets of discrimination who want to shed light on their experience can ensure their ability to speak out by filing their claims with state and federal agencies.

What Opponents/Management/Defense Attorneys Say About Anti-NDA Legislation

Opponents of the anti-NDA legislation contend that restricting NDAs takes away a survivor’s choice to keep their case private and provides a strong incentive for employers to refuse settlement options and to defend themselves against a publicly disclosed allegation. According to Attorney Jill Basinger, an entertainment litigation partner and Michael L. Smith an associate at Glaser Weil in Los Angeles, “This harms survivors of sexual harassment and assault by removing their choice and forcing them to endure the hardship and uncertainty of a public trial as the only means of vindicating their claims.”[1] Once an agency filing occurs or a lawsuit is commenced, the NDAs become unenforceable. It seems as if these laws would remove a strong incentive for defendant employers to settle claims.

It appears, however, as if the STAND Act has resulted in an increase in pre-filing mediations in employment cases in California.[2] According to Mariko Yoshihara, the Legislative Counsel and Policy Director for the California Employment Lawyer’s Association, the predictions and fears over the STAND Act impairing the ability to settle have not borne out. According to Attorney Yoshihara, attorneys involved in this type of litigation have informally reported that the legislation has not lowered settlement amounts or impaired the settlement process. Additionally, according to Yoshihara, it has made it easier to advocate for employee rights from a public policy perspective because the targets of harassment and discrimination can make their stories public. While dispositive data on this point is not yet available, it seems as if the legislation is working in California.

Further, fears surrounding the forced public disclosure of the identity of the claimant are unfounded. Under the STAND Act there are specific provisions which protect the identity of the complaining employee in the context of a lawsuit. The STAND Act includes a specific provision that shields the identity of the claimant and all facts that could lead to the discovery of his or her identity, including documents and pleadings filed in court, at the request of the claimant. California Code of Civil Procedure 1001(c). Thus, the anti-NDA legislation does not force the disclosure of a claimant’s identity.

While many employer advocacy groups including various chambers of commerce and industry and trade associations have opposed legislation such as STAND and SNM, similar legislation should be considered by all state legislatures that have not already enacted similar laws.  When it comes to use of NDAs in employment discrimination and sexual harassment cases there is an unfair imbalance of power between the bargaining parties. The employers who are often defending the harasser or denying that the harassment occurred have an overwhelming advantage over the complaining employee in terms of investigative, legal, personnel, and financial resources. Employers are frequently holding all of the cards in a settlement negotiation. Legislation such as STAND and SNM will help to level the playing field at least with respect to NDAs.

More Power to the People/Employees – Shift In the Balance of Power

Placing the power over which aspects of the case can or will be made public in the hands of the targets of harassment and discrimination will help balance the power in the arena of employment settlement agreements. As evidenced by the initial success of the STAND Act, these laws can be an important tool in ending the culture of silence that has permitted harassing and discriminatory behavior to continue in the workplace for so long. In a recent opinion piece, the feminist writer and critic Marcie Bianco said: “If the societal change necessary for dignity and justice is to occur, we must move from awareness to accountability.”[3] This legislation should help bridge the gap between awareness and accountability. We need to see a whole lot more of those “hidden truths” lying beneath the surface of the American workplace.

If you would like more information about this article, please contact Carey & Associates, P.C. at info@capclaw.com or call 203-255-4150.

Christopher S. Avcollie

[1] Basinger, Jill and Smith, Michael L.; “How California’s NDA Restrictions Cause More Harm Than Good for Survivors” (Guest Column); Hollywood Reporter;  https://www.hollywoodreporter.com/news/how-californias-nda-restrictions-cause-more-harm-good-survivors-guest-column-1280922

[2] LeHocky, Mark, “Shining a Needed Light on Harassment and Discrimination Claims: The Collective Benefits from California’s Recent Secret Settlement Restrictions”, Contra Costa County Bar Association, March 2020;   https://www.cccba.org/article/shining-a-needed-light-on-harassment-and-discrimination-claims/

[3] Bianco, Marcie, “Britney fans angry at Justin Timberlake have a point.” CNN Opinion, February 10, 2021.

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