Why it matters

On September 30, 2018, Governor Brown signed a bill prohibiting the inclusion of confidentiality provisions in settlement agreements in cases and administrative actions involving sexual harassment, as well as other sexual offenses, while allowing the claimants in such actions to retain the right to include provisions that shield their identity.

Confidentiality provisions in settlements, often referred to as “secret settlements” or “nondisclosure agreements” (NDAs) are used to prevent details of cases from becoming public. While the previously existing law prohibited secret settlements of certain civil actions in which the public has a strong interest, it did not prohibit secret settlements in cases of sexual harassment, sexual assault and workplace harassment. This law will prevent the use of secret settlement agreements in such cases, while allowing the amount of the settlements to still remain confidential. Further, information about the identities of the claimants could be kept confidential by request of the claimants, except in cases where government agencies or public officials are parties to the cases.

Detailed discussion: California and Washington politics continue to converge

In response to the growing national #MeToo movement and revelations of sexual harassment by powerful public figures, including members of the California legislature, State Senator Connie Leyva (D-Chino) sponsored Senate Bill 820 to prohibit secret settlements and NDAs in sexual harassment cases entered into on or after January 1, 2019.

Leyva, a mother of twin girls, is a former union leader and the current vice chair of the California Legislative Women’s Caucus. Senator Leyva and the Legislative Women’s Caucus have been proactive in responding to sexual harassment scandals at the state capitol, introducing a number of bills that were sent to Governor Brown in his last year in office.

Specifically, the prohibitions in SB 820 will apply to cases of sexual assault, any workplace harassment or discrimination based on sex or failure to prevent an act of workplace harassment or discrimination, any retaliation for reporting harassment or discrimination based on sex, and more. According to Senator Leyva, the purpose of the bill is to prevent “wealthy and well-connected perpetrators” from repeatedly engaging in sexually harassing behavior with “no public accountability.”

Existing law already disfavors the secret settlements of certain civil actions in which the public has a strong interest, such as prohibiting the confidential settlement of a civil action the factual basis for which is a cause of action for “an act that may be prosecuted as a felony sex offense” and in civil actions based on a violation of the Elder Abuse and Dependent Adult Civil Protection Act. Leyva, who refers to the bill as the STAND Act (Stand Together Against Non- Disclosures), asserts that the prohibitions in SB 820 are consistent with current law and policy in this regard.

Opponents of the law have raised concerns it will interfere with the settlement of claims alleging sexual harassment or assault by forcing companies to litigate through trial in order to preserve their public image. Additionally, this law may pose future problems for employers. They are often named parties in sexual harassment actions regardless of culpability, because employers have more financial resources from which to extract a settlement. By eliminating confidentiality, this law could expose employers to a public presumption of guilt even where the decision to settle was not based upon merit, which in turn may drive employers to litigate to trial rather than opt for early resolution.

Despite strong opposition from the business community, Governor Brown signed SB 820 and 17 other bills aimed at addressing sexual harassment and discrimination on the very last day to sign or veto any bills passed in 2018. The governor’s announcement regarding Leyva’s bill happened to coincide with the extended and highly contentious Supreme Court confirmation hearings in Washington, D.C. The four-term governor of California highlighted his legislative actions as laws intended to “strengthen protections for women and children.” In addition, Brown stated that “recent events in Washington, D.C.—and beyond—make it crystal clear that many are not getting the message” as he signed SB 826 (Jackson, ch. 924 stats. 2018), a bill that requires publicly held corporations whose principal executive offices are located in California to have a representative number of women on their boards of directors by 2019. The reference and overall viewpoint regarding Washington, D.C., clearly drove Brown’s decision on SB 820 and secret settlement agreements.