A new law in California protects a consumer’s right to post online reviews about a company.

Governor Jerry Brown signed the bill into law in early September, and it took immediate effect. The legislation was spurred by the story of a couple on the receiving end of a $3,500 bill from online retailer KlearGear.

John Palmer and Jennifer Kulas wrote a negative review of the company on RipoffReport.com. Claiming that the couple violated a non-disparagement clause in its terms of service, KlearGear sent the bill. The couple refused to pay and later claimed in a lawsuit against the company that their credit was damaged as a result. In July, a federal judge ordered KlearGear to pay Palmer and Kulas $306,750.

When the story made headlines and consumers learned about the existence of such clauses, the California Legislature sprang into action and passed the bill by a vote of 27 to 9 in the Senate and 63 to 14 in the Assembly.

Assembly Bill 2365 bans non-disparagement clauses or similar terms that restrict a consumer’s right to post a review. A consumer may agree to a clause, but his or her rights must be “knowingly, voluntarily and intelligently” waived.

Attempts to enforce such a clause could result in penalties ranging from $2,500 for a first-time offense up to $10,000. State attorneys are tasked with enforcement, but the law also grants consumers a private right of action and notes that the penalties set forth in the statute are not the exclusive remedies available to plaintiffs.

Individuals or businesses that host online consumer reviews or comments are not prohibited from removing a statement that is otherwise lawful to remove.

To read the new law, click here.

Why it matters: Companies should familiarize themselves with the new law and remove or amend non-disparagement clauses in consumer contracts as necessary.