Did Your Non-Disclosure Agreement Just Vanish?
A broad, new Washington state employment law just went into effect June 8, 2022, and for better or for worse, all employers should review their employment related agreements to ensure compliance. The law, Washington State’s Silenced No More Act (Engrossed Substitute House Bill [ESHB] 1795) (we will refer to it as the “Act”) seeks to end the pervasive abuse of Non-Disclosure Agreements (NDAs) used to shield employers from accountability from illegal and inappropriate conduct. Noncompliance can result in hefty statutory damages of $10,000, or actual civil damages, whichever is greater.
Traditionally used to protect trade secrets and proprietary information, NDAs have been misused to coverup workplace misconduct by preventing people from speaking out while keeping the public, and policy makers, from learning the extent to which illegal and inappropriate conduct is committed by Washington employers. The Act builds on S.B. 5996, which went into effect June 7, 2018, and which prevents employers from requiring that employees sign an NDA that restricts their ability to disclose workplace sexual harassment and assault as a condition of employment.
The Act casts a wide net, impacting employers, their current and former employees, independent contractors, and even prospective employees. It does not just apply to NDAs, but rather to the nondisclosure or non-disparagement provisions in most employment-related agreements, which can include employment agreements, independent contractor agreements, agreements to pay compensation in exchange for the release of a legal claim, employment-related settlement and severance agreements, and any other agreement between an employer and an employee.
Under the Act, employees cannot be restricted from disclosing or discussing what the employee “reasonably believes” is illegal conduct or violations of the law by the employer. Such illegal conduct can include discrimination, harassment, retaliation, wage and hour violations, sexual assault actions which are illegal under state, federal, or common law, or conduct which constitutes a violation of public policy. The Act applies to conduct arising in the workplace, at work-related events coordinated by the employer, between the employer or an employee, or even between employees, regardless of whether it occurred on the physical premises. The Act stops short of defining the term “reasonably believe” for application of the statute.
Particular to Washington residents, employers are prevented from forum shopping as the Act applies to any employment-related nondisclosure or non-disparagement provision in any agreement entered into by a Washington resident. This will apply retroactively to any agreement previously entered into during the course of, or at the outset of, employment, rendering those provisions in previous agreements unenforceable. However, this will not apply to employment-related settlement or severance agreements previously entered into. Nondisclosure or non-disparagement provisions will remain effective for existing severance and settlement agreements
To prevent retaliation, employers will be strictly prohibited from taking adverse action against an employee for disclosing or discussing covered conduct. Specifically, the Act prohibits discharging, discriminating, or retaliating against an employee. Employers will be prohibited from requiring or requesting that an employee enter into an agreement which contain a non-compliant nondisclosure or non-disparagement provision. An Employer attempting to enforce such an agreement through a lawsuit or a threat to enforce “may be liable for statutory damages of $10,000 or actual civil damages, whichever is greater, as well as reasonable attorneys’ fees and costs.”
If applicable, employers must cease any efforts to enforce noncompliant terms that are a part of employment agreements previously entered into. To be clear, the Act does not impact provisions and agreements which are related to lawful business conduct. Employers may continue use nondisclosure agreements to prohibit disclosure of trade secrets, proprietary information, or confidential information that does not involve illegal acts, but employers will need to consider some actions to be compliant with the new act. It is highly advisable for employers to proactively analyze and update employment-related and severance agreements with nondisclosure or non-disparagement terms that are compliant with the new law to avoid statutory damages for noncompliance. Some non-disclosure or non-disparagement provisions may be retained to preserve rights over protectable interests and lawful activity.
This blog is for educational purposes only and does not constitute legal advice. This article, or contacting Apex, does not in any way form an attorney-client relationship. Speak to a licensed attorney if you need help or advice in how your organization should dissolve. If you have any questions or would like to learn more, please contact George Ptasinski at George@apexlg.com or visit our website.