One By One, States Are Banning NDAs To Protect Workers

(April 1, 2022, 8:15 PM EDT) -- Amazon, Starbucks, Microsoft and Costco are among the thousands of employers in Washington state that will soon be barred from making nondisclosure agreements a condition of employment or settlements, as the Evergreen State becomes the latest to do away with these prickly legal tools.

Washington's Silenced No More Act, which Gov. Jay Inslee signed into law March 24, will make it unlawful for employers in the state to require, or even request, that workers sign NDAs or nondisparagement provisions that restrict workers' right to talk openly about illegal discrimination, harassment, sexual assault, retaliation, wage and hour violations, or any other breaches of public policy.

Unlike laws in California and New York that also restrict use of NDAs by employers, the Washington law goes a step further by barring confidentiality clauses in workplace settlements related to illegal acts, even if requested by an employee.

The law, which takes effect June 9 and applies to all employment agreements, aims to restrict commonly used legal tools that critics say shield abusers and muzzle workers.

Here, Law360 explores what Washington's new law means for employers and employees, as well as what workers' advocates are hoping to see next.

Dirty Laundry

Kathy Barnard, principal partner at Barnard Iglitzin & Lavitt LLP, told Law360 that Washington employers who fail to take action to fix systemic workplace problems are likely to see their dirty laundry aired out in public once the law takes effect.

"Employers that are playing by the rules aren't really going to be affected very much at all. It's the repeat offenders that are going to have trouble," said Barnard, whose Washington-based law firm represents more than 150 public- and private-sector unions across the country. Barnard also sits on the board of the Washington Employment Lawyers Association, which helped legislators draft the law.

She said it's not unusual to see an employer or an organization with a sexual harassment problem buy the silence of victims and then do nothing to correct the systemic workplace issues, which allows the same problem to happen again.

Barnard said that in the 1990s, she represented 17 plaintiffs alleging sexual harassment against a restaurant chain in the Pacific Northwest. She later learned that during that same period, three other attorneys at different firms were handling complaints from other plaintiffs against that same employer.

Instead of dealing with the underlying issue, the employer simply swept it under the rug, she said.

"What they would do is they would settle these cases and then require silence. And usually what the agreement does, is it says: If you talk, that's a violation of the agreement. We come and get our money back," Barnard said.

That practice is still "pretty pervasive," Barnard said.

"It's rampant in wage theft and race discrimination cases," she said, adding that employers often require a worker's silence because they don't want the fallout that can come when a worker's story goes public.

Piercing the Secrecy Veil

Inslee's press secretary, Mike Faulk, told Law360 that the Silenced No More Act is an important step in addressing the role that nondisclosure agreements and settlement agreements can have in covering up workplace misconduct and past practices.

"Employees who have faced harassment or workplace violations deserve the right to speak about their experience without fear of retaliation," Faulk told Law360. "The Legislature recognized limitations in the scope of current law on nondisclosure agreements, which was narrowly focused on sexual assault and harassment."

"This bill expands worker protection," he added.

The Washington law voids all blanket NDAs and nondisparagement clauses entered as a condition of employment, no matter when they were signed.

Workers bound by NDAs or nondisparagement clauses signed after a dispute and who did not receive a financial settlement will be able to talk openly about their experiences and about any agreements to not talk about those settlements. In settlements with whistleblowers, employers will no longer be allowed to ask employees to sign confidentiality agreements.

The law does, however, have carveouts for settlement agreements where compensation has been paid to a worker. It also excludes confidentiality agreements concerning trade secrets, proprietary information or confidential information not involving illegal acts.

Going forward, employers can still make it a requirement that a worker who agrees to a settlement not disclose the settlement's monetary amount, but the employer cannot silence a worker from openly discussing any other aspects of the dispute or settlement.

Employers who still try to enforce such secrecy contracts in Washington state face a potential $10,000 fine or actual damages, whichever is greater, as well as the worker's attorney fees.

Law360 reached out to some of Washington's largest employers, including Microsoft, Amazon, Starbucks and Costco, about how they expect the new law will affect their businesses. Costco, Microsoft and Amazon declined to comment, while Starbucks did not respond to requests for comment.

Industry Pushback

Leading up to the law's passage, industry groups representing major employers in the state spoke out against the bill during the legislative process.

"There was a lot of pushback from the industries on the bill," Barnard said.

The Association of Washington Business, whose members include employers such as Boeing and Microsoft, and the Washington Retail Association, whose members include Walmart, Walgreens and Target, pushed for an alternative bill that would have continued to allow the practice of using confidentiality agreements in sexual assault and sexual harassment settlements between an employer and an employee.

They said the Silenced No More Act was confusing and repealed a recently enacted statute that stakeholders spent a long time working on.

The groups further argued that the Silenced No More Act is problematic because it permits an employee to discuss conduct that they may reasonably believe to be illegal, even when it's not. Since Washington's Department of Labor and Industries already handles employment issues, such as wage and hour disputes, the groups argued that the new law would be redundant.

The Washington Retail Association and the Association of Washington Business did not respond to requests for comment.

Navigating the New Law

The sweeping new law will require Washington employers to rethink NDAs.

Catharine Morisset, a Seattle-based partner at Fisher Phillips who represents local and national employers in litigation, said in a recent blog post that under the new law, any employment agreement — including those with former or prospective employees or independent contractors — is prohibited if it prevents the worker from talking openly about conduct that the worker reasonably believed to be illegal or a violation of public policy.

Employers should "exercise caution before even mentioning such obligations in any workplace investigation, hiring process (other than trade secrets protection), in workplace policies such as social media use, or at separation of employment," Morisset wrote.

Barnard said Washington's new law will also affect the common tech industry practice of requiring new hires — as a condition of employment — to agree not to talk about certain aspects of the employers' practices, potentially even unlawful practices. Come June 9, employers will no longer be able to require, or even request, that workers sign a blanket agreement barring them from disclosing unspecified confidential information. Any confidentiality clause in those agreements must be specifically tailored to not run afoul of the Silenced No More Act.

While more and more states pass laws curbing NDAs, it's up to multistate employers to decide whether they change their employment contracts nationwide to conform with Washington state law or leave those practices intact in states that still allow it.

Employment attorney Amy Kangas Alexander of Stokes Lawrence told Law360 that as with any provision in an employment contract, "multistate employers will likely balance the interests of consistency and uniformity with advantageous state law."

"On a settlement or severance agreement, employers should consider the circumstances of the particular employee or claim in addition to state law to decide whether to request confidentiality or nondisparagement restrictions," she said.

Last-Minute Settlements

The new law may result in a crush of last-minute settlements as its enforcement date draws near.

Alexander said that since existing severance and settlement agreements with a confidentiality or nondisparagement provision can still be enforced, "we may see an uptick in the settlement of claims before June 9."

"If companies have any litigation that won't settle without a nondisparagement or confidentiality requirement, then they should consider settling those before June 9," Alexander said.

She also noted that employees may find it to be more difficult to settle claims after June 9, given that companies frequently settle in order to preserve their reputations.

"Without the possibility of an NDA, employers may see less upside to settling claims," she said.

Alexander said employers may also be less inclined to offer severance, pointing out that "the nondisparagement and confidentiality provisions in severance agreements are sometimes aimed at reducing the workplace disruption of a nonamicable separation."

Advocates for Change

The law has some high-profile advocates.

Former Fox News host Gretchen Carlson and former Fox News contributor Julie Roginsky, who co-founded a nonprofit organization to eradicate NDAs following their own experiences bringing sexual harassment and retaliation lawsuits against the network's late CEO Roger Ailes, praised the Silenced No More Act.

They told Law360 in a statement that in addition to protecting victims, allowing them to seek justice publicly and hold their abusers accountable, Washington's law "also discourages bad behavior, because would-be predators know that they will no longer be protected by legal mechanisms that silence the colleagues they target."

Stephanie Van de Motter, a former whistleblower and the founder of the Silenced No More Foundation, told Law360 that the Silenced No More Act in Washington builds on the momentum of a version of the law's passage in California last year.

"Washington is now the second state to pass a version of this law that encourages workers to speak their truth in the face of inappropriate or illegal misconduct at work," Van de Motter said. "It also builds on the #MeToo-era legislation that basically says the nonsense stops here."

While Washington and California have passed Silenced No More Acts, other states, including New York, Illinois, New Jersey and Oregon, have enacted their own NDA-narrowing provisions that cover all forms of employment discrimination. Hawaii, New Mexico, Louisiana, Nevada, Tennessee, Virginia, Maryland and Vermont also have passed laws in recent years restricting the use of confidentiality agreements.

However, those laws' protections and scope vary wildly. For instance, in some states, like New York and California, NDAs are banned in employment settlements, but not if a complainant wants one.

Critics, including Carlson and Roginsky, argue that such carveouts still allow employers to pressure employees into opting for an NDA, silencing complainants. New York law also still permits NDAs in preemployment contracts and severance contracts.

Van de Motter noted that other states, including Maine, are considering NDA-narrowing legislation as well.

"We will keep going until every single state has enacted a version of the Silenced No More Act that creates a shift in workplace culture," she said.

Jessica Stender, senior counsel for workplace justice and public policy at the nonprofit Equal Rights Advocates, told Law360 that she sees promising signs.

Washington's adoption of these new workplace protections "is an important sign that legislators and the public are becoming more aware of the harm of NDAs, and it is an indicator that other states will similarly recognize the need for such protections," Stender said.

Nationwide Efforts

Workers' advocates aren't just pushing for every state to pass their own laws banning secrecy pacts between employers and employees. They're also pushing for a federal prohibition on the practice.

Carlson and Roginsky — who also advocated for a new federal law banning mandatory arbitration for sexual harassment and assault claims — told Law360 that they are "committed to expanding these protections at the federal level to include banning NDAs for toxic workplace issues and covering other discrimination including that based on race, LGBTQIA+ and age."

Stender said that given the strong bipartisan support for the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, she thinks there is momentum to pass additional reforms, including an effort underway in the Senate to bar certain nondisparagement or nondisclosure clauses from employment pacts.

"Our lawmakers are finally recognizing the importance of protecting workers from sexual harassment and discrimination of all forms," Stender said. "We need continued movement in this area to ensure that employers are truly held accountable and actually change their practices to ensure that abuses can no longer go unchecked in their workplaces." 

--Editing by Alanna Weissman and Kelly Duncan.

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