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House Introduces Legislation Restricting Confidentiality Provisions in Settlement Agreements


federal restrictive covenant legislationLast week, in connection with a House Oversight hearing, Representative Carolyn Maloney (D-N.Y.) introduced legislation to restrict confidentiality provisions from covering claims of discrimination, harassment, and retaliation. The “Accountability for Workplace Misconduct Act,” H.R. 8146, appears to be a federal effort to expedite the state-level trend to exempt discrimination, harassment, and retaliation information from confidentiality restrictions.

Over the last decade, lawmakers at the state and federal level have introduced and passed legislation designed to limit the reach of confidentiality provisions in certain circumstances. Those modifications include:

  • The Defend Trade Secrets Act of 2016 (“DTSA”) (Federal) – As we have extensively covered, the DTSA created a federal cause of action for trade secret misappropriation and protects individuals from civil liability for disclosing a trade secret if the disclosure is made in confidence to a governmental official or attorney and for the purpose of reporting a violation of law. This extension of immunity has been used to protect individuals who disclose alleged trade secrets to their counsel. The DTSA also contains a provision that requires a notice of immunity for a plaintiff to recover exemplary damages and attorneys’ fees.
  • The Stand Together Against Non-Disclosures Act of 2018 (“STAND Act”) (California) – This Act prohibits in settlement agreements only a confidentiality provision that restricts the disclosure of factual information related sexual assault, sexual harassment, discrimination, or retaliation for reporting harassment or discrimination based on sex.
  • The Silenced No More Act (California (2021) and Washington (2022)) – California and Washington pass legislation that prohibits non-disclosure and non-disparagement provisions that cover any conduct that an employee reasonably believes to be illegal discrimination, harassment, retaliation, a wage-and-hour-violation, sexual assault, or conduct that is recognized as against a clear mandate of public policy. Both states also authorize a cause of action against any employer who enters into a prohibited agreement.

Like the STAND Act, the bill limits its coverage to non-disclosure provisions in settlement agreements, so it would not impact confidentiality agreements outside the settlement context. Unlike the STAND Act, as presently drafted, the bill would invalidate a confidentiality provision for the following reasons:

  • No carve-out for government disclosures – the confidentiality provision cannot prohibit a party from disclosing information to the government or law enforcement relating to conduct that is unlawful or that the employee believes to be unlawful
  • No communication about government carve-out – the employer must communicate that the agreement does not restrict disclosures to the government or law enforcement for unlawful conduct or conduct the employee believes to be unlawful
  • Confidentiality agreement requires pre-disclosure notification – the confidentiality provision cannot require that the employee notify the employer before disclosing specified information to the government or law enforcement
  • No notification – the employer must include the following disclaimer: ‘‘Nothing in this agreement prevents you from disclosing information to Congress, a Federal, State, or Local government entity, or law enforcement about behavior you reasonably believe constitutes harassment, discrimination, or retaliation”
    • It seems that this disclaimer should satisfy the notification obligation
  • Consideration period – the agreement must provide a 21-day consideration period and 7-day revocation period, which mirror the non-reduction in force consideration periods in agreements containing Age Discrimination in Employment Act releases
  • No interference – in the most concerning provision, the bill would invalidate confidentiality restriction if the employer “engages in behavior to intimidate, hinder, obstruct, impede, retaliate against, or otherwise discourage an employee subject to a non-disclosure agreement” from communicating with the government or law enforcement

In addition to these potential avenues to invalidate a non-disclosure provision, the bill also includes requirements for employers to establish specified processes for receiving and investigating alleged discrimination, harassment, and retaliation, as well as empower the Equal Employment Opportunity Commission to investigate alleged violations of reporting procedure requirements.

The bill is also notable for what it does not address. The proposed legislation does not impact non-disparagement provisions, nor does it affect confidentiality provisions that are not included in settlement agreements.

We will continue to monitor this and other pending legislation at the federal and state level.



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