NDAs (Non-Disclosure Agreements) are in the news this week as it became public that Tiger Woods’ ex-girlfriend Erica Herman filed two separate complaints in Florida after their six-year relationship came to an end. The first suit was filed in October 2022 and alleges a trust owned by Woods violated Florida’s Landlord-Tenant law by essentially evicting Herman from the home she shared with Woods. Woods’ trust filed a motion to dismiss in response to Herman’s complaint, and in that motion cited the NDA between the two, stating it required “confidential arbitration in all disputes,” and that Herman’s lawsuit violates that agreement. While the Woods-Herman NDA is not publicly available, it is known to have been signed in August 2017, and Woods’ trust commenced arbitration against Herman based on the NDA. Herman asked the court in Florida to find the NDA invalid and unenforceable.
NDAs (aka “Confidentiality Agreements,” “Non-Disparagement Agreements”) have been used by businesses to seek to protect their important information, such as non-patented ideas or sensitive financial records, from competing companies for decades. The use of NDAs by high-profile individuals has come to light in recent years with multiple cases brought by former employees of Donald Trump and his companies to invalidate NDAs they signed. Laws on employee NDAs differ across states, and California courts have long enforced NDAs for certain confidential business, financial, and technical information as “trade secrets,” such as:
- client lists (Gordon v. Schwartz (1956), 147 Cal. App. 2d 213, 217);
- unpatented inventions (Sketchley v. Lipkin (1950) 99 Cal. App. 2d 849, 854);
- product plans and designs (Vacco Indus., Inc. v. Van Den Berg(1992) 5 Cal. App. 4th 34, 50);
- recipes and chemical formulas (Brescia v. Angelin (2009) 172 Cal. App. 4th 133, 151), and more.
California’s Civil Code Section 3426.1(d) adopted a modified version of the Uniform Trade Secrets Act and includes a definition of “trade secret” that protects a broad array of information, such as a formula, pattern, compilation, program, device, method, technique, or process, as long as:
- the information is not generally known outside of the owner’s organization and control;
- the owner derives economic value or business advantage by virtue of that secrecy; and
- the owner makes reasonable efforts under the circumstances to preserve its secrecy. Cal. Civ. Code § 3426.1(d).
Regarding confidential matters that touch on workplace harassment or discrimination, California NDA laws were strengthened last year with Senate Bill (SB) 331, known as the “Silenced No More Act,” which generally prohibits NDAs in settlement agreements involving workplace harassment or discrimination. SB 331 was intended to strengthen the 2018 California legislation SB 820, also known as the STAND (Stand Together Against Non-Disclosure) Act, which was passed in response to the #MeToo movement. SB820 was intended to address secret settlements used to cover up cases of sexual harassment involving high-profile executives as it prohibited the use of confidentiality provisions in settlement agreements for actions including claims based on sex. While the STAND Act allowed employees to discuss information relating to sexual harassment in the workplace, it still allowed employers to require NDAs for cases involving all other forms of discrimination, harassment, or retaliation. As a result, in situations with discrimination on both sex and race bases, the claimant could speak about the sex discrimination but be prohibited from discussing the race discrimination.
SB 331 sought to address this issue by amending Code of Civil Procedure Section 1001 (enacted as part of SB 820 in 2018) to expand the prohibition of confidentiality provisions for all acts of workplace discrimination or harassment, not only based on sex. This expansion includes acts based on race, religion, color, national origin, ancestry, disability, medical condition, familial status, sex, gender, age, and other protected characteristics. SB 331 also prohibits “non-disparagement” agreements or similar agreements required as a condition of employment or continued employment that deny an employee’s right to disclose information about unlawful acts in the workplace, unless the agreement includes a specific carve-out providing for the employee’s right to discuss workplace conduct the employee has “reason to believe” is unlawful. California’s Government Code was amended to 1) provide that any agreement that has the purpose or effect of denying an employee the right to disclose information about those acts is against public policy and unenforceable, and 2) bar severance agreements containing provisions preventing an employee from discussing unlawful acts in the workplace absent a similar carve-out specifying the employee’s ability to disclose such information based on a reasonable belief.
SB 331 did preserve the protection against disclosure of employer-employee settlement amounts. While employees may discuss the underlying facts of the case, employers can still prevent disclosure of the amount of money paid to settle the claim. Employers may still include non-disparagement clauses or similar provisions in agreements provided there is specific language stating the employee’s right to disclose information about unlawful acts in the workplace. Absent that language, the provision is against public policy and unenforceable. Lastly, SB331 does not alter the exception allowing claimants to maintain their own privacy. At the request of the claimant, a settlement agreement may still include a provision that shields the claimant’s identity and all facts that could lead to the discovery of their identity. This exception does not apply if a government agency or public official is a party to the settlement agreement.