SB 820 & SB 1300

On September 30th, Governor Brown approved several bills related to workplace harassment, gender discrimination, and retaliation claims inspired by the #MeToo and #TimesUp movements. These bills impact California employers in pre-litigation and litigated claims.

SB 820 Prohibits Non-Disclosure Provisions in Settlement Agreements

One of the main targets of the #MeToo movement was the California Legislature because of its practice of entering into confidential settlement agreements pertaining to harassment and discrimination claims. The Legislature responded by enacting this statute, which prohibits non-disclosure provisions or “secret settlements” in sexual assault, sexual harassment, gender discrimination, and retaliation claims. A settlement agreement executed on or after January 1, 2019 that includes a prohibited non-disclosure provision will be considered against public policy and void as a matter of law.

The ban on non-disclosure provisions applies to settlements of civil and administrative claims, including claims under the Fair Employment and Housing Act (FEHA) for sexual harassment, gender discrimination, and failure to prevent or retaliation for reporting such acts. The law also applies to claims for sexual assault and sexual harassment between parties in a business, service, or professional relationship under Civil Code § 51.9. There are two exceptions to the ban: (1) the parties may agree to preclude disclosure of the amount paid in settlement, and (2) the claimant may request that his or her identity be shielded. However, these provisions do not apply if a government agency or public official is a party to the agreement. This aspect has an arguably unfair impact on individual defendants, since they cannot shield their identity even if the claims against them are unproven or frivolous.

Confidentiality in settlement agreements (apart from those subject to the Public Records Act) has been an important tool in resolving disputed claims. Employers are justifiably concerned about “copycat” claims based on a belief that there is easy money to be had. Many claims and lawsuits of the type subject to this restriction are settled well before any definitive finding of fact, for a variety of reasons not tied to liability. This statute curtails the benefit defendants may realize by early settlement, particularly individuals who are accused of the subject acts and challenge the viability of the claims. We can expect to see more sexual harassment, discrimination, and retaliation claims proceeding to trial in order to protect the reputation of the accused individuals and entities.

SB 1300 Limits the Opportunity for Dispositive Motions, Extends Employer Liability, and Severely Limits the Ability of Employers to Recover Fees and Costs

This statute consists primarily of legislative approval or rejection of several case law opinions on harassment. Of most concern to California employers is the language that states that a single incident of harassing conduct toward the plaintiff can meet the threshold showing that the harassment was likely motivated by a category protected by the FEHA (race, age, gender, sexual orientation, religion, disability, etc.). We should expect every opposition to a motion for summary judgment in harassment cases to include this quote from the new statute: “Harassment cases are rarely appropriate for disposition on summary judgment.”

The statute also extends liability for the acts of non-employees toward employees, applicants, unpaid interns or volunteers, or persons providing services pursuant to a contract for all types of harassment covered by the FEHA. Previously, this was limited to sexual harassment.

Prior to the passage of this bill, the language of the FEHA pertaining to an award of attorney’s fees and costs to a prevailing party appeared to apply evenly to plaintiffs and defendants. Over the years, case law interpreted that language to hold that a prevailing defendant may only recover fees if the court finds the plaintiff’s case to be frivolous. In 2015, the California Supreme Court held that a prevailing defendant may not recover its costs under Code of Civil Procedure § 1032 unless it proves the FEHA claim was frivolous and that the plaintiff continued to litigate it after it clearly became so. SB 1300 codifies these holdings. In addition, it eliminates the benefit of filing an offer under § 998 of the Code of Civil Procedure by stating that even if a § 998 offer is made, a prevailing defendant still must prove that the FEHA claim was frivolous.

The Takeaway

Harassment based on FEHA-protected categories is unlawful, and employees should not be subject to such conduct. Some claims of harassment are clearly true, and others are clearly not true. The vast majority fall into the grey area in the middle. Employers and individual defendants in grey areas or questionable claims may now be motivated to take the case to trial rather than settle and face media spin if a settlement agreement is made public. However, the cost of doing so is significant and a prevailing defendant has little chance of recovering its costs and fees, while a losing plaintiff faces no financial repercussion. A claim that survives a motion for summary judgment will almost never be found to be frivolous, even if the plaintiff does not ultimately prevail.

It remains to be seen whether these statutes will have the effect on litigation that the drafters intended.

Article authored by Litigation Attorneys,

Courtney de Groof & Jill Schubert