New Washington Statute Impacts Settlement Agreements in Employment Disputes and Limits Scope of Nondisclosure Agreements

A significant statutory update regarding the resolution of employment-related claims, disputes and lawsuits, RCW 49.44.211, went into effect on June 9,  2022.  The new law amends the 2018 law prohibiting employment agreements from including non-disclosure provisions related to details or allegations of sexual harassment and assault.

The amended statute now applies to settlement agreements and independent contractor agreements, in addition to employment agreements.

Importantly, it also significantly expands the scope of conduct which cannot be shielded by a non-disclosure clause.  Non-disclosure clauses in settlement agreements can no longer apply to “any conduct the employee reasonably believed under Washington state, federal, or common law to be illegal discrimination, illegal harassment, illegal retaliation, a wage and hour violation, or sexual assault, or that is recognized as against a clear mandate of public policy.”

More particularly, the law provides that:

“[a] provision in an agreement by an employer and an employee not to disclose or discuss conduct, or the existence of a settlement involving conduct, that the employee reasonably believed under Washington state, federal, or common law to be illegal discrimination, illegal harassment, illegal retaliation, a wage and hour violation, or sexual assault, or that is recognized as against a clear mandate of public policy, is void and unenforceable.  Prohibited nondisclosure and nondisparagement provisions in agreements concern conduct that occurs at the workplace, at work-related events coordinated by or through the employer, between employees, or between an employer and an employee, whether on or off the employment premises. Prohibited nondisclosure and nondisparagement provisions include those contained in employment agreements, independent contractor agreements, agreements to pay compensation in exchange for the release of a legal claim, or any other agreement between an employer and an employee.”

RCW 49.44.211(1).   The law specifically notes that it does not prohibit “enforcement of a provision in any agreement that prohibits the disclosure of the amount paid in settlement of a claim.”  RCW 49.44.211(2).  It also does not prohibit an employer and an employee from protecting trade secrets, proprietary information, or confidential information that does not involve illegal acts.  RCW 49.44.211(6).

Given the accompanying private right of action, which includes minimum damages of $10,000 plus attorney’s fees, employers likely should carefully review the scope of any non-disclosure agreements in their employment agreements and settlement agreements.

Michael Chait

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