Prohibited Confidential Settlement Agreements

California’s Code of Civil Procedure contains several prohibitions on certain settlement agreements. Part 2, Title 14, Chapter 3.5 deals with confidential settlement agreements and, in Section 1001, provides that a provision within a settlement agreement that prevents or restricts the disclosure of factual information related to a claim filed in a civil action or a complaint filed in an administrative action regarding certain types of actions is prohibited.

The following types of actions are governed by this prohibition: sexual assault, sexual harassment, workplace harassment or discrimination, failure to prevent an act of workplace harassment or discrimination, retaliation against a person for reporting or opposing harassment or discrimination, harassment or discrimination, or retaliation against a person for reporting harassment or discrimination by the owner of a housing accommodation.

In addition, a court is prohibited from entering an order that restricts the disclosure of information in a manner that conflicts with the above prohibition. However, a provision that shields the identity of the claimant and all facts that could lead to the discovery of the claimant’s identity may be included within a settlement agreement at the request of the claimant (except in cases of a government agency or public official).

This subdivision does not apply if a government agency or public official is a party to the settlement agreement. Also, a provision within a settlement agreement that prevents or restricts the disclosure of factual information related to the specified claims is void as a matter of law and against public policy. Finally, the disclosure of the amount paid in settlement of a claim may be restricted.

Section 1002 provides that a provision within a settlement agreement that prevents the disclosure of factual information related to an action is prohibited in any civil action the factual foundation that establishes a cause of action for civil damages for specified actions.

The following types of actions are governed by this prohibition: felony sex offense; childhood sexual assault; sexual exploitation of a minor, or conduct prohibited with respect to a minor; and, sexual assault against an elder or dependent adult.

In addition, a court is prohibited from entering an order that restricts the disclosure of information in a manner that conflicts with the above prohibition. This prohibition does not preclude an agreement preventing the disclosure of any medical information or personal identifying information regarding the victim of the offense.

A provision within a settlement agreement that prevents or restricts the disclosure of factual information related to the specified claims is void as a matter of law and against public policy. An attorney’s failure to comply with the requirements of this section may be grounds for professional discipline.

Code of Civil Procedure Part 2, Title 14, Chapter 3.6 deals with agreements settling employment disputes. Section 1002.5 prohibits these agreements from containing a provision prohibiting, preventing, or otherwise restricting a settling party from obtaining future employment with the employer against which the aggrieved person has filed a claim.

This prohibition applies against any parent company, subsidiary, division, affiliate, or contractor of the employer, and an agreement that violates this section is void as a matter of law and against public policy. Nonetheless, an employer and aggrieved person can make an agreement to end an employment relationship, or limit future employment when the aggrieved person engaged in sexual harassment, sexual assault, or any criminal conduct.

This section defines the terms “aggrieved person,” “sexual assault,” and “sexual harassment.”