Utah Enacts H.B. 55, Impacting the Use of Confidentiality Clauses in Employment Settlement Agreements
On March 13, 2024, Governor Spencer Cox signed House Bill (H.B.) 55 into law, making Utah the latest state to restrict the use of certain nondisclosure and non-disparagement agreements relating to sexual assault or sexual harassment claims.
The new law applies to any agreement between an employee or former employee and employer that prevents or has the effect of preventing the employee from discussing sexual assault, allegations of sexual assault, sexual harassment, or allegations of sexual harassment. Likewise, the law applies to agreements that prohibit or have the effect of prohibiting an employee or former employee from making a negative statement about his or her employer relating to the same.
Under the statute, these types of agreements are void unless the employee requests confidentiality. This change aims to promote transparency and accountability in the workplace, ensuring that instances of misconduct are not hidden by employers. Similar bills have been passed in recent years in other states, including Arizona, California, Maryland, New Jersey, New York, and Washington, to name a few.
This law also voids certain confidentiality clauses contained in employment agreements. Specifically, confidentiality clauses regarding sexual misconduct that are required to be signed as a condition of employment are against public policy and are void and unenforceable.
An employer seeking to enforce a confidentiality clause voided by the law is not entitled to receive monetary damages from an employee’s breach of the clause and moreover will be liable for the attorney’s fees of the defending employee.
Likewise, H.B. 55 prohibits employers of any size from retaliating against an employee for: (1) making an allegation of sexual harassment or assault, or (2) refusing to enter into an agreement or employment contract that contains such a nondisclosure or non-disparagement clause.
H.B. 55 adds Section 34A-5-114 to Utah’s Antidiscrimination Act and has a retrospective application to January 1, 2023, meaning that any covered agreements entered into after that date cannot be enforced. The Utah Antidiscrimination Act covers Utah Employers with 15 or more employees. However, as set forth above, the language of the anti-retaliation provision extends to employers of any size.
Utah employers should be careful to review any settlement agreements, employment agreements, or similar agreements entered into with employees that have an effective date of January 1, 2023, or later for compliance with the statute.
