California bill would ban NDAs for legislative negotiations: ‘This should not happen again’

Nondisclosure agreements would be banned from future discussions or negotiations on legislation in California under a new bill, slated to get its first hearing this week at the state Capitol.

Assemblyman Vince Fong, R-Bakersfield, authored the legislation.

Nondisclosure agreements are legally binding contracts that prevent information-sharing with unauthorized parties. They are typically used to protect proprietary information, financial data or other sensitive information.

The introduction of the bill was prompted by the use of NDAs during negotiations between fast food industry and labor groups over a landmark deal to raise California’s minimum wage for fast food workers to $20 per hour.

“It’s unacceptable,” Fong said in an interview. “Transparency is the foundation of our democracy. We need transparency to build trust and confidence in how laws are being made.”

Fong pointed to questions around which food establishments the new law, which took effect April 1, applies.

A complicated carveout regarding bread “produced” and baked onsite led to reports that the law would not apply to Panera franchises, including those owned by a billionaire Newsom donor. The governor’s legal team later said Panera is not exempted from the law because its bread is not produced, or mixed, on-site.

Fong said the use of NDAs, first rreported by KCRA, left many of those questions unanswered in the first place.

“Who asked for that carveout? How did it transpire? This should not happen again,” Fong said in an interview with The Sacramento Bee. “If there’s legislation crafted that’s going to impact every single Californian, we need to ensure it’s transparent and NDAs are not used to shield important information.”

The Bakersfield Republican said that during his more than two decades of work on public policy at the state and federal levels, he had “never heard of the use of NDAS until now.”

His bill would invalidate future legislation that is crafted using signed non-disclosure agreements.

As an amendment to the state’s Political Reform Act, the bill needs support from two-thirds of lawmakers and the governor to become law.

Asked whether he believes the proposal can reach that level of support, Fong said it’s “a question for legislative Democrats and the governor. Do they value transparency? Do they endorse the use of NDAs to shield information from the public and the legislature?”

Assembly Speaker Robert Rivas did not respond to a request for comment.

A spokesperson for Gov. Gavin Newsom said the bill “wouldn’t change anything for our office.”

“The Governor’s office doesn’t sign NDAs, for legislation or anything else,” Newsom spokesman Alex Stack wrote in an email. “Having said that, we typically don’t weigh in on hypothetical or pending legislation.”

The California Chamber of Commerce has already coming out against the bill. In a letter to Fong Friday, the business group said California law already “ensures transparency” and that NDAs are “critical to allowing frank discussions around complicated issues.”

The bill will force state lawmakers to decide whether nondisclosure agreements have a place in future legislative negotiations.

“NDAs have a role in litigation [and are used] to protect financial or proprietary data and trade secrets in corporate disputes,” said Chris Micheli, an adjunct professor at the McGeorge School of Law at University of the Pacific and a longtime Sacramento lobbyist. “The question raised here is: is it inappropriate to use them in the lawmaking process?”

Micheli, like Assemblyman Fong, added that he had never heard of NDAs being used in legislative negotiations during his roughly 30 years of lobbying.

Fong’s bill will be heard in the Assembly Elections Committee on Thursday.