Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR Duhigg
LAST UPDATED
ORIGINAL DATE 2/23/2025
SHORT TITLE Prohibit Certain Employment Agreements
BILL
NUMBER Senate Bill 324
ANALYST Hanika-Ortiz
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
Courts
Indeterminate
but minimal
Indeterminate
but minimal
Recurring General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Sources of Information
LFC Files
Agency Analysis Received From
New Mexico Attorney General (NMAG) Administrative Office of the Courts (AOC)
SUMMARY
Synopsis of Senate Bill 324
Senate Bill 324 (SB324) amends Section 50-4-36 NMSA 1978 (Employment Law) to prohibit
employers from including sexual act in nondisclosure and non-disparagement clauses in
settlement agreements with private employers.
Under Section 1, an employer shall not, as a condition of employment, require a prospective,
current, or former employee or independent contractor to sign a nondisclosure or non-
disparagement provision of a settlement agreement from a claim of sexual assault, sexual
harassment, sexual discrimination, or sexual retaliation or prevent that person from disclosing a
claim. The bill allows exceptions in confidentiality provisions for monetary awards, underlying
facts of the case, or for facts that could lead to the identity of the employee or contractor.
Section 1 adds several subsections: E) allows the plaintiff (victim) to present evidence that the
employer (defendant) entered into an agreement with a nondisclosure or non-disparagement
clause, and such evidence may be used to support punitive damages; F) makes such clauses
unenforceable if agreed to before the claim and if alleged to violate the law; G) invalidates any
pre-dispute arbitration agreement or joint-action waiver for the claim if filed under state, federal,
or tribal law, and that relate to the claim; and H) requires the statute to be liberally construed.
Section 2 applies the provisions to settlement agreements between a private employer and a Senate Bill 324 – Page 2
prospective, current, or former employee or independent contractor on or after June 20, 2025.
This bill does not contain an effective date and, as a result, would go into effect 90 days after the
Legislature adjourns if enacted, or June 20, 2025.
FISCAL IMPLICATIONS
AOC commented it would incur minimal administrative cost for updating, distributing, and
documenting statutory changes. Any additional fiscal impact on the judiciary would be
proportional to the enforcement of this law and challenges to disclosure or nondisclosure, as well
as challenges to the law. New laws, amendments to existing laws, and new hearings have the
potential to increase caseloads in the courts, requiring additional resources to handle the increase.
SIGNIFICANT ISSUES
The bill adds non-disparagement clauses, which NMAG contends bar discussion of the
underlying misconduct. In addition, the material expands the purview from “employees” and
prevents an employer from requiring prospective or former employees, as well as independent
contractors, to agree to these provisions. Additionally, the bill adds claims of workplace sexual
assault.
Further, with regards to the new material that invalidates certain arbitration clauses, according to
NMAG, this may be preempted by the relevant portion of the Federal Arbitration Act (FAA), 9
U.S.C. Section 2, which prevents the singling out of arbitration provisions for unenforceability.
PERFORMANCE IMPLICATIONS
AOC noted, in 2022, the president signed the federal Speak Out Act (S. 4524) into law. The act
prohibits the enforcement of nondisclosure and non-disparagement clauses in predispute
agreements in sexual harassment or sexual assault cases, for employees and independent
contractors. The act does not apply to agreements for claims entered into after a dispute arises.
TECHNICAL ISSUES
Both AOC and NMAG comment that the proposed amendment to subsection D that says “except
as provided in Subsections B and Subsection C, a confidentiality provision in a settlement
agreement subject to this section is void and unenforceable...” Section D, as amended, states only
that, “except as provided in Subsection C…” However, there are no confidentiality provisions in
Subsection C, as amended, and this appears to contradict and negate confidentiality provisions in
Subsection B, as amended. Perhaps the drafter meant “except as provided in Subsection B.”
Neither the bill nor statute contain a definition for or describe “non-disparagement” or “non-
disparagement clause,” terms which AOC thought may be best to define so there is no confusion
as to whether statements that are true but still damaging constitute disparagement under laws.
OTHER SUBSTANT IVE ISSUES
As NMAG explains, Subsection E allows for the use of previous nondisclosure agreements and
could result in the divulgement of settlement agreements from before the effective date of the Senate Bill 324 – Page 3
bill. s allows be a serious concern, the NMAG said, given that the bill likely serves a legitimate
public purpose the use of previous nondisclosure agreements (NDA) in civil actions, would
result in divulging settlement agreements made before the bill’s effective date, creating a conflict
with Section 1, Article, 10 of the U.S. Constitution. “However, this may not be such a serious
concern given that the bill likely serves a legitimate public purpose and may be deemed
‘reasonable and necessary’ for that purpose.” Also from NMAG:
Additionally, the bill applies to claims made under “federal, tribal, or state law.”
However, the bill would only be applicable to contracts interpreted under New Mexico
state law and disputes heard in New Mexico courts. If a dispute concerns a violation of
tribal law, heard by a tribal court, then it is very likely that circumstances of the contract
itself would require it to be interpreted according to the law of the relevant tribe. Under
those circumstances, the bill would not be applicable.
AMENDMENTS
As suggested by AOC, NMAG (see “Technical Issues”):
1) Amend Section 1(D) to include both Subsections B and C.
2) Define either one or both of the terms “non-disparagement” and/or “non-disparagement
clause” as used in Section 50-4-36 NMSA 1978.
AHO/rl/hg