NJ Governor Signs Law Banning Some Employment Non-Disclosure Agreements

In 2018, New Jersey legislators introduced companion bills S121 and A1242. The legislation was proposed in the wake of the #MeToo movement and sought to ban non-disclosure agreements arising from sexual harassment allegations.  The bills met with substantial approval by New Jersey lawmakers, and this March, Governor Phil Murphy signed the legislation into law as an amendment to New Jersey’s Law Against Discrimination.

Law Components

As enacted, this law prohibits an employer from enforcing a non-disclosure agreement if an employee has publicly revealed “sufficient details of the claim so that the employer is reasonably identifiable.” Thus, the law effectively prevents an employer from forcing any worker to stay silent about a claim of harassment or discrimination, even if the employee has not formally filed a lawsuit.

The law further states that any “provision in an employment contract that waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment shall be deemed against public policy and unenforceable.” This prohibition applies to any claims of this type brought under the New Jersey Law Against Discrimination or any other statute.  With regard to non-disclosure provisions in settlement agreement and releases, the law likewise prohibits the inclusion of provisions designed to conceal the details “relating to a claim of discrimination, retaliation, or harassment.”

As of March 18, 2019, such non-disclosure provisions are unenforceable against a current or former employee. Notably, the law does not apply retroactively. Thus, only existing employment contracts or settlement agreements “entered into, renewed, modified, or amended on or after the effective date” are covered. Additionally, the law does not alter or affect the terms of any employee or employer covered by a collective bargaining agreement.

Guidance for Employers

Critics of this law suggest that it will likely lead to litigation regarding the enforceability of jury-waiver provisions and agreements to arbitrate Law Against Discrimination claims against an employer. While these provisions may be construed as waivers of substantive and/or procedural rights, which are unenforceable under the new law, critics suggest this portion of the law may conflict with the Federal Arbitration Act, which specifically preempts state laws prohibiting the use of arbitration agreements.

In light of this recent amendment, employers are encouraged to review their policies and procedures regarding complaints of harassment and discrimination and the employer’s handling of same.  Additionally, employment and severance agreements may need to be modified in order to remain legally enforceable and not contrary to public policy. By law, future employment or settlement agreements will need to include a clear and bolded notice setting forth when a non-disclosure provision does not apply.

If you have questions about the new law and its effects, contact me at ngrzeskowiak@hoaglandlongo.com or call 732-545-4717 today.