New Jersey Has Outlawed Confidentiality Provisions In Employment Discrimination Settlements

Written by: Jacqueline Voronov, Esq. and Jeff Daitz, Esq.

That’s right! Effective March 18, 2019, employment contracts, discrimination, harassment or retaliation related settlement agreements can no longer contain non-disclosure agreements (“NDAs”) against the employee if it has the “purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment…” This warrants repeating-provisions in any employment contract or settlement agreement that have the purpose or effect of concealing the details of a discrimination, retaliation or harassment claim are deemed against public policy and unenforceable against the employee. This applies regardless of whether the employee agreed to – or even requested – such confidentiality.

Below is a synopsis of the key provisions of the Non-Disclosure law and its impact on New Jersey employers:

Restriction on Enforcement of NDAs

Employers thinking about resolving a sexual harassment or discrimination claim confidentially better think again. As drafted, an employer that seeks to resolve a claim under the New Jersey Law Against Discrimination (“NJLAD”) would be unable to enforce any confidentiality or non-disclosure provisions in settlement agreement whether as part of a litigation or pre-suit negotiation. However, if the employee “publicly reveals sufficient details of the claim so that the employer is reasonably identifiable,” the non-disclosure provision will also become unenforceable against the employer.

Notice Requirement

The law also requires that any settlement agreement of claims of discrimination, retaliation or harassment between and employee and employer must have a bold, prominently placed notice that reads:

ALTHOUGH THE PARTIES MAY HAVE AGREED TO KEEP THE SETTLEMENT AND UNDERLYING FACTS CONFIDENTIAL, SUCH A PROVISION IN AN AGREEMENT IS UNENFORCEABLE AGAINST THE EMPLOYER IF THE EMPLOYEE PUBLICLY REVEALS SUFFICIENT DETAILS OF THE CLAIM SO THAT THE EMPLOYER IS REASONABLY IDENTIFIABLE.

Employees who enter into such agreements are thus given fair warning that if they disclose details about their claims that render the employer “reasonably identifiable,” the employees can no longer enforce the non-disclosure provision against the employer, and the employer is free to discuss the matter publicly as well.

The Law Goes Into Effect Immediately

The law was signed on March 18, 2019 and went into effect immediately. It applies to all contracts and agreements entered into, renewed, modified, or amended on or after the date the law took effect. Agreements entered into before March 18, 2019 will not be affected.

Prohibition on Waivers

Provisions in employment contracts that waive any substantive or procedural right or remedy relating to a claim of discrimination, retaliation or harassment will be deemed against public policy and unenforceable. Therefore, the bill would prohibit employers from requiring employees to sign mandatory arbitration agreements to the extent they encompass claims of discrimination, retaliation, or harassment. Whereas similar laws in other states (such as New York) prohibit mandatory pre-dispute arbitration of sexual harassment claims, the New Jersey bill extends such protections to all claims of discrimination, retaliation, and harassment.

One thing to keep an eye on is how New Jersey and federal courts will reconcile the new law with the Federal Arbitration Act. Though the statutory language stops short of an outright ban on arbitration agreements for certain employment related claims, language that constitutes a functional blanket ban on agreements to arbitrate will surely raise preemption issues with the Federal Arbitration Act. For employers with mandatory arbitration agreements, this is a game changer.

Carve Outs for Non-Competes and Non-Disclosure Agreements

Nothing in the law prevents employers from requiring employees to sign agreements not to enter into competition with the employer (either during or after employment) or to disclose the employer’s proprietary information.

Anti-Retaliation Provision

The Act provides a separate cause of action for an employee who is retaliated against for refusing to enter into any settlement agreement which requires a non-disclosure provision which is enforceable against the employee, relating to a claim of discrimination, retaliation, or harassment. Further, a prevailing plaintiff who brings such a claim shall be awarded reasonable attorney fees and costs.

Suffice it to say, the new Non-Disclosure law will dramatically change the way that sexual harassment and discrimination claims are litigated and negotiated by New Jersey employment attorneys going forward. Employers are strongly encouraged to review any employment contracts, handbooks, arbitration provisions, severance agreements and other agreements to ensure compliance with these changes. Hall Booth Smith, P.C. attorneys are available to answer any questions you may have on this or other employment law issues.