Effective March 18, 2019, New Jersey significantly diminished the ability of parties to enter into non-disclosure provisions in resolving workplace discrimination, harassment, and retaliation claims under the state’s Law Against Discrimination (“NJLAD”). This Client Alert describes the amendments to the NJLAD and their implications to businesses.
The Changes to the NJLAD
First, the law prohibits on public policy grounds the enforcement of a non-disclosure provision against a current or former employee in a settlement agreement or employment contract where the provision has the “purpose of concealing the details relating to a claim of discrimination, retaliation, or harassment.” The law further requires settlement agreements resolving employee discrimination, harassment, or retaliation claims to include a “bold, prominently placed notice that 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.” It appears that the employee will have the right to disclose details of the dispute, irrespective of a confidentiality provision, whereas the employer can only discuss related information if the employee provides enough public information that the employer’s identity is “reasonably identifiable,” which is an undefined term. This provision does not impact non-compete agreements or agreements intended to protect an employer’s proprietary information. This provision also does not appear to apply retroactively.
Second, the law renders unenforceable any provision in an employment contract that purports to waive “any substantial or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment.” The law also prohibits prospective waivers of any right or remedy under the NJLAD “or any other statute or case law.” These provisions will most likely impact an employer’s ability to seek enforcement of an arbitration agreement with current or former employees. It does not apply to collective bargaining agreements.
The law prohibits retaliation against employees that refuse to enter into non-disclosure agreements and permits the award of attorneys’ fees and costs, as well as whatever remedies would be available in a common law tort action.
The Larger Picture
This legislation reflects an overall trend in many jurisdictions to curtail parties’ abilities to enter into confidential settlements for harassment claims or to otherwise take steps that are perceived as “silencing the victim.” Unlike certain other jurisdiction’s laws with similar prohibitions, New Jersey’s extends beyond sexual harassment claims to all claims under NJLAD such as race, religion, and disability. While the impetus for these legislative changes has been in large part a response to incidents where egregious harassment has been concealed and the attention given to such actions through the #metoo and other movements, both employee and employer advocates have expressed concern that this type of legislation will discourage mutually agreeable resolutions because of the benefits of confidentiality. However, at this time, given the newness of these types of laws, no significant study as to their impact on workplace discrimination lawsuits has been published.
1. Employers should immediately review template employment agreements to conform with the new law. This review should not be limited to settlement agreements, but should also include employment agreements and other start-of-employment documentation that has historically contained non-disclosure obligations. The review should also include non-disparagement language in agreements to ensure that such language conforms with the new requirements.
2. Employers should be aware of the constraints on confidentiality in evaluating potential resolution of pending or active litigation of NJLAD claims.
3. Employers with arbitration agreements should monitor developments with respect to the second part of the law purporting to render unenforceable contracts that waive certain substantial or procedural rights. There is skepticism that this law can invalidate the enforceability of arbitration agreements subject to the Federal Arbitration Act, but there will likely be renewed litigation testing the enforceability of such arbitration agreements until this issue is settled.
Employers should take appropriate measures to ensure they are in compliance with this new law.
Please feel free to contact Chuck Ercole
or 215.569.4282; Jonathan S. Krause
or 215.569.4496 if you have any questions regarding these changes. Special thanks to Augusta M. O’Neill
for her contributions to this Client Alert.
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