On March 18, 2019, Governor Murphy officially signed S-121 into law that makes any provision in an employment which waives any substantive or procedural right of an employee unenforceable as against New Jersey public policy. Under the new law, New Jersey employers will no longer be able to conceal the underlying details of sexual harassment and other claims of discrimination through the use of non-disclosure or confidentiality provisions in settlement agreements. The new Non-Disclosure law also protects employees from being retaliated against for not entering into any agreement or contract that requires them to waive their substantive or procedural rights.
The Non-Disclosure bill will apply to all workplace discrimination claims alleged or brought under the New Jersey Law Against Discrimination. The New Jersey Law Against Discrimination prohibits workplace discrimination on the basis of protected traits such as gender, disability, race, national origin and other protected classes of people. It also prohibits employers from retaliating against employees who oppose discrimination or participate in harassment investigations. Finally, it makes employers responsible for the harm caused to employees who are forced to work in a hostile work environment.
The Non-Disclosure bill is being touted a significant win for New Jersey employees’ rights and the #MeToo movement. The law was sponsored by Senators Loretta Weinberg and Nia Gill an Assembly members Valerie Vainieri Huttle, John F. McKeon and Jon M. Brammick. The law will not be administered retroactively. Instead, it will only apply to employment contracts that are entered into, renewed, modified or amended on or after the law’s March 18, 2019 effective date. This means any contract to arbitrate or settlement agreement requiring the underlying claims of lawsuit to be confidential signed before March 18, 2019 can still be enforced by an employer against an employee.
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 UNENFORCABLE AGAINST THE EMPLOYER IF THE EMPLOYEE PUBLICALLY REVEALS SUFFICIENT DETAILS OF THE CLAIM SO THAT THE EMPLOYER IS REASONABLY IDENTIFIABLE
One thing to keep an eye on is how New Jersey and federal courts will reconcile the new Non-Disclosure bill along with the Federal Arbitration Act. While the Non-Disclosure bill invalidates arbitration agreements made after March 18, 2019, the Federal Arbitration Act preempts state laws that govern the procedures of arbitration. Plaintiff employment lawyers will point to the Federal Arbitration Act’s provision providing the state the right to determine the enforceability of contracts and that New Jersey’s public policy is against forcing employees to waive statutory rights.
The Non-Disclosure bill expressly excludes non-competition agreements made during or after the employment as a clause that is still permitted to be agreed upon by the employer and employee. The law also excludes agreements in which the employee agrees to not disclose proprietary information of the employer such as non-public trade secrets, business plans and customer information.
The impact of the new law on the motivation of employer’s to settle cases of sexual harassment or fight them in a public court remains to be seen. It is routine that employers require confidentiality as a material term of any settlement agreement in cases of discrimination, harassment or retaliation. Some New Jersey employment attorneys argue that the Non-Disclosure law will result in increased litigation by not allowing settlements of sexual harassment cases be confidential. They believe that employers will have less incentive to resolve discrimination lawsuits if the plaintiff cannot be silenced concerning the underlying allegations of the claim. Others contend that this concern is overstated because the employer still must choose between entering into settlement that ends the case or having a public trial that will shed more public scrutiny to the underlying facts.
No matter what, the Non-Disclosure bill is clearly a game-changer and will change the way that sexual harassment and discrimination claims are litigated and negotiated by New Jersey employment attorneys.