New Jersey lawmakers have introduced a bill that will prohibit an employer from requiring that victims of discrimination, retaliation and harassment to keep their claims confidential as part of a settlement. Employers routinely require that non-disclosure provisions are included as a material term of any settlement agreement in cases of sexual harassment and other employment discrimination. Bill No. 121, if passed, will render any confidentiality provision contained in a settlement agreement as unenforceable.
Earlier this year, the federal government passed the Tax Cuts and Jobs Acts (“TCJA”). In an apparent response to the #MeToo movement, the TCJA included a provision that prohibits employers from taking a deduction for attorney fees’ and costs that are incurred in any sexual harassment or sexual abuse case if the settlement agreement includes a non-disclosure provision. While this provision was clearly aimed at curbing the use of the non-disclosure provisions in sexual harassment lawsuits, it did not prohibit the use of non-disclosure provisions all together. Under TCJA, an employer can still require a victim of sexual harassment or abuse to keep any settlement of his or her claim confidential if they are willing to forgo the tax deduction.
Bill No. 121 takes it much further by making any confidentiality provision in any settlement agreement that attempts to conceal discrimination, retaliation, or sexual harassment, null and void. Under the bill, an employer must include a prominent notice that the clause is unenforceable if they choose to add it to any settlement agreement. The bill also prohibits an employer from taking any retaliatory action against an employee who refuses to sign an employment agreement that contains any illegal non-disclosure clause.