On the heels of the #MeToo movement and countless sexual-harassment scandals that have spread across industries, states including New York, Florida, and California have responded by enacting or considering laws to create additional workplace protections for employees. New Jersey has joined the march, passing its own legislation which renders non-disclosure agreements against public policy and unenforceable as they relate to discrimination, harassment, and retaliation claims. New Jersey Governor Phil Murphy signed the legislation on March 18, 2019, effective immediately. This advisory provides guidance on what the bill says, its potential impact, and what companies can do to comply.
The Crux of the New Law
As enacted, the bill prevents any employer from enforcing a non-disclosure agreement if an employee “publicly reveals sufficient details of the claim so that the employer is reasonably identifiable.” Importantly, while non-disclosure provisions are often used in settlement agreements, the law is not limited only to those circumstances – to the contrary, it expressly applies to any employment contract between an employer and an employee except for collective bargaining agreements. In essence, even if litigation has not been formally instituted, a company would not be able to force any worker to stay silent about his or her harassment or discrimination claim and can make the identity of his or her employer known. While the bill allows a settlement agreement to contain non-disclosure language, it would also need to provide a “bold, prominently placed notice” advising as to when the clause is not enforceable. Employers would also be prohibited from adversely affecting or changing the terms of a person’s employment – or failing to hire that individual – if he or she refuses to sign a non-disclosure agreement.
The bill likewise bars “provisions in employment contracts that waive” prospective “rights or remedies” available to an employee under the New Jersey Law Against Discrimination.
An employee may bring suit within two years of a violation of this law and, if he or she prevails, may be entitled to attorneys’ fees and costs.
Potential Concerns Under This Legislation
Despite its well-intended aims, critics of the legislation – both plaintiffs’ side and defendants’ side – warn that depriving employers of the ability to prevent an employee from divulging information may deter them from settling claims all together. In turn, employees would be forced to engage in protracted litigation without any guarantee of recovery and it would further bloat an already congested court docket. Likewise, prohibiting waivers of rights and remedies could be problematic in the context of arbitration agreements as the Federal Arbitration Act, which requires enforcement of arbitration agreements, may preempt any conflicting state law.
Guidance for Employers
Though the law is still in its infancy, companies should review their employee discrimination policies and internal complaint procedures, as well as any non-disclosure agreements used to ensure conformity with New Jersey law. Future employment or settlement agreements with current or prospective employees should provide a clear and conspicuous notice as to when any non-disclosure provision does not apply.