In the era of the #MeToo movement and in the aftermath of certain high-profile sexual harassment claims against celebrities, a new law in New Jersey renders unenforceable non-disclosure agreements (NDAs) and other clauses that would waive the rights of victims of discrimination, retaliation or harassment. On March 18, 2019, Governor Phil Murphy signed into law new provisions that restrict the use of NDAs in employment agreements and settlement agreements where the agreement has the purpose or effect of concealing details relating to discrimination, retaliation or harassment claims. In other words, employees can no longer be prevented from publicly disclosing such matters. The law takes immediate effect for all contracts and agreements signed or modified after its signing.
The new law, nearly unanimously passed in the State Assembly and Senate, provides that any NDA in an employment contract or settlement agreement which has the purpose of concealing the details relating to claims of discrimination, retaliation or harassment is unenforceable against a current or former employee who is a party to the contract or settlement. Moreover, every settlement agreement which involves, and resolves, a discrimination, retaliation, or harassment claim, by an employee against an employer, must now include a “bold, prominently placed notice” that states that although the parties may have agreed to keep the terms of the settlement and underlying facts confidential, the provision is unenforceable against the employer if the employee publicly reveals sufficient details of the claim so that the employer is reasonably identifiable. In essence, the new law allows only hollow confidentiality provisions such that the employee is not bound, and if the employee reveals enough information to reasonably identify the employer, the employer is not bound. Thus, the employee is no longer held to abide by traditional confidentiality provisions in these types of cases.
The law prohibits an employer from enforcing or attempting to enforce such a confidentiality clause and also establishes a cause of action prohibiting retaliation against an employee who does not enter into such an agreement. The statute also provides that should an employee be aggrieved by such a violation, the employee may initiate suit in the Superior Court. This newly established cause of action has a two-year statute of limitations, and, as with all violations of the New Jersey Law Against Discrimination (LAD), a prevailing plaintiff is entitled to reasonable attorneys’ fees and costs.
The new law further provides that no employment contract may contain a provision prospectively waiving any of employee’s rights or remedies under the LAD or any other statute or case law. The statute does, however, exempt collective bargaining agreements, and clarifies that it does not prohibit non-competition agreements or obligations of an employee to maintain confidentiality of trade secrets, business plan and customer information.
Since confidentiality is often a key requirement (and incentive) for many employers and parties to bring claims to a successful resolution, the law will likely result in less settlements and thus, prolonged and costly litigation. The law also appears, on its face, to raise questions as to the enforceability of arbitration agreements for certain employment related claims and will certainly be the subject of future litigation as the courts test the limits (or expansiveness) of this new statute.