On March 18, 2019, New Jersey Governor Phil Murphy signed new legislation (S121) that significantly impacts the scope of certain employment agreements and settlement agreements between employers and employees/former employees. The controversial legislation addresses the following:

  1. Ban on waiver of substantive and procedural rights in employment contracts related to discrimination, harassment or retaliation claims

The legislation voids any provision in an employment contract that waives “any substantive or procedural right or remedy relating to a claim of discrimination, retaliation or harassment.” In addition, the legislation prohibits an employer from prospectively waiving any right or remedy under the New Jersey Law Against Discrimination (NJLAD).

This language could impact agreements such as jury trial waivers and arbitration agreements. To the extent that the law touches arbitration agreements, however, it will likely face challenges on the grounds that the law conflicts with, and is preempted by, the Federal Arbitration Act.

2. Makes non-disclosure agreements unenforceable against employees

While parties can still agree to keep the terms of an agreement confidential, the law prohibits employers from actually enforcing any non-disclosure agreement in an employment contract or settlement agreement to the extent the provision relates to a claim of discrimination, retaliation or harassment. While the provision cannot be enforced against the employee, if the employee publicly reveals details of the claim that causes the employer to become identifiable, then the non-disclosure provision is also unenforceable against the employer. Importantly, every settlement agreement resolving a discrimination, retaliation or harassment claim “shall include a bold, prominently placed notice” informing the employee that the non-disclosure provision could become unenforceable against the employer.

3. Anti-retaliation

The law contains an express anti-retaliation provision that prohibits employers from taking any adverse action against an employee or prospective employee for refusing to sign an agreement that is deemed against public policy under this law.

4. Available damages

If an employer attempts to enforce any provision declared contrary to public policy (presumably including, for example, an arbitration agreement), the employer is liable for the employee’s attorney’s fees and costs.

The law permits any person aggrieved under this law to file a civil action. There is a two-year statute of limitations. A prevailing plaintiff can recover: statutory remedies; “all remedies available in common law tort actions”; and attorney’s fees and costs.

The act takes effect immediately and applies to any agreements entered into, renewed or modified beginning March 18, 2019. Thus, agreements signed on or before March 18, 2019 are unaffected.