New Jersey Bans Non-Disclosure Agreements in Discrimination and Harassment Settlements

Gov. Phil Murphy Recently Signed into Law Legislation that Prohibits Mandatory Non-Disclosure Clauses in Settlement Agreements Involving Workplace Discrimination and Harassment

On March 18, 2019, New Jersey Gov. Phil Murphy signed legislation into law that prohibits mandatory non-disclosure clauses in settlement agreements involving workplace discrimination, harassment, and retaliation claims. The new law became effective upon signing and applies to all contracts and agreements entered into, renewed, modified, or amended on or after March 19, 2019.

New Jersey’s New NDA Ban

New Jersey’s latest employment law, Senate Bill 121, prohibits any provision in any “employment contract or settlement agreement which has the purpose or effect of concealing the details relating to a claim of discrimination, retaliation or harassment.” It also bars provisions in employment contracts that waive rights or remedies.

Below are several of the law’s key provisions:

• Waivers: A provision in any employment contract that waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment is “deemed against public policy and unenforceable.” The law further provides that no right or remedy under the New Jersey Law Against Discrimination (NJLAD) or any other statute or case law can be prospectively waived.
• Non-Disclosure: A provision in any employment contract or agreement which has the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment, is deemed against public policy and unenforceable. Notably, the law makes the non-disclosure provisions unenforceable against the employer if the employee publicly reveals sufficient details of the claim so as to make the employer reasonably identifiable.
• Notification Requirements: Every settlement agreement resolving a discrimination, retaliation, or harassment claim by an employee against an employer must include a “bold, prominently placed notice” stating that although the parties may have agreed to keep the settlement and underlying facts confidential, such a provision is unenforceable against the employer if the employee publicly reveals sufficient details so that the employer is reasonably identifiable.
• Exceptions: The law does not apply to the terms of any collective bargaining agreement between an employer and the collective bargaining representative of the employees. It also does not prohibit an employer from requiring an employee to sign a contract in which: (1) the employee agrees not to enter into competition with the employer during or after employment; or (2) the employee agrees not to disclose proprietary information, which includes only non-public trade secrets, business plan and customer information.
• Anti-retaliation: The law prohibits employers from taking any retaliatory action, including but not limited to failure to hire, discharge, suspension, demotion, discrimination in the terms, conditions, or privileges of employment, or other adverse action, against a person, on grounds that the person does not enter into an agreement or contract that contains a provision deemed against public policy and unenforceable pursuant to the bill.
• Enforcement: Any person claiming to be aggrieved by a violation of the law can initiate suit in Superior Court. The statute of limitations is two years after the cause of action accrued. All remedies available in common law tort actions are available to prevailing plaintiffs. A prevailing plaintiff may also be awarded reasonable attorney fees and costs.

Similar Prohibitions Under NY Law

New Jersey is the third state in the country to ban the use of NDAs in sexual harassment settlements. In the wake of the #MeToo movement, several other states have taken steps to both enhance transparency and restrict mandatory arbitration with respect to sexual harassment, retaliation, and other employment claims.

New York has similar restrictions in place. The state’s 2018-2019 budget, signed into law by New York Gov. Andrew Cuomo on April 12, 2018, contained a ban on mandatory arbitration clauses for claims of workplace sexual harassment. It specifically prohibits “any clause or provision in any contract which requires as a condition of the enforcement of the contract or obtaining remedies under the contract that the parties submit to mandatory arbitration to resolve any allegation or claim of an unlawful discriminatory practice of sexual harassment.” The provision states that such prohibited clauses will be considered null and void, except where inconsistent with federal law or in conflict with a collective bargaining agreement.

Next Steps for New Jersey Employers

Because the law took effect immediately, New Jersey employers should act quickly to review all employment and settlement agreements to determine if their nondisclosure and arbitration provisions must be revised. To ensure compliance, we advise consulting with an .

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Robert E. Levy, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.