NJ Bans Non-Disclosure Clauses in Employment Settlements

March 19, 2019Alerts

New Jersey employers should review their current practices to ensure compliance with a new law prohibiting non-disclosure provisions in employment contracts and the settlements of discrimination, harassment and retaliation claims under the New Jersey Law Against Discrimination (NJLAD).

Signed by Gov. Phil Murphy on March 18, 2019 and effective immediately, the law states that employers cannot insist that employees keep confidential the details of such claims. Non-disclosure provisions in settlements of NJLAD claims are now deemed against public policy and unenforceable against current or former employees in the state. Although the law is applicable only to agreements and contracts entered into, renewed, modified or amended on or after March 18, 2019, it creates an additional requirement for agreements resolving such claims.

These agreements must contain a bold notice, prominently placed, stating that while the parties “may have agreed to keep the settlement and underlying facts confidential,” if the employee publicly discloses “sufficient details” of the claim that make the employer “reasonably identifiable,” the employee cannot later attempt to enforce a non-disclosure provision against the employer. In other words, the law permits a one-sided non-disclosure provision enforceable against the employer unless the employee discloses first.

Yet, the law is silent about how much detail is sufficient to make the employer reasonably identifiable. And even in the event of employee disclosure, the law never permits a non-disclosure provision to be enforced against an employee; it just permits an employer to publicly state its side. Further, the law offers little protection against an employee’s potential defamation or retaliation claim against the employer based on such public statements.

Notably, employers are still free to protect other elements of a settlement agreement, including settlement amounts and proprietary business information – though that protection is now limited to non-public trade secrets, business plans and customer information. Non-compete provisions remain unaffected by the law.

The law also bars prospective waivers of any NJLAD claim, except for such waivers contained in collective bargaining agreements. This is probably less of a concern for most employers, as these waivers are not common.

The law provides for an award of reasonable attorneys’ fees against a person who enforces or attempts to enforce a non-disclosure provision. It also prohibits retaliation against a person who refuses to sign a contract or agreement with a non-disclosure provision or prospective waiver of NJLAD claims.

Although the New Jersey Legislature may have been influenced by media coverage of sexual harassment claims as part of the #MeToo movement, and similar legislation enacted last year in New York, New Jersey’s prohibition is much broader. Unlike New York’s law, which is limited to sexual harassment, New Jersey’s law applies to any allegation of discrimination, harassment or retaliation under the NJLAD.

It remains to be seen what effect this law will have on settlements of NJLAD claims. This law was opposed by both employer and employee advocates, who warned that it could lead to fewer settlements of claims and a decrease in settlement values. What is clear is that employers should immediately consult experienced employment counsel to determine whether their contracts and agreements need to be revised to include the language required by the law.

For more information about this alert or if you have any questions or concerns, please contact Justin Schwam at 973.548.3313 or [email protected], or any member of Fox Rothschild’s Labor & Employment Department.