United States: New Jersey Enacts Ban On Non-Disclosure Provisions In Settlement Agreements Addressing Claims Of Discrimination, Retaliation And Harassment

Common employer practices related to employee claims of discrimination, harassment and retaliation are now prohibited by law in New Jersey. Bill S121, signed into law by Governor Phil Murphy on March 18, 2019, and taking effect immediately, strictly prohibits employers from enforcing non-disclosure agreements entered into in connection with a settlement of any claim of discrimination, retaliation or harassment, to the extent the settlement agreement seeks to conceal the details of the claim. In addition, the new law purports to render unenforceable any waiver of a substantive or procedural right relating to such claims in an employment contract.

The key statutory prohibition states:

The law does not appear to prevent the parties from agreeing to keep the amount of any settlement payment confidential, although this is not specifically addressed.

Note that the law requires employers to comply with provisions that have "the purpose or effect of concealing the details" relating to such claims, even though current or former employees cannot be bound. Employers are relieved of obligations under such confidentiality provisions only if the employee publicly discloses "sufficient details" of the claim such that the employer may be reasonably identified. The law requires any settlement agreement addressing claims of discrimination, retaliation or harassment to inform employees of this consequence by including a notice to this effect that is prominently placed and bolded in the agreement.

The law does offer some limitations to clarify its scope. The law specifies that an employee may still be bound by a confidentiality agreement preventing disclosure of proprietary information, which is defined as nonpublic trade secrets, business plans and customer information. The law also has no impact on restrictive covenants. And, perhaps most critically, the law applies only to contracts entered into, renewed, modified or amended on or after March 18, 2019, the effective date.

The law also provides that any provision in an employment contract waiving any substantial or procedural right or remedy relating to a claim of discrimination, retaliation or harassment is now against public policy, and thus, on its face, the law purports to prohibit employers from requiring employees to arbitrate claims of discrimination, retaliation and harassment. However, as with New York State's new law addressing sexual harassment, this provision appears to be pre-empted by federal law, and arbitrating such claims may be permissible under the Federal Arbitration Act.

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