New Jersey Bill Banning Non-Disclosure Provisions is Another Step Closer to Enactment

Labor and Employment Law Alert

On January 31, 2019, New Jersey Bill S121 (A1242) was passed by both Houses and is now before Governor Phil Murphy. If signed into law by Governor Murphy, the new law would have far reaching implication for employers in New Jersey.

Prohibition on Waivers of Rights Relating to Claim of Discrimination, Harassment or Retaliation

The Bill would bar provisions in “employment contracts” which waive any right relating to discrimination, harassment or retaliation and no right or remedy under the New Jersey Law Against Discrimination (NJLAD) may be prospectively waived. The Bill’s failure to define the phrase “employment contract” is problematic. It is likely that attorneys representing employees may argue that the term should include severance, separation or settlement agreements, rendering private settlement of employment claims impossible. We disagree with this interpretation and believe that if enacted as written litigation over the definition of “employment contracts” may be the ultimate resolution of this ambiguity.

Additionally, this provision could be interpreted to discourage arbitration, in direct conflict with the Federal Arbitration Act (FAA). In turn, litigation regarding whether the FAA preempts this provision could ensue. Finally, the Bill exempts Collective Bargaining Agreements form its provisions.

Ban of Non-Disclosure Provisions


The Bill would also ban 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”, in other words, a non-disclosure provision. If the employee however, publicly reveals enough information so that the employer’s identity is apparent, then the employer is no longer prevented from disclosing information about the employee or the claim.

The Bill requires that every settlement agreement of a harassment, discrimination or retaliation claim include a bold, prominent notice “that although the parties may have agreed to keep the settlement and underlying facts confidential, such a provision in an agreement is unenforceable against the employer if the employee publicly reveals sufficient details of the claim so that the employer is reasonably identifiable.”

Not Applicable to Restrictive Covenant Agreements

On January 28, 2019, the Bill was amended by the Assembly AAP committee to specifically carve-out an employer’s right to enter into non-competition and confidentiality agreements as to the employer’s proprietary information which would be defined as to only include “non-public trade secrets, business plan and customer information.” Although the Bill does not specifically address non-solicitation agreements, we believe that such agreements would be specifically carved-out as well.

Prohibition Against Retaliation

The Bill also prohibits retaliation against any employee who refuses to enter into an agreement or contract that contains a non-disclosure provision.

Remedies


The Bill provides for a private cause of action if an employer attempts to enforce a non-disclosure provision. If the employee prevails, the Bill would permit an employee to recover “reasonable attorney fees and costs.” The Bill also provides for a two year statute of limitations.

If signed by the Governor, the Bill would become law and take effect immediately; however, it would only apply to Agreements signed after the law is enacted.

The Bottom Line

Governor Murphy is expected to sign this Bill into law. Most employer-side attorneys believe that this Bill will result in fewer out-of-court settlements and longer and more expensive litigation. Some employees would also prefer to resolve claims, quickly and quietly without having to experience lengthy and public of their claims in the New Jersey court system. As a result, we anticipate that this legislation will likely significantly affect NJLAD lawsuits and the strategy in defending them.