Governor Murphy Signs Bill Making Nondisclosure Provisions Unenforceable and Against Public Policy

On Monday, March 18, 2019, Governor Phil Murphy signed Senate Bill No. 121, which makes nondisclosure provisions in employment contracts or settlement agreements that are intended to conceal the details of claims of discrimination, retaliation, or harassment unenforceable and against public policy in New Jersey.

Section 1 of the new law warns that 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 against public policy and unenforceable.” The law does not define “employment contract” and leaves open to interpretation whether it applies to all agreements between employer and employee, whether an employment agreement, a separation agreement, or a settlement agreement. The prohibition on waiving any procedural right would make arbitration agreements, which by their nature waive the right to a jury trial, also invalid and unenforceable in contravention of the Federal Arbitration Act and recent United States Supreme Court precedent. An immediate challenge to this aspect of the law is likely since it casts doubt on all arbitration agreements between an employer and employee that seek to include claims of discrimination, harassment, and retaliation. Section 1 also prohibits a prospective waiver of any right or remedy under the New Jersey Law Against Discrimination (NJLAD) or any other statute or case law. However, Section 1 does not apply to the terms of a collective bargaining agreement between an employer and any collective bargaining representative of the employee.

In its initial pronouncement, Section 2 declares that a nondisclosure provision concealing the details of a claim of discrimination, retaliation, or harassment in any employment contract or settlement agreement is unenforceable and against public policy. One would expect it to end there, but it does not. Immediately following this statement, the law explains that a nondisclosure provision is never enforceable against the current or former employee but is enforceable against the employer unless the employee publicly reveals sufficient details of the claim that the employer is reasonably identified, in which case the nondisclosure is also unenforceable against the employer. As written, the law allows an employer to bind itself to a nondisclosure provision that the law itself declares unenforceable and against public policy. The obvious question: why would an employer do so when the employee can never be bound under any circumstances?

The law goes one step further and provides that every settlement agreement resolving a claim of discrimination, harassment, or retaliation and that contains a now “unenforceable and against public policy” nondisclosure provision must contain a bold and prominent notice that “although the parties may have agreed to keep the settlement and underlying facts confidential, it is unenforceable against the employer if the employee reveals sufficient details of the claim so that the employer is reasonably identified.” In short, this ill-drafted law allows what it expressly forbids, an agreement with a nondisclosure provision, but only to bind the employer. The employee who agrees to its inclusion is free to walk away at any time.

An amendment to the law adopted by the Assembly on January 28, 2019 made its way into the final bill. The law makes it clear that an employer can still require an employee to sign an agreement with a non-competition provision and a confidentiality provision protecting against the disclosure of proprietary information, including “non-public trade secrets, business plan and customer information.”

Section 4 of the law prohibits retaliation against a person who refuses to enter into an agreement or contract that contains a provision declared unenforceable and against public policy by the law. Section 5 applies a two year statute of limitations to claims asserting a violation of the law and offers a range of remedies to an aggrieved party, including common law tort damages, attorneys’ fees and costs, and the remedies available under any other statute.

The law takes effect immediately and applies to all contracts and agreements entered into, renewed, modified, or amended on or after the effective date.

If you have any questions about the new law and its impact, feel free to contact any of the attorneys in the Gibbons Employment & Labor Law Department.

Susan L. Nardone is a Director in the Gibbons Employment & Labor Law Department.
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