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New Jersey Bars Nondisclosure Agreements in All Discrimination Settlements, Purports to Bar Arbitration Agreements

On March 18, 2019, Governor Phil Murphy signed into law Senate Bill 121 (S121), which amends the New Jersey Law Against Discrimination (NJLAD) in two important respects, effective immediately.

First, the law provides that confidentiality provisions in “any employment contract or settlement agreement” that would prohibit current or former employees from revealing “the details relating to a claim of discrimination, retaliation, or harassment,” are “deemed against public policy and unenforceable.” That is, it renders unenforceable nondisclosure provisions in settlement agreements that resolve discrimination-related claims. The law applies to all contracts and settlement agreements entered into, renewed, modified, or amended on or after March 18, 2019, and so does not affect agreements entered into before that date.

Second, the new law states that any provision in an employment contract “that waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment shall be deemed “against public policy and unenforceable” and that employees cannot prospectively waive any other right or remedy under the NJLAD, other statute, or case law. Further, the amendment provides that no person (or employer) can take retaliatory action against any applicant or employee for refusing to enter into such a contract. While the new law carefully avoids using the word “arbitration,” its clear purpose is to prevent employers from requiring employees to sign arbitration agreements (though it expressly exempts collective bargaining agreements from its scope) and, possibly, class action waivers, jury waivers, and waivers or limitations of certain kinds of damages. To the extent that the new law does purport to bar or prevent enforcement of arbitration agreements, it likely is preempted by the Federal Arbitration Act.

The law further provides that any person who attempts to enforce a provision that is deemed to be against public policy and unenforceable by this law shall be liable to the employee for reasonable attorneys’ fees and costs incurred in resisting it. Again, to the extent that this purports to be applicable to arbitration provisions, it likely is preempted by the Federal Arbitration Act.

The immediate point of concern for employers may be the prohibition on confidentiality provisions in employment contracts and settlement agreements. Unfortunately, the language of the new law is not a model of clarity. For example, the terms “employment contract” and “settlement agreement” are not defined anywhere in the statute. Further, while the language “the details relating to a claim” likely is not meant to include the fact of settlement and/or its monetary terms and other provisions (as opposed to the underlying allegations), the language of the law could have been clearer. What is clear, however, is that when determining the monetary value of a separation agreement or settlement—or whether to settle at all—an employer may have to reckon with the possibility that all details eventually will become public—possibly before the ink is dry on the settlement.

In addition, New Jersey-based employers entering into settlements with employees in other states may want to take care when using language to the effect that New Jersey law will govern the agreements. Such language may be deemed to incorporate provisions of this new law into an agreement with a person who otherwise would not be covered by the law.

© 2020, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.National Law Review, Volume IX, Number 81


About this Author

Peter O. Hughes Class Action & Trial Attorney Ogletree Deakins Law Firm
Office Managing Shareholder

A class action and trial attorney, Peter Hughes has represented companies in virtually every kind of lawsuit and administrative proceeding an employer might face, and has done so throughout the United States. He has particularly strong experience in whistleblower and retaliation litigation, including successful results and jury verdicts under Sarbanes-Oxley and the New Jersey Conscientious Employee Protection Act (“CEPA”). Peter also has extensive class and collective action experience, including FLSA, Equal Pay Act, Title VII, and state-law discrimination and wage & hour litigation....

Michael Nacchio Employment Attorney

Michael represents management in employment-related disputes before state and federal courts and administrative agencies in both New Jersey and New York. He has defended large and small companies, professional firms, hospitals, government agencies, and individual defendants in claims alleging wrongful termination, discrimination, harassment, and sexual harassment, retaliation, whistleblowing, wage and hour, and unfair competition. Michael is an experienced trial attorney who has obtained defense verdicts in both state and federal court as well as summary judgments and dismissals alike. He also counsels clients towards proactive solutions and policies aimed at preventing disputes and has experience conducting sexual harassment trainings.

Prior to joining Ogletree, Michael served as an Assistant Corporation Counsel for the City of New York in the Office of the Corporation Counsel. He most recently served in the Labor and Employment Division as a Senior Counsel and was responsible for the defense of senior and commissioner level officials as well as the City’s agencies, such as the New York City Police Department, Fire Department, Department of Education, and NYC Health + Hospitals. Before that, he served in the Manhattan Borough Unit of the Tort Division as a back-to-back trial attorney.

In law school, Michael was an Intraschool Editor of the Brendan Moore Trial Advocacy Center and competed on four national trial competition teams, twice advancing to the national finals. He was an Associate Editor of the Fordham Intellectual Property, Media, and Entertainment Law Journal and interned with the New York City Department of Investigation.

Michael is active with both the Fordham Law School alumni and the Georgetown University Baker Scholars alumni groups. He is a native of Morristown.