February 6, 2023

Volume XIII, Number 37

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February 03, 2023

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New Jersey Prohibits Particular Waiver and Non-Disclosure Provisions in Employee Contracts and Settlement Agreements

New Jersey continues to rewrite the employment law landscape under Governor Phil Murphy. On March 18, 2019, the state amended the New Jersey Law Against Discrimination (NJLAD) in two significant ways.

Non-Disclosure Provisions in Agreements With Employees are Unenforceable

The new legislation—which takes effect immediately—explains that certain non-disclosure provisions contained within either an employment contract or settlement agreement are against public policy, and, therefore, unenforceable. An employer cannot enforce a non-disclosure provision against an employee if the provision is in an employment contract or settlement agreement and has the "purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment…" If the parties decide to include such a non-disclosure provision, it can be enforced against the employer unless the employee has "publicly reveal[ed] sufficient details of the claim so that the employer is reasonably identifiable."

The law also requires that every settlement agreement resolving a discrimination, retaliation, or harassment claim by an employee against an employer shall include a "bold, prominently placed 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."

No Rights Relating to Discrimination Claims Can Be Waived

The other significant part of this legislation states 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 shall be deemed against public policy and unenforceable," and "[n]o right or remedy under the 'Law Against Discrimination' or any other statute or case law shall be prospectively waived."

A notable concern here is how this may impact the ability of employers to enforce arbitration agreements or jury-waiver provisions for the types of claims delineated in the statute. It is possible that New Jersey courts will find arbitration agreements that cover employment claims and/or agreements that waive an employee's right to a jury trial for employment claims to be unenforceable under the new legislation, although many authorities believe that the Federal Arbitration Act (FAA) preempts at least the arbitration portion of this provision. Finally, the language of these prohibitions is seemingly expansive enough to encompass other statutes and case law beyond the NJLAD.

Private Right of Action/Anti-Retaliation

The statute provides for a private right of action and, therefore, an employee may bring a claim under the new provisions and be awarded common law tort remedies along with attorney's fees and costs. Moreover, the statute provides for an additional cause of action for any retaliatory action (i.e., failure to hire, discharge, suspension, demotion, discrimination in the terms, conditions, or privileges of employment, or any other adverse action) taken against any person who refuses to enter into an agreement or contract that contains a provision prohibited by the new legislation.

Based on these changes in the law, employers should be sure to review employment contracts, employee handbooks, arbitration agreements, and any settlement or severance agreements to ensure they are in compliance with the new law.

Copyright © by Ballard Spahr LLPNational Law Review, Volume IX, Number 78

About this Author

Denise Keyser Employment Law Attorney Ballard Spahr

Denise M. Keyser has more than 30 years of experience representing national, regional, and locally based businesses in labor and employment matters, including traditional labor law (such as collective bargaining and arbitrations), OSHA, ERISA, wage and hour, employment-at-will, wrongful discharge, discrimination, management training, executive compensation, and affirmative action.

Louis Chodoff, Labor, Employment, Harassment, Discrimination, Ballard Spahr, Law FIrm

Louis L. Chodoff handles labor and employment law counseling and litigation associated with harassment, discrimination, wage and hour, whistleblower, wrongful discharge, and restrictive covenant disputes.

Mr. Chodoff litigates in state and federal courts as well as in various administrative agencies such as the New Jersey Department of Labor, New Jersey Division on Civil Rights, New Jersey Office of Administrative Law, Pennsylvania Human Relations Commission, and the Equal Employment Opportunity Commission. He counsels his clients on the employment and labor law implications of...

Patricia Smith, Ballard Spahr Law Firm, New Jersey, Labor and Employment Litigation Attorney

Patricia A. Smith represents management in all areas of employment and labor law and litigation. She has experience in a variety of industries, including health care, transportation, refining, manufacturing, construction, and commercial lending. Ms. Smith regularly provides advice and counseling to employers concerning the implementation of reductions in force and other difficult employment decisions. She also practices traditional labor law and regularly handles labor arbitrations, union organizing campaigns, collective bargaining negotiations, and unfair labor practice...

Tara Humma Litigation Attorney

Tara L. Humma is an associate in the Litigation Department who focuses on labor and employment matters. Tara defends clients in all phases of employment litigation, from initial pleadings, discovery, and motion practice to trial preparation and appeals. She represents employers in hearings before administrative agencies, arbitrators, and hearing officers appointed under contractual grievance procedures. Tara also regularly counsels employers in the application of various state and federal employment laws, civil service regulations, and collective bargaining agreements.

In addition...