New Jersey Now Prohibits Most Confidentiality and Arbitration Provisions

03.26.19

On March 18, 2019, Governor Phil Murphy signed a law that fundamentally changes settlement agreements and employment contracts in New Jersey. The law, which took effect immediately, applies to all contracts entered into, renewed or modified on or after March 18th, including settlement agreements, severance agreements, employment contracts or similar agreements (such as onboarding documents signed by employees).

Settlement and Severance Agreements

Under the new law, it is now a violation of public policy to include a provision that "has the purpose or effect of concealing the details relating to a claim of discrimination, retaliation or harassment." The term "details" is not defined, but presumably means the facts surrounding the allegations and does not include the amount of the settlement. Any provision that does conceal the "details" of the claim of discrimination, retaliation or harassment is unenforceable. The law also requires a bold, prominent notice in any settlement agreement that includes a confidentiality clause (such as all-caps, set off from other provisions) that says "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 publically reveals sufficient details so that the employer is reasonably identifiable."

While this change in the law is in response to the #MeToo and #TimesUp campaigns, it is not limited to sexual harassment claims. Since the change is to the Law Against Discrimination (LAD), protected classes covered by that statute including race, religion, age, disability, etc. are implicated.

The law does clarify that it does not prohibit non-compete agreements or non-disclosure agreements that relate to proprietary information or trade secrets.

As with most changes to the LAD, the law includes anti-retaliation provisions and provides for a private cause of action including provisions for attorney's fees.

Employment Agreements

The second part of the 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 is against public policy and unenforceable. This provision impacts employment contracts and onboarding documents and makes provisions such as arbitration agreements, class action waivers, etc. no longer available to employers. It remains to be seen if this provision will be applied in light of the Federal Arbitration Act and the recent U.S. Supreme Court decisions that have come out in favor of arbitration provisions.

Comment: These groundbreaking changes will require employers to take immediate action. For those discrimination, harassment and retaliation claims currently pending, the fact that confidentiality provisions regarding the "details" of the claim are no longer enforceable will likely change settlement and litigation strategies. Such provisions also cannot be part of severance agreements. Employers need to review all of their employment agreements and on boarding documents to make sure that they do not include provisions that waive substantive or procedural rights or remedies.

As always, we are here to help. If you have questions about the law or how it may impact your organization, please contact Julie Kinkopf at jkinkopf@wglaw.com or 215.972.7914.

Media Contacts

Jennifer R. Williams 
215.972.7917
jwilliams@wglaw.com

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