New Jersey Voids Non-Disclosure Agreements for Claims of Discrimination, Retaliation, or Harassment and Effectively Bans Arbitration Agreements Relating to Those Claims

Non-Disclosure Agreements

The legislation, enacted in the wake of the #MeToo movement, is in response to criticism that mandatory non-disclosure and arbitration agreements relating to sexual harassment claims silence victims of sexual assault and harassment; however, the new law applies not only to harassment claims but to all claims of workplace discrimination and retaliation. 

The law continues to allow clauses that prohibit the disclosure of “the settlement and underlying facts” (i.e., the fact of settlement and its terms), provided the agreement contains a bold and prominently placed notice stating the clause is unenforceable against the employer if the employee publicly reveals sufficient details of the claim that the employer is reasonably identifiable. 

The new law makes clear it does not prohibit an employer from requiring an employee to sign an agreement containing a covenant against competition or a restriction upon the employee’s disclosure of proprietary information.  

Arbitration Agreements

The new law’s ban on waiver provisions does not apply to collective bargaining agreements. 

It remains to be seen whether the law will survive expected challenge on preemption grounds under the Federal Arbitration Act (FAA). The FAA allows employers to enter into binding alternative dispute resolution agreements with employees.  

Penalties, Anti-Retaliation, and a Private Cause of Action

Employers who enforce or attempt to enforce an agreement containing prohibited non-disclosure or waiver provisions will be held liable for the employee’s reasonable attorney fees and costs. The legislation expressly prohibits retaliation (including failure to hire or adverse employment action) against individuals who refuse to sign agreements containing those prohibited provisions. Any person subject to retaliation in violation of the new law may bring suit against the offending employer, and all common law tort remedies as well as attorney fees and costs are available to the prevailing plaintiff.  

Advice to Employers

We urge all New Jersey employers to review post-March 18, 2019 employment and separation agreements for compliance. This should include any agreements that renew, modify, or amend pre-existing agreements. We at Lowenstein Sandler will gladly assist as needed.