Following the passage of similar laws in New York and California, a bill in the New Jersey State Legislature which bars nondisclosure clauses in workplace harassment settlement agreements is on Governor Murphy’s desk, with the expectation that it will be signed in the coming days. Assembly Bill 1242 and its twin version, Senate Bill 121 (the Bill), would render employment contracts and settlement agreements which contain nondisclosure provisions unenforceable.

Proposed Changes to Employment Contracts and Settlement Agreements
The Bill, which has the potential to be the broadest law of its kind in the country, provides that any clause in an employment agreement that “waives any substantial procedural right or remedy” relating to any discrimination, retaliation, or harassment claim is unenforceable. The Bill also provides that provisions in “any employment contract or settlement agreement which has the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment” will be considered to be against public policy, and therefore, unenforceable.

For discrimination, retaliation, or harassment claims resolved by a settlement agreement, the new law would require that all agreements must include a “bold, prominently placed notice” indicating that although the parties have agreed to keep the settlement and underlying facts of the agreement confidential, such a provision is “unenforceable against the employer if the employee publicly reveals sufficient details of the claim so that the employer is reasonably identifiable.” The proposed law would also bar retaliatory action against individuals who refuse to sign an agreement or contract that creates such unenforceable provisions, and even awards attorney fees and costs to employees who sue employers for enforce or try to enforce such provisions.

Civil Remedies for Aggrieved Employees
The law would also allow employees to initiate a lawsuit in New Jersey state court for violations and would allow for an award to a prevailing plaintiff reasonable attorney fees and costs. The law, however, would not apply to employees subject the terms of a collective bargaining agreement.

Potential Downsides of the Bill
The Bill passed overwhelmingly in both chambers of the state legislature, with champions of the bill celebrating it as a step in the right direction for victims of workplace harassment. Some, including the New Jersey State Bar Association (NJSBA), have expressed concerns that the legislation as written prevents employees from choosing whether or not to enter into a confidentiality agreement. Specifically, the NJSBA has expressed concerns that outright bans on nondisclosure agreements may chill settlement agreements and lead to more litigation. In addition, critics have also noted that the portion of the bill restricting arbitration agreements in employment contracts violates the Federal Arbitration Act in prohibiting forced arbitration of discrimination, retaliation, or harassment claims.

Bottom Line for Employers
Once signed by Governor Murphy, the new law will apply immediately to all contracts and agreements entered into, renewed, modified, or amended on or after the effective date. New Jersey employers should review their current employment and settlement agreements with legal counsel to ensure compliance once the Bill is signed into law.