New Jersey recently enacted a new law that changes an employer’s ability to require employees to arbitrate disputes and limits confidentiality restrictions employers can place in some employee settlement agreements.
Under the new law, settlement agreements and employment contracts that have the purpose or effect of concealing the details relating to a claim of discrimination, retaliation or harassment, are unenforceable against current and former employees. Despite that, if such a provision is included in a settlement agreement or employment contract and the employee publicly reveals sufficient details of the claim so that the employer is reasonably identifiable, then the non-disclosure provision is also unenforceable against the employer.
To add teeth to this obligation, the new law requires employers to include the following prominently placed language in bold in all settlement agreements that resolve a discrimination, retaliation or harassment claim:
Although the parties may have agreed to keep the settlement and underlying facts confidential, such 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.
It is not clear whether “the details relating to a claim” includes the settlement amount or just the facts underlying the claim. Thus, the new law may be interpreted such that settlement agreements cannot require the parties to keep the amount of settlement confidential.
The new law also renders language in employment contracts (except for collective bargaining agreements) unenforceable if the language waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation or harassment. Additionally, the law prohibits the prospective waiver of rights and remedies under either the New Jersey Law Against Discrimination or any other statute or case law. Waivers of rights to jury trials, judge trials and class or representative lawsuits under New Jersey employment law, requiring those proceedings to be decided by arbitration, or requiring that there be no class or representative actions at all, would all be invalid under the new law.
The new law became effective on March 18, 2019 and applies to all contracts and agreements entered into, renewed, modified, or amended after March 18, 2019. In addition, the law allows employees to collect reasonable attorney’s fees and costs if an employer attempts to enforce a provision rendered unenforceable by the new law. Employers are prohibited from taking any retaliatory action against employees who refuse to enter into any agreement that violates this law.
While this new law may have originally been targeted to prohibit confidential settlement agreements in sexual harassment cases, it has a broader reach. With regard to settlement agreements, employers must now include specific bold, prominent language that relates to a claim of discrimination, retaliation or harassment. Employers will not be able to mandate that employees keep confidential the details relating to a claim of discrimination, retaliation or harassment. This change may make employers reluctant to settle some claims – particularly if the statute is interpreted to mean that the employer cannot keep the dollar value of the settlement confidential.
With respect to the invalidation of prospective waivers, the law states that no right or remedy under the New Jersey Law Against Discrimination or any other statute or case law shall be prospectively waived. That covers employee protections originated by the courts in case law, plus New Jersey employment-related statutes, such as New Jersey wage and hour laws and the Conscientious Employee Protection Act. The invalidation of waivers appears to treat contracts requiring employment arbitration different from other contracts. As a result, that part of the law may be subject to challenge as being preempted by the Federal Arbitration Act.
On a positive note for employers, the law specifies that it is not intended to prohibit employers from entering into non-competition agreements with employees or agreements protecting the employer’s proprietary information, such as nonpublic trade secrets, business plans and customer information.
Companies who routinely use arbitration agreements, settlement agreements or are simply unsure how this change in law could affect their business should consult Harry Horwitz at hah@stevenslee.com, Brandon Shemtob at bss@stevenslee.com, or the Stevens & Lee attorney with whom you regularly work.
This News Alert has been prepared for informational purposes only and should not be construed as, and does not constitute, legal advice on any specific matter. For more information, please see the disclaimer.
