New Jersey Bill Set To Shred Employment-Related NDAs

New Jersey Bill Set To Shred Employment-Related NDAs

By Jeff Schervone – August 10, 2018 

New Jersey continues to adopt a raft of remedial employment laws, including the recent Equal Pay Act  and the Paid Sick Leave Act.  Now, the New Jersey Legislature has its sights set on private contracts, namely employment-related nondisclosure agreements, or NDAs.  When (not if) adopted, these NDAs will be dead on arrival.   

In response to public outcry over recent high profile employment-related NDAs, the Legislature is advancing a bill to limit ‘confidentiality agreements’ concerning “discrimination, retaliation and harassment.”  According to Senator Loretta Weinberg, “Nondisclosure agreements have been used to silence and intimidate the victims of sexual assault and harassment….  Limiting these … will help lift the secrecy that allowed the abuses to continue.”  Amen.  But this is New Jersey, so of course, the Devil is in the details. 

The bill passed the New Jersey Senate on June 7, 2018 by a vote of 34 to 1 and is now pending before the Assembly. 

The bill bans waivers in employment contracts related to discrimination and the Law Against Discrimination.  Next, the bill bans any confidentiality agreements that seek to conceal details regarding claims of discrimination, retaliation or harassment, even if disputed.  Here are the two primary provisions of the bill:

(1)  “A provision in any employment contract that waives “any substantive or procedural right or remedy relating to any claim of discrimination, retaliation, or harassment shall be deemed against public policy and unenforceable.” 

(2)  “A provision in any employment contract or agreement which has the purpose or effect of concealing the details related to a claim of discrimination, retaliation, or harassment shall be deemed against public policy and unenforceable.”

Note the reference to any claim of discrimination or harassment.  More than to just protect “the victims of sexual assault and harassment,” the bill bans NDAs or other confidentiality agreements related to any protected class member(s) claiming discrimination.  In light of #MeToo, it might make sense for the state to limit concealment of conduct amounting to sexual harassment, assault, battery, criminality and the like.  But, the bill reaches well beyond those victims of sexual assault and applies to any claim of discrimination.  #WeToo?

Further, under Section (1) an employment contract cannot waive any procedural right, such as a jury trial.  Given that many employment agreements contain binding arbitration provisions, the bill appears to brush up against the Federal Arbitration Act and settled case law favoring arbitration over litigation if the parties clearly and unambiguously agree.        

Other critical elements of the bill include a cause of action in the Superior Court by “any person aggrieved by a violation of” the provisions of the bill with a two-year limitations period and fee shifting.  After all, this is a New Jersey remedial statute.     

Also, the bill includes protections to individuals who refuse to enter into an agreement with provisions contrary to the legislation.  The bill prohibits an employer from taking retaliatory action (e.g., refusal to hire, discharge, suspension, demotion, and so on) on the grounds that an individual refuses to enter into an agreement with terms contrary to the bill.  To the extent an employer seeks to enforce an agreement contrary to the bill, the employee may collect costs and reasonable attorney’s fees for defending against any such suit.

The proposed legislation is not retroactive, but rather applies to “all contracts and agreements entered into, renewed, modified or amended on or after the effective date.”  Although not through to Governor Murphy’s desk yet, employers should anticipate quick adoption and implementation.  As with all of New Jersey’s recent spate of remedial employment laws, employers need to look carefully at their procedures and practices to ensure compliance

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