New NJ Law Prohibits Certain Waiver and Nondisclosure Provisions in Employment Contracts and Settlement Agreements
- On March 19, 2019
On Monday, March 18, 2019, Governor Murphy signed into law PL2019 Ch 39 prohibiting certain wavier and nondisclosure provisions in employment contracts and settlement agreements. The law prohibits the waiver of any “substantive or procedural right or remedy relating to a claim of discrimination retaliation or harassment.” If an agreement contains such a clause that clause shall be deemed void as against public policy and unenforceable. Further, the law provides that it is illegal to waive prospectively any right or remedy under the State’s Law Against Discrimination. Any provision in any contract which constitutes a nondisclosure agreement or as the law reads a clause that has “the purpose or effect of concealing the details relating to a claim of discrimination, retaliation or harassment shall be deemed against public policy and unenforceable. Thus, the law prevents nondisclosure agreements in employment contracts and settlement agreements. The language of the statute is sufficiently broad enough to cover those agreements and/or decisions reached in a nonpublic forum such as binding arbitration or mediation. Importantly, the law also applies to current or former employees who are parties to an already existing contract or settlement containing such a nondisclosure provision.
The law contains a provision that any employer or person who attempts to enforce such a provision is liable for the employee’s attorney’s fees and costs in fighting such an enforcement action. The law further prohibits any employer or person from taking any retaliatory action including the “failure to hire” against a person on the grounds that “the person does not enter into agreement or contract that contains a provision deemed against public policy and unenforceable.” Thus, it is no longer permissible to refuse to hire an applicant for failing to enter into a nondisclosure agreement. Perhaps most importantly the act “takes effect immediately and applies to all contracts and agreements entered into, renewed, modified or amended on or after the effective date.”
Thus, it is therefore imperative for employers to be cautious in the drafting of their agreements going forward. Additionally, employers should undertake an immediate and extensive review of all of their current employment agreements, arbitration agreements as well as any currently pending mediations, arbitrations or litigations which may be settled while this law is in effect. Furthermore, employers should review and assess their harassment, anti-discrimination, retaliation policy and investigation protocols together with any and all ongoing training programs and procedures in light of the new law. Given the opposition to this bill by various business groups, it is anticipated that this law will be subjected to a legal challenge in the very near future. However, pending any legal challenge and any court ruling that alters the effect of this law employers, both current and prospective, must exercise extreme caution in their hiring, disciplinary, training and settlement protocols.