Asima J. Ahmad
New Jersey appears to be the next state to ban non-disclosure clauses in employment contracts or settlement agreements. On January 31, 2019, Senate Bill 121 passed the New Jersey Assembly by a 68-4-4 vote and the Senate in a 36-0 vote, sending the bill to Governor Phil Murphy’s desk.
Not Just About Non-Disclosure. The bill was introduced early last year in response to the #MeToo movement and deems unenforceable and against public policy any employment contract provision that either waives substantive or procedural rights or remedies relating to claims of discrimination, retaliation, or harassment, or has “the purpose or effect of concealing the details” of such any such claim. In effect, the bill prohibits forced arbitration of discrimination, retaliation, or harassment claims—of course, that includes sexual harassment claims. Similarly, the bill prohibits confidentiality or non-disclosure provisions from being included in employment contracts or settlement agreements involving those same types of claims. The bill does not prohibit employers from including noncompetition provisions in employment agreements, or from prohibiting the disclosure of proprietary information, which includes non-public trade secrets, business plan, and customer information.
Employees Can Sue and Recover Attorney Fees. The bill creates a private right of action and provides aggrieved employees two years to file litigation in state court, with the ability to recover reasonable attorney fees and costs from any person or employer who enforces or attempts to enforce an agreement containing the prohibited provisions.
Federal Preemption? If signed by the governor, however, it remains unclear whether the Federal Arbitration Act would preempt the state law’s ban on forced arbitration—this question is one with national implications for all the similar #MeToo laws popping up around the country.
We will continue tracking the bill’s progress, but expect it to be signed and effective very soon. Once signed, we believe it will be effective immediately and will apply to all contracts and agreements entered into, renewed, modified, or amended on or after the effective date. Please contact a member of our labor and employment team with any questions you may have, or if you would like assistance complying with the bill’s requirements if and when it is passed.