New Jersey's Response to #MeToo: New Law Voids Non-Disclosure Agreements and Questions Future of Employee Arbitration Agreements

Date   Mar 19, 2019

Executive Summary: Effective immediately, an amendment to New Jersey’s Law Against Discrimination (“LAD”) signed into law on March 18, 2019, invalidates any provision of an employment agreement which “waives any substantive or procedural right or remedy” under the State’s broad anti-discrimination laws. The amendment also invalidates confidentiality and non-disclosure provisions in any employment contract or settlement agreement.

In an apparent nod to Stormy Daniels and the #MeToo movement, the amendment prevents employers from enforcing confidentiality clauses designed to keep private the details of claims of discrimination, harassment, or retaliation, and requires every settlement agreement involving a LAD allegation to include a “bold, prominently placed notice” explaining the employee cannot be punished for publicly revealing details of the claim. Though parties to a LAD dispute remain free to agree among themselves to keep the settlement agreement (and the underlying facts) confidential, yesterday’s amendment renders such an agreement legally powerless. Though a similar law about sexual harassment claims was passed in New York last year, New Jersey’s amendment goes much further by applying to all claims of discrimination, harassment, and retaliation.

Agreements protecting an employer’s “proprietary information” and employer non-compete agreements are not affected by the amendment.

The LAD amendment also creates a private right of action for “[a]ny person claiming to be aggrieved” by a violation of the law, and provides two mechanisms for fee awards to successful employees. In line with other claims under the LAD, any action for violation of the law as amended must be commenced within two years of the violation.

The amendment’s invalidation of employment agreements which prospectively waive any substantive or procedural rights under the LAD or “any other statute or case law” appears to invalidate employee jury waivers, class action waivers, and arbitration agreements. It is, however, unclear if such an outright ban on arbitration agreements violates the Federal Arbitration Act. Indeed, the U.S. Supreme Court’s May 2017 decision in Kindred Nursing Centers LP v. Clark clarifies that states cannot promulgate facially neutral laws which discriminate against arbitration agreements for any particular claim. A California measure similar to the New Jersey Amendment was vetoed by Governor Jerry Brown last year because it could not be reconciled with the Federal Arbitration Act and the Kindred Nursing Centers decision.

Employers’ Bottom Line: Though the LAD amendment does not alter existing employment agreements and exempts collective bargaining agreements, employers with operations in New Jersey should review their employment agreements, confidentiality and non-disclosure provisions, arbitration agreements, and other documents which limit substantive or procedural rights about LAD claims. Perhaps most important, employers in the midst of negotiating resolution of a LAD claim with an employee must ensure the settlement agreement complies with the new law to avoid potential liability.

If you have any questions about the amendment or compliance with New Jersey’s Law Against Discrimination, please contact any attorney in our Berkeley Heights, New Jersey office or the FordHarrison attorney with whom you usually work.