New Jersey Enacts Limits on Employment and Settlement Agreements

Labor & Employment @lert

Date: April 08, 2019

Key Notes:

  • Recently passed New Jersey law could be broad enough to prevent mandatory arbitration provisions in employment agreements.
  • Non-disclosure provisions relating to claims of discrimination, retaliation or harassment are unenforceable and against New Jersey’s state public policy.
  • New Jersey employee settlement agreements must now contain bold prominent notice of the effect of disclosing identifiable information.
  • Employers are prohibited from retaliating against employees who refuse to sign an agreement containing a provision that violates the new law.

In the wake of the #MeToo movement, the New Jersey legislature is addressing employers’ abilities to limit the legal venues in which employees can pursue discrimination or harassment claims and covenants that curtail the ability to disclose information concerning the claims. Many companies require employees to enter into employment agreements stipulating that they agree to resolve all disputes through alternative dispute resolution (ADR) such as arbitration, mediation or another alternative to court. It is also equally common for companies to settle disputes with or provide separation pay to employees in exchange for a release of claims and an agreement to keep certain information confidential.

On March 18, 2019, New Jersey Governor Phil Murphy signed a new law that immediately took effect, which makes any provision in an employment agreement that waives an employee’s substantive or procedural rights or remedies related to a discrimination, retaliation or harassment claim a violation of public policy. Although the new law does not expressly set out which substantive or procedural rights relate to a claim of discrimination, retaliation or harassment, the law may be construed to prohibit certain mandatory ADR provisions commonly found in employment agreements. As a result, it may be subject to challenge as preempted by the Federal Arbitration Act. Additionally, the law deems any provision calling for the prospective waiver of a right under the New Jersey Law Against Discrimination violative of public policy.

The law also makes non-disclosure provisions in employment and settlement agreements against public policy if they apply to claims of discrimination, retaliation or harassment. In addition, New Jersey settlement agreements must now provide employees with notice of the employer’s rights should they choose to disclose identifying information about their employer.

The New Jersey law has teeth. It prohibits an employer from retaliating against an employee who refuses to enter into, renew or modify a prohibited agreement that is inconsistent with state public policy. Further, the law gives individuals the right to sue employers who attempt to enforce such agreements or retaliate against employees who exercise their rights.

The law makes a few notable exceptions. It does not apply to collective bargaining agreements, non-compete agreements or non-disclosure agreements that protect trade secrets, business plans or customer information.

Because the law recently went into effect, courts have not had a chance to weigh in on its proper scope. However, prudent employers with operations in New Jersey should review the law, examine their employment and separation agreements, and consider effective strategies to comply.

FOR MORE INFORMATION

For more information, please contact:

Jason Carruthers
404.541.2955
Jason.Carruthers@ThompsonHine.com

Megan S. Glowacki
513.352.6503
Megan.Glowacki@ThompsonHine.com

M. Scott Young
513.352.6617
Scott.Young@ThompsonHine.com

or any member of our Labor & Employment group.

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