New Jersey Senate Labor Committee Amends Bill Prohibiting Use of Nondisclosure Provisions in Employment and Settlement Agreements

In response to the recent spotlight on sexual abuse and harassment claims in the workplace and the #MeToo movement, the federal government and numerous states, including New Jersey, have focused attention on the use of nondisclosure provisions in settlement agreements involving claims of sexual harassment and assault. As we previously reported, the Tax Cuts and Job Bills Act was passed in December 2017 and includes a provision that bars any settlement or payment related to claims of sexual harassment or sexual abuse from being deducted as a business expense if the payments are subject to a nondisclosure agreement.

While the federal tax bill aims to discourage the use of nondisclosure agreements, the proposed New Jersey legislation initially provided an outright ban on such agreements. At the time of its first introduction during the prior legislative session in December 2017, Senator Loretta Weinberg’s proposed bill prohibited New Jersey employers from including “a provision in any employment contract or agreement which has the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment.” The bill is unique because it is not limited to sexual harassment or abuse claims, but rather would apply to any type of discrimination, retaliation, or harassment claim under New Jersey’s Law Against Discrimination.

Senator Weinberg’s bill was reintroduced in the current legislative session as Senate Bill 121 and mirrors Assembly Bill 1242. The bill was referred to the Senate Labor Committee and on March 5, 2018, an amended version of Senate Bill 121 was approved by the committee with a unanimous bipartisan vote. As originally drafted, Senate Bill 121 definitively stated that a nondisclosure provision concealing details relating to a claim of discrimination, retaliation, or harassment would be unenforceable. As amended, the bill now provides that a nondisclosure provision is unenforceable against an employee who is a party to the agreement, giving the employee the option to reveal details of the claim if he/she so chooses. The amendment further provides that a nondisclosure provision is unenforceable against the employer only if the employee publicly discloses sufficient details of the claim so that the employer is reasonably identifiable. To ensure that the employee fully understands the consequences of his/her own disclosure, the amended bill requires a “bold, prominently placed” notice in the settlement agreement advising the employee that the employer will no longer be held to confidentiality if the employee decides to publicly reveal details of the claim. Perhaps in response to concerns raised by harassment and assault victims, the amendment seems to permit nondisclosure provisions in settlement agreements where the victim has a desire for confidentiality.

If this legislation is passed in its current form, an employee could never be held to confidentiality under a nondisclosure provision because the employee retains the right to disclose details if he/she chooses. Inevitably, this uncertainty over disclosure will impact whether a settlement is reached and the amount.

Although the bill has yet to come up for a full vote (and it is unclear when it will), employers should be aware of how the passage of this legislation would impact their ability to settle discrimination, harassment, and retaliation claims. If recent history is any indication (think equal pay and paid sick leave), the eventual passage of this bill in some form seems likely.

If you have any questions regarding this blog please feel free to contact any of the attorneys in the Gibbons Employment & Labor Law Department.