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New Jersey Bill Seeks to Ax Non-Disparagement Provisions in Employment Agreements

October 11, 2022

New Jersey Bill Seeks to Ax Non-Disparagement Provisions in Employment Agreements

October 11, 2022

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The bill also seeks to remove the 2019 exemption for collective bargaining agreements, meaning that collective bargaining agreements would be subject to the prohibition on non-disclosure and non-disparagement provisions.

On September 29, 2022, the New Jersey Assembly Judiciary Committee unanimously approved a bill that would ban non-disparagement provisions in employment agreements. As we previously reported in March 2019, a sweeping amendment to the Law Against Discrimination (LAD) was enacted to bar enforcement of non-disclosure provisions in employment contracts and settlement agreements. The law was in response to the #MeToo movement, which brought public scrutiny on the use of confidentiality clauses in employment agreements and the perception that such clauses enabled sexual harassment by silencing purported victims. Prior to 2019, confidentiality or non-disclosure provisions and non-disparagement provisions in settlement agreements for employment-related cases were a standard practice.

The renewed interest in restricting employment agreements comes after a recent New Jersey Appellate Division case that ruled that the 2019 amendment did not prohibit parties from entering into non-disparagement clauses that did not have the purpose or effect of concealing the details of a LAD claim. Savage v. Township of Neptune, 472 N.J. Super. 291 (App. Div. 2022).

In response to the decision in Savage, the Assembly Judiciary Committee approved a bill that adds the following language to the LAD:

A provision in any employment contract that waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment, including but not limited to, a non-disclosure or non-disparagement provision, or other similar agreement, shall be deemed against public policy and unenforceable. [Emphasis added.]

In another section, the bill clarifies that non-disparagement provisions (as well as non-disclosure provisions) are also prohibited in settlement agreements.

The bill also seeks to remove the 2019 exemption for collective bargaining agreements, meaning that collective bargaining agreements would be subject to the prohibition on non-disclosure and non-disparagement provisions.

Notably, the 2019 amendment had sought to curtail arbitration provisions in employment contracts by rendering unenforceable, and “against public policy,” any provisions that waived “substantive or procedural” rights or remedies relating to claims of discrimination, retaliation or harassment. Both New Jersey state and federal courts have since held that, to the extent the amendment prohibits pre-dispute agreements, it is preempted by the Federal Arbitration Act. See e.g., Antonucci v. Curvature Newco, Inc., 470 N.J. Super. 553 (App. Div. 2022); N.J. Civil Justice Institute v. Grewal, 2021 U.S. Dist. LEXIS 57437 (D.N.J. Mar. 25, 2021). Nevertheless, the bill does provide that “any employment contract that is a result of a collectively bargained agreement may contain a provision requiring mediation or arbitration of a claim of discrimination, retaliation, or harassment.”

If enacted, the bill will take effect immediately and will only apply to agreements entered into, renewed, modified or amended after the effective date.

What This Means for New Jersey Employers

Like the 2019 amendment, the practical effect of the bill will be to eliminate incentives for many parties to resolve LAD claims, particularly at the early stages of litigation. It will also open the door to continued litigation, as it does not define the term “non-disparagement.”

Although the bill is not yet law, employers will want to proactively take inventory of their employment agreements to see which, if any, will need to be modified if the bill is enacted. While the bill is not retroactive per se, it will apply to agreements that are renewed or modified after the effective date, meaning that any agreements that have automatic renewal clauses will be subject to these provisions.

Even if the bill is enacted as proposed, employers may still be able to achieve the effect of a non-disparagement clause by including language tailored to public comments beyond the details of the LAD claim, including party impressions of present and future behavior. Employers wishing to include such language should consult with counsel before doing so.

For More Information

If you have any questions about this Alert, please contact Patrice E. LeTourneau, Michael R. Futterman, Danielle M. Dwyer, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.