One of the foundational goals of the #MeToo movement was encouraging the victims of workplace abuse and harassment to speak up so everyone would be aware how pervasive of a problem it is. However, many victims of employment discrimination are barred from telling their story by non-disclosure agreements signed as part of a lawsuit settlement or severance package.
In order to give victims a voice, the New Jersey Legislature passed a law banning the use of non-disclosure agreements in cases involving certain workplace issues, like harassment and retaliation. Since the law went into effect in 2019, victims have been able to speak out about what happened to them… or so everyone thought.
This summer, a New Jersey Appellate Court ruled the 2019 law banning non-disclosure agreements does not cover non-disparagement clauses. The ruling in Savage v. Township of Neptune, 472 N.J. Super. 291, created a lot of confusion in the employment law world. Victims are upset, and employers who want to quietly settle sexual harassment suits are rushing to do so while they have a way to keep them quiet. But perhaps nobody was more shocked by the court’s decision than the legislators who drafted the 2019 law.
As a law firm that handles a lot of employment law disputes for small to mid-sized companies in central New Jersey, Dressel/Malikschmitt has been keeping a close eye on these developments.
What’s Happening Now?
The latest action in this area is once again on the legislative front. In a direct response to the opinion in Savage, New Jersey lawmakers introduced A4521, which would clarify that the current law on non-disclosure provisions also prohibits certain non-disparagement provisions in employment contracts and settlement agreements.
This sort of swift, targeted response to the courts is unusual, and highlights the importance of this issue.
Right now, the bill is sitting in the Senate Labor Committee waiting on a hearing. It passed the Assembly in a landslide with 59 members voting yes, 9 no’s, and 4 abstentions. 8 members did not vote.
If passed into law, this legislation would become effective immediately, and apply to “all contracts and agreements entered into, renewed, modified, or amended on or after the effective date.”
A Few Other Changes To Note
We also want to note that the bill “removes a provision of current law that provides that the prohibition on non-disclosure agreements does not apply to the terms of any collective bargaining agreement between an employer and the collective bargaining representative of the employees.” And “permits mediation or arbitration clauses to be included in an employment contract that is a result of a collectively bargained agreement for claims related to discrimination, retaliation, or harassment.” Unlike the outright ban on non-disparagement provisions, these changes won’t impact every employer. But larger employers who have collective bargaining agreements with their employees should be aware of this potential update.
And for anyone concerned that the bill’s broad language allowing employees to speak freely about their past employment could create some problems when there is a non-compete agreement in place, the drafters thought of that. The legislation states:
Notwithstanding any other provision of law to the contrary, this section shall not be construed to prohibit an employer from requiring an employee to sign an agreement:
(1) in which the employee agrees not to enter into competition with the employer during or after employment; or
(2) in which the employee agrees not to disclose proprietary information, which includes only non-public trade secrets, business plan and customer information.
However, as we noted in a previous blog post, the New Jersey Legislature is taking steps the significantly limit the use of non-compete agreements, so this might end up being a non-issue.
Contact Dressel/Malikschmitt Today for Advice on Employment Contracts and Settlement Agreements
Any New Jersey employer that includes language limiting the ability of current and former employees from speaking out about their job should take note of this pending legislation, and consider how they want to react if it becomes law.
New Jersey businesses have relied on non-disclosure and non-disparagement clauses for decades as a way to protect their assets and encourage the quick settlement of employment disputes. Taking away this tool without considering what other means might be used to accomplish these goals is risky.
Dressel/Malikschmitt is advising a number of businesses in New Jersey and beyond as they consider whether to make changes to their existing employment documents. Please contact our experienced team of attorneys to schedule a meeting if this is a topic we can assist you with.