New Jersey Bill Seeks To Ax Non-Disparagement Provisions In Employment Agreements

• Published date: 14 October 2022
• Subject Matter: Employment and HR, Contract of Employment, Discrimination, Disability & Sexual Harassment, Employee Rights/ Labour Relations
• Law Firm: Duane Morris LLP
• Author: Ms Patrice LeTourneau, Michael Futterman and Danielle Dwyer

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....