One of the greatest barriers to settling lawsuits by existing or former employees is the employer’s fear that other employees will learn about the settlement and start their own lawsuits. For many years New Jersey lawyers have inserted non-disclosure clauses in employment contracts and business litigation settlement agreements that prevent both the employer and the employee from telling anyone about the terms of the settlement.
These clauses have proved effective in preventing wide-dissemination of the terms of the settlement agreement. In recent years, however, employee advocates have sought legislation that would permit employees to disclose the terms of any settlement agreement that involved discrimination or sexual harassment in order to pave the way for similar lawsuits by other victims of discrimination or harassment.
The New Jersey legislature has now passed a bill that renders all non-disclosure provisions in settlement agreements relating to claims of discrimination, retaliation or harassment unenforceable. Every settlement agreement in an action against an employer for discrimination, retaliation or harassment must contain a notice, printed in bold type and prominently placed in the contract, stating that all non-disclosure agreements relating to the contract or the substance of the lawsuit are void and unenforceable.
The bill also contains provisions that explicitly state that the new law does not prohibit employment agreements in general or prohibit an employer from asking the employee not to compete or to disclose confidential or proprietary information.
The law states that it shall become effective “immediately.” The statute also states that it shall apply to employment contracts and settlement agreements that are executed, renewed, modified or amended on or after the effective date. Anyone with questions about the effect of this law may wish to consult an experienced employment or business law attorney.