A bill that was reported out of the Senate Labor Committee in New Jersey, S-1688, would, if passed, further restrict the use of nondisclosure and nondisparagement agreements in employment contracts—particularly in cases involving discrimination, retaliation or harassment. For agency owners who employ staff, this proposed legislation could significantly impact how workplace disputes are handled and settled.
Let’s break down the bill, its potential implications and what insurance business owners should consider moving forward.
What is the impetus of this bill?
The push for S-1688 follows a unanimous New Jersey Supreme Court ruling in May that extended the state’s existing ban on settlement provisions prohibiting victims from discussing discrimination, harassment, or retaliation. The court ruled that non-disparagement agreements, like NDAs, are also unenforceable in such cases. This decision stemmed from a case involving a former Neptune Township police sergeant who was accused of violating a settlement’s non-disparagement clause after publicly criticizing the township’s workplace culture. While the ruling clarifies the law, lawmakers argue that codifying it through S-1688 will prevent future legal ambiguity.
What does the bill change?
The bill would amend P.L.2019, c.39, which prohibited certain employment contract provisions that waived an employee’s rights related to discrimination claims. However, S-1688 introduces some key changes.
Explicit ban on nondisclosure/nondisparagement agreements. The bill adds language to the existing law that would ban the use of both nondisclosure agreements and nondisparagement agreements in employment contracts.
This means that employees would not be legally restricted from disclosing information related to a settlement, or making negative, but truthful, statements about their employer related to discrimination, harassment or retaliation claims.
Elimination of collective bargaining exemptions. The previous law exempted collective bargaining from the NDA restrictions. S-1688 would remove that exemption, meaning unionized workplaces also would have to comply with the new NDA restrictions.
Clarifies settlement agreement rules. If an employee were to discuss their discrimination, harassment or retaliation claim publicly with enough detail to identify their employer, the NDA or nondisparagement clause would no longer be enforceable against the employer either. Employers would not be able to prevent employees from speaking about workplace discrimination in public forums, even if a settlement was reached.
Exclusions for business protections remain. Employers still can require agreements that protect legitimate business interests, such as nonsolicitation and confidentiality agreements related to trade secrets, business strategies and customer information.
What agreements are impacted? If S-1688 were enacted, it would apply to all employment contracts and agreements entered into, renewed, modified or amended on or after the date the bill is signed into law.
How this affects insurance employers
Greater exposure to public complaints. With NDAs and nondisparagement agreements becoming unenforceable, employers could see an increase in public allegations from current and former employees.
Changes in employment dispute resolution. Employers would need to rethink how they handle internal complaints. Mediation and workplace investigations could become more important, as settlements can no longer guarantee confidentiality.
Policy and contract updates required. Employers would need to review and update their employment contracts to ensure compliance. Any agreements that include nondisclosure or nondisparagement clauses should be reviewed by legal counsel carefully.
What happens next?
Recently, S-1688 was reported out of the Senate Labor Committee, and it will now move toward a full Senate vote. However, its Assembly counterpart (A-1928) has not advanced in that chamber. Notably, previous versions of this bill have passed the Assembly, but failed to gain traction in the Senate. Given the recent Supreme Court ruling, S-1688 is unlikely to face significant opposition as it moves through the Legislature.
Bradford J. Lachut, Esq.
Bradford J. Lachut, Esq., joined PIA as government affairs counsel for the Government & Industry Affairs Department in 2012 and then, after a four-month leave, he returned to the association in 2018 as director of government & industry affairs responsible for all legal, government relations and insurance industry liaison programs for the five state associations. Prior to PIA, Brad worked as an attorney for Steven J. Baum PC, in Amherst, and as an associate attorney for the law office of James Morris in Buffalo. He also spent time serving as senior manager of government affairs as the Buffalo Niagara Partnership, a chamber of commerce serving the Buffalo, N.Y., region, his hometown. He received his juris doctorate from Buffalo Law School and his Bachelor of Science degree in Government and Politics from Utica College, Utica, N.Y. Brad is an active Mason and Shriner.
