By Francine Foner, Esq., and Ty Hyderally, Esq.

The Me-Too movement has brought to the forefront the problem with confidentiality provisions in settlement agreements which silence victims of sexual harassment, as well as other forms of discrimination. Some states, including New Jersey, have passed laws to prohibit confidentiality provisions which unfairly restrict an employee’s desire to speak out about discrimination.  Effective March 18, 2019, an amendment to the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1, et seq. (“NJLAD”) requires that any agreements settling claims of discrimination under the NJLAD contain a “bold, prominently placed notice” stating: “although the parties may have agreed to keep the settlement and underlying facts confidential, such a provision in an agreement is unenforceable against the employer if the employee publicly reveals sufficient details of the claim so that the employer is reasonably identifiable.”

However, sexual harassment and discrimination claims are not the only types of employment claims for which a secrecy provisions in settlement agreements are prohibited.   Settlements of claims brought for failure to pay proper compensation under the federal Fair Labor Standards Act, 29 U.S.C. § 201, et seq. (“FLSA”) must also be settled without imposing confidentiality requirements upon employees.  At least that was the conclusion reached in a recent decision by the New Jersey District Court.  In Hudson v. Express Transfer & Trucking, 2021 U.S. Dist. LEXIS 22136 *10; 2021 WL 406450 (Feb. 5, 2021), the Court declined to approve a settlement agreement resolving employee Dorian Hudson’s claims against his employer for failure to pay overtime in violation of the FLSA because of the agreement’s inclusion of confidentiality and broad release provisions.

In reaching its decision, the Hudson Court explained that settlement of an FLSA claim is subject to Court approval, in which the Court must find the agreement to be “fair and reasonable.”  The Court further observed that New Jersey federal courts, and numerous other federal courts around the country, have found confidentiality agreements which prevent employees from speaking to anyone about the contents of the settlement are not “fair and reasonable.”  Rather, such provisions “undermine fundamental purposes of the FLSA.”  Hudson at *10, citing Brumley v. Camin Cargo Control, Inc., 2012 U.S. Dist. LEXIS 40599, 2012 WL 1019337, at *7-8. (D.N.J. 2012).  The Brumley Court further found that “such provisions potentially allow employers to retaliate against employees for asserting their FLSA rights by permitting them to sue if the employee speaks about the agreement.” Id. (emphasis in original).

Relying upon numerous decisions striking down confidentiality provisions and broad release provisions in agreements settling FLSA claims, the Hudson Court found that the settlement agreement before it was not “fair and reasonable,” because it contained a confidentiality provision and a broad release provision.  The Court held that such provisions “in the parties’ settlement agreement were overbroad, contravene the ‘public-private character’ of employee rights under the FLSA, and serve to ‘nullify the purposes of the Act.’”  Id. at *14, citing Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 710 (1945).

In addition to claims for violation of the FLSA and state wage laws, Hudson’s claims included claims for disability discrimination, failure to accommodate and retaliation under the NJLAD. However, because the Court’s review of the settlement agreement was limited to whether it fairly settled the FLSA claims, it did not address whether the settlement agreement complied with the NJLAD’s requirement that the settlement agreement contain a bold and prominent notice to the employee of the employee’s right to choose to make public details of the discrimination claim.

While the Court declined to approve the settlement agreement, it gave the parties an opportunity to provide it with reasons why the Court should approve the settlement agreement with the confidentiality and release provisions, rather than strike those provisions. It would certainly seem unlikely that the Court would reverse its opinion, contrary to the substantial authority relied upon by the Court in rejecting the inclusion of confidentiality and general release provisions in the settlement agreement.

En nuestra firma hablamos español. This blog is for informational purposes only.  It does not constitute legal advice, and may not reasonably be relied upon as such.  If you face a legal issue, you should consult a qualified attorney for independent legal advice with regard to your particular set of facts.  This blog may constitute attorney advertising.  This blog is not intended to communicate with anyone in a state or other jurisdiction where such a blog may fail to comply with all laws and ethical rules of that state of jurisdiction.