By: Ty Hyderally, Esq., Francine Foner, Esq., and Maya Patel

A recent study of the 2019 New Jersey law banning non-disclosure agreements (NDAs) in employment contracts or settlement agreements, for claims of discrimination, harassment and retaliation in violation of the New Jersey Law Against Discrimination, N.J.S.A. 10:5-12, et seq. (LAD), reveals promising outcomes.  The study, authored by Professor Mark Gough, Ph.D. of Penn State University, School of Labor and Employment Relations, sheds light on the effectiveness of this groundbreaking legislation and its implications for workplace transparency.

NDAs have long been a staple in employment contracts, aiming to protect a company’s confidential information.  However, a significant majority of workers express a desire to end their use in covering up unlawful sexual harassment, discrimination and retaliation in the workplace. In an attempt to address this issue, on March 18, 2019, Governor Phil Murphy signed into law S. 121, which bans NDAs for discrimination, retaliation, and harassment claims in employment contracts or settlement agreements. N.J.S.A. 10:5-12.7 to -12.11. More specifically, the law renders unenforceable: “A provision in any employment contract or settlement agreement which has the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment (hereinafter referred to as a “non-disclosure provision”) shall be deemed against public policy and unenforceable against a current or former employee (hereinafter referred to as an “employee”) who is a party to the contract or settlement.” N.J.S.A. 10:5-12.8(a)

The study, entitled “Breaking the Silence: Stakeholder Experiences with New Jersey’s Non-Disclosure Agreement Ban,” was commissioned by Lift Our Voices, a nonprofit organization advocating for workers’ rights. The goal of the study is to assess the impact of the NDA ban on New Jersey employees, employers, and attorneys. Contrary to concerns of some in the business and legal community that the NDA ban would hinder complaint filings or diminish settlement amounts, the study reveals that the legislation empowered employees to openly discuss their experiences without impeding the resolution of their complaints. The study also found that while many employees were not aware of their rights under the law until they engaged legal representation, once informed of the NDA ban, employees generally praise the protections afforded by the law. According to the study, one employee expressed gratitude, stating, “I found out later this wasn’t the first time this person had been a predator. At least now they can’t hide it from anyone else. Everyone knows and I’m protected.” Another employee emphasized the importance of sharing her story, stating, “People need to know what they did to me. I don’t want anyone else to be at the center of that abuse. I want to tell the world, ‘Don’t work there, don’t work for him, run.’ And I do.”

Despite the positive reception from employees, employer perspectives on the NDA ban vary. The study highlights a significant awareness gap, with many employers unaware of the specifics of the legislation. According to the study, one employer stated, “This is the first I’m hearing about it,” indicating a lack of familiarity with the ban on NDAs. While some acknowledged the inequities inherent in using NDAs to conceal workplace discrimination and harassment, others opposed legislative bans, citing concerns about regulatory overreach. As one employer expressed, “I would never ask an employee to sign [an NDA] myself, but I don’t need another law or regulation telling me what I can or can’t do.” Although some employers expressed reservations about the potential impact of the NDA ban on their operations, most employers reported no significant changes in their practices following the implementation of the law. However, management attorneys have shifted towards advising their clients to include non-disparagement clauses in settlement agreements as a deterrent for plaintiffs considering disclosing facts of the case. In fact, the New Jersey Appellate Division has held that certain statements made by a plaintiff following settlement were not protected by the NDA ban because they violated the non-disparagement provision of the settlement agreement. Savage v. Township of Neptune, 472 N.J. Super. 291 (App. Div. 2022). The New Jersey Supreme Court granted certification and on January 17, 2024 heard oral argument on the question of whether the non-disparagement provision in the parties’ settlement agreement is enforceable. As of this writing, no opinion has been issued.

Not surprisingly, the study found that there was a divergence of opinions between plaintiff and defense attorneys regarding the necessity of NDA bans. While both plaintiff and defense attorneys agreed that the law posed minimal burdens, they held divergent views on potential improvements to the law. Defense attorneys, aligned with business interests, suggested repealing or abolishing the ban on NDAs altogether. Some proposed exceptions for voluntary, post-dispute NDAs as a more pragmatic approach. In contrast, plaintiff-side attorneys generally expressed satisfaction with the law. While some advocated for expressly forbidding non-disparagement clauses, others deemed such an amendment unnecessary.

New Jersey’s ban on NDAs in employment contracts or settlement agreements of claims for unlawful discrimination, harassment and retaliation under the LAD represents a significant milestone in the ongoing quest for workplace equity and accountability. While challenges persist, including awareness gaps and differing perspectives, the study underscores the importance of legislative measures in addressing systemic issues of workplace discrimination and sexual harassment. By listening to the voices of employees, employers, and legal professionals, policymakers can enact meaningful change and cultivate more just workplaces for all.

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