Kathleen M. Connelly and Alexander Avellan, attorneys with
Lindabury, McCormick, Estabrook & Cooper, P.C. (based in Westfield, NJ), explain what New Jersey employers need to know about the Speak Out Act, which prohibits non-disclosure and non-disparagement agreements in sexual harassment and assault cases.

Following a unanimous vote in the Senate, on November 16, 2022, the House of Representatives passed the Speak Out Act (the “Act”) which now heads to President Biden’s desk for signature. The Act is just the latest effort by legislators at the federal and state levels to shine the light on instances of sexual assault and harassment in the workplace. This new legislation renders unenforceable certain non-disclosure and non-disparagement provisions that prevent individuals from disclosing the details of sexual harassment or assault claims that may occur in the future.

In practice, this Act will have a limited impact because its prohibitions only apply to employment or other agreements signed prior to a claim of harassment arising. Thus, the Act will not bar the inclusion of non-disparagement/non-disclosure provisions in separation agreements or settlements of sexual harassment or assault claims. In addition, the Act does prohibit non-disclosure agreements that bar disclosure of other forms of discrimination (e.g., age, race religion) or workplace misconduct. Finally, the Act explicitly states that nothing in the new law limits employers’ prevalent use of non-disclosure and confidentiality agreements designed to protect trade secrets or critical propriety information.

This law will have little effect on New Jersey employers who are already subject to more onerous restrictions on non-disclosure and confidentiality agreements in employment contracts. In 2019 the New Jersey Legislature amended the New Jersey Law Against Discrimination (“NJLAD”) to prohibit the inclusion of non-disclosure provisions in any settlement or employment agreement that precludes employees from discussing not only claims of unlawful sexual harassment, but any other form of unlawful discrimination under the NJLAD.

It bears noting these NJLAD amendments also banned employment agreements mandating arbitration of any discrimination claim under statute, but this restriction was subsequently deemed preempted by the Federal Arbitration Act (“FAA”) which embodies the federal public policy favoring arbitration of employment claims. However, in 2021 Congress passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act which amended the FAA to prohibit mandatory arbitration of sexual assault and harassment claims. It is important to note that with the exception of the carve out for sexual harassment/assault claims, all other forms of employment discrimination, including NJLAD claims, remain subject to the FAA’s policy favoring arbitration and New Jersey employers remain free to enter into mandatory arbitration agreements with respect to these claims.

Key Takeaways:
The passage of the Speak Out Act does not change the legal landscape for New Jersey employers already subject to broader prohibitions against non-disclosure provisions restricting an employee’s ability to discuss the details of unlawful harassment in violation of the NJLAD. Moreover, given the amendments to the FAA, New Jersey employers are further barred from enforcing agreements calling for mandatory arbitration of sexual harassment claims.
Employers may, however, continue to enter into and enforce agreements calling for mandatory arbitration of all other discrimination and employment related claims.

Employers should consider reviewing and revising employment, arbitration, and nondisclosure agreements to ensure compliance with these evolving legislative developments aimed at limiting employer attempts to stifle employees’ ability to speak out about harassment in the workplace.