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Understanding New Jersey’s law on non-disclosure agreements

| Dec 3, 2020 | employment law | 0 comments

Non-disclosure agreements are a popular method used by businesses and celebrities to protect information from public disclosure. Such agreements are commonly used by both small and large businesses in New Jersey to protect their proprietary information from snooping by competitors. They are also used in the aftermath of a lawsuit that has been settled to prevent the parties from disclosing the details of the claim and the terms of the settlement. A seismic shift in the use of non-disclosure agreements occurred in March 2019 when New Jersey passed a law that prohibits the use of non-disclosure agreements in the settlement of various types of employment claims.

The new law

The new law makes two critical amendments to the New Jersey Law Against Discrimination. The use of such agreements in settling law suits is prohibited if the agreement has the “purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment. . . .” The new law also requires that every settlement agreement involving such claims contain a notice that, even if the parties agreed to keep the facts of the case confidential, the confidentiality provision is unenforceable against the employer if the employee publicly releases enough information about the case so that the employer can be reasonably identified.

The second major change was the prohibition of any term in a non-disclosure agreement that is intended to be the waiver by an employee of any procedural or substantive right relating to a claim of discrimination, retaliation, or harassment.

The old law

Non-disclosure agreements have long had another purpose: to prevent former employees from revealing confidential or propriety information to a competitor. If an employee is fired or otherwise quits a job under duress, the employee may be tempted to give or sell confidential information to a competitor. A non-disclosure agreement that has been executed under proper circumstances may be an effective barrier to such an action. These agreements are not directly affected by the new law, but any business that is considering adding a non-disclosure provision to its standard employment agreement may benefit from having the proposed language reviewed by a capable small business attorney.