By: Robert W. Small
Frequently, Employers enter into agreements with terminated employees that involve the payment of severance, which the employee would not otherwise be entitled to, in exchange for a release of all claims against the Employer arising out of the employment or termination of employment. Such agreements occur even in the absence of a claim of discrimination or wrongful conduct by the Employer, such as when there is a layoff or job elimination. Routinely, such agreements contain confidentiality requirements that have multiple goals. Where there is an actual claim of discrimination, such clauses keep the allegations out of the public eye. In the layoff scenario, such clauses prevent those not eligible to participate in the severance arrangements from knowing of them. Severance agreements also frequently require the arbitration of claims, waive a right to a jury, and prohibit class or concerted action claims.
Recent amendments to the New Jersey Law Against Discrimination (LAD) will significantly change, if not eliminate, the use of such agreements. The amendments are effective immediately and render unlawful as against public policy agreement terms that:
waive any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment;
prospectively waive a right or remedy under the LAD or any other statute or case law; or
have the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment.
New Jersey Employers will have little incentive to enter into Severance Agreements, the terms of which may not be kept confidential (which must contain a prominent notice to the employee that it cannot be punished for making disclosure of the details of the claim), and provide no protection from the employee exercising a “substantive right” or obtaining a “remedy” available under the LAD “or any other statute or case law. The amendments’ prohibition of requiring that such disputes be arbitrated might run afoul of the Federal Arbitration Act and a 2017 United States Supreme Court case that held that states may not enforce laws which discriminate against arbitration agreements, but even if that is the case, the use of such agreements in New Jersey has been negatively affected.
Employers should immediately review existing employment agreements and employee handbooks to remove any language that might now be unlawful as the amendments accord employees tort remedies against employers whose agreements, including employment agreements, contain language violative of the amended LAD.
If you have any questions, or would like additional information, please contact Bob Small, Partner in Reger Rizzo & Darnall’s Employment Practices Group, at 215.495.6541, or via email at firstname.lastname@example.org.
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