Dive Brief:

• New Jersey’s five year-old ban on the use of NDAs to cover up workplace misconduct hasn’t had any effect on the ability of parties in a complaint to reach a settlement, a study shows.
• Nor has the law led to an increase in plaintiff and management-side lawyer caseloads, most likely because few people on either the employee or management side are familiar with it, says Mark Gough, a Penn State associate professor of labor and employment relations who conducted the study.
• If there’s one result from the law, it’s that management-side attorneys are more likely to recommend their clients use non-disparagement agreements to protect their companies’ reputations rather than risk violating the law by using NDAs for this purpose. “Increased use of non-disparagement clauses seems to be the only salient secondary effect of [the law],” says the report, called Breaking the Silence.

Dive Insight:

New Jersey passed S. 121 in March 2019 to ban the use of nondisclosure agreements for discrimination, retaliation and harassment claims, three years before Congress passed a similar law, called the Speak Out Act, in 2022. Other states, including California, Maryland, New York, Oregon, Tennessee, Virginia, Vermont and Washington, have since passed similar laws, according to the report.

Although New Jersey’s law has been in effect for several years, it’s virtually unknown to employees, the study shows. Of eight people Gough interviewed who’ve been involved on the plaintiff side of misconduct claims, only one knew about the law and came forward in part because of it. The rest only learned about it from their legal representatives after already deciding to come forward.

“This … reveals a distinct need for public education of rights at work even before lawyers come into the picture,” Gough said. 

Most employers and their HR officers didn’t know about the law, either. “There is a clear lack of general knowledge (or concern) about S. 121 among employer owners and human resource officers,” Gough said. 

Gough recounted an owner of a company employing nearly 150 workers in north New Jersey who admitted knowing nothing about the law until being asked about it. “‘I didn’t even know about this ban until today,’” the owner said. 

All of the attorneys participating in the study knew about the law, and said it didn’t play a role in the process for settling claims. “Both plaintiff and defense lawyers … acknowledge S. 121 has not affected the frequency or ease of obtaining a settlement,” the report says. 

Nor has it resulted in employers changing their business practices. “I would never ask an employee to sign [an NDA] myself,” one employer told Gough, “but I don’t need another law or regulation telling me what I can or can’t do.” 

“It’s a nothingburger,” one attorney said. “My clients have more important things to worry about.”

Some management attorneys said their recommendation for clients to replace NDAs with non-disparagement agreements doesn’t close off claims but it can still be a reasonable option. 

“Even if [a non-disparagement clause] ultimately wouldn’t hold up … it is an extraordinary plaintiff who is going to risk a settlement and not voluntarily comply,” one attorney said. 

The study was based on interviews with a small sample of people who have been involved in misconduct-related claims, are employers or HR officers or are attorneys who represent clients in these types of employment disputes.