Amid the nationwide #MeToo movement and a local scandal highlighting some of the issues that sparked the public outcry, New Jersey could soon join New York, California and Washington in prohibiting non-disclosure agreements in workplace sexual harassment and discrimination cases.
Many non-disclosure agreements (NDAs) require an accuser to never reveal any details of an incident in exchange for a financial settlement achieved through arbitration rather than in court. Proponents of S121 argue that employers have used NDAs to silence victims of sexual assault, allowing alleged wrongdoers to continue harming other employees. But some employment law experts suggest that the bill goes too far and could limit options for both employers and accusers. In addition, if Murphy signs the bill, a court challenge could follow in short order.
‘Paying for secrecy’
Senate Majority Leader Loretta Weinberg, D-37th District, a sponsor of the bill, said the NDA practice was essentially “paying for secrecy, which allowed the Bill Cosbys and Harvey Weinsteins of the world to continue to operate with impunity.
“When it comes to the issues of sexual harassment, sexual assault, why would anybody want to even enforce an NDA, except for the victim, who under this bill would be allowed to do so,” Weinberg said.
Weinberg is the co-chair of a select legislative committee scrutinizing the employment practices of the Murphy administration after reports that the administration hired Al Alvarez, who had been accused of sexual assault, as chief of staff at the Schools Development Authority.
Katie Brennan, now a senior housing official, alleges that Alvarez, then a campaign aide, atttacked her in 2017 after a campaign gathering. Brennan said she made numerous attempts to notify the campaign, transition team and administration of the allegations, but her complaints fell on deaf ears.
Alvarez, despite reportedly being urged to leave his post at the SDA, stayed on the job until October 2018 when a reporter from The Wall Street Journal contacted him about Brennan’s allegations.
Weinberg’s bill languished after its introduction early in 2018, only to quickly move through the Legislature in January after Brennan’s accusations and her December testimony before the investigative committee.
By prohibiting employers from enforcing NDAs, including for discrimination and harassment cases, New Jersey’s bill effectively eliminates the option of arbitration, according to some employment lawyers.
That has some experts worried, including the New Jersey State Bar Association.
“The intention is to protect people and in fact what it’s doing is eliminating options for people who find themselves in that situation,” said Domenick Carmagnola, second vice president of the NJSBA.
“Most people that make complaints don’t want to go public with them. They just want it dealt with,” Carmagnola said. “What studies have found is that if somebody complains early and the company has an opportunity to deal with it, for the most part it’s addressed and it doesn’t happen again.”
The legislation, Carmagnola said, would essentially render the settlements a public record that could be pulled up by another person even against the wishes of the accuser.
“When it’s done with they don’t want to relive it,” he said. “This statute allows someone who brings a claim to go back and look at everybody else’s claim and use those claims to support their claim.”
Alvaro Hasani, an attorney at Fisher Phillips, said he is also uneasy about the enactment of S121. The measure could be the “first of the kind in the country” because of the lengths it goes to clamp down on arbitration and NDAs, Hasani said.
“Several other states already have mandatory arbitration agreements and NDAs but they’ve only done so as it relates to sexual harassment claims only,” Hasani said. “What the New Jersey bill does, it’s really just much wider in scope in that it covers literally every type of claim under the New Jersey Law Against Discrimination. All of your protected categories, all types of discrimination, harassment and retaliation.”
The measure could run afoul of the Federal Arbitration Act, enacted in 1925, Hasani suggested.
“Congress enacted [the FAA] to combat what they term the longstanding judicial hostility toward arbitration agreements,” Hasani said. “It was really to encourage the use of arbitration to avoid costly litigation.”
Tim Ford, a partner at the law firm Einhorn Harris, said that the law would almost certainly wind up in court.
“I think it’s going to be challenged on constitutional grounds, New Jersey and federal constitutional grounds,” Ford said. “The federal government has taken a strong position favoring arbitration.”
Hasani said removing employers’ ability to enforce gag orders means those businesses would have less incentive to settle through arbitration.
“I would hope that they understand that NDAs are appropriate in some areas, and some are not,” Weinberg said, pointing to proprietary information such as a restaurant’s recipes or a pharmaceutical company’s drug formulas.
But the passage of the bill through the Legislature has and will prompt companies in New Jersey to beef up their workplace harassment policies, according to Carmagnola.
“Companies are encouraged to have detailed policies [and] procedures and to take action in response to complaints,” Carmagnola said. “The big push right now should be ensuring all companies have those policies, they have a procedure and people are aware of it and feel comfortable enough that they’re reporting [incidents].”
The Brennan case
Brennan, in a lawsuit against the state, alleges that soon after her testimony before the legislative committee in December 2018, the New Jersey Office of Equal Employment and Affirmative Action notified her it was opening an investigation into the allegations against Alvarez.
That would mean she could not publicly discuss the case, according to the lawsuit, and Brennan alleges those actions were taken to silence her.
But given Brennan’s public employment, as well as the fact that she went to court, S121 would not apply to her case. The measure is aimed at private businesses.
“Even the Katie Brennan case … they’re a matter of public record until it’s settled. You can access [it] on e-courts, the nature of the complaint, so there isn’t confidentiality,” Ford said.
Brennan’s attorney, Katy McClure, Smith Eiber LLC, called for Murphy to sign the bill.
“It allows the victims of harassment and discrimination to elect whether to have confidentiality, and requires that if a settlement agreement does provide for confidentiality, there needs to be a provision in place that alerts the employee that if they share the information publicly, then it can’t be used against them,” McClure said.
The bill, McClure added, “will allow victims to know about other victims, and will not force confidentiality on people, on women and other people who complain.”
On Feb. 5, the governor’s office unveiled revisions to state policies on handling allegations of sexual misconduct against current and prospective state employees, mainly by extending the current policies to gubernatorial transition teams.
The attorney general’s equal opportunity office said it did not have jurisdiction over Brennan’s allegations because neither she nor Alvarez was a state employee during the time of the alleged incident.
“These sweeping revised policies and procedures make significant and impactful changes to how sexual harassment and misconduct allegations are handled in state government,” Murphy said in a statement accompanying the changes. “These additional measures clearly dictate the appropriate course of action to be taken by both survivors and the state.”
But S121 could raise doubts about the NDAs that Murphy’s campaign has enforced against its participants, which Murphy, at an unrelated Feb. 8 press conference in Paterson, said he is reluctant to change.
“Campaigns the country over —my guess is the world over – have operated in very similar fashions to the way we operated, including NDAs,” Murphy said. “And I see no reason why they should operate otherwise.”
Those NDAs have drawn considerable opposition from lawmakers, including Weinberg, who has called for Murphy to relieve campaign participants of the NDA requirements.
“I can’t see much covered by proprietary information in a campaign once a campaign is over,” Weinberg said.
“We read news reports that some people wanted to talk about certain issues that they’re afraid to because of the NDA,” Weinberg said. “That there was an atmosphere in the campaign that did not encourage people to feel comfortable, that a male threw a chair at a woman and made some remark that went along with throwing a chair that had to do with her gender.”