Non-Disclosure Agreements

Over the past several weeks, New Jersey has enacted, or plans on passing, several new bills that secure New Jersey’s position as one of the nation’s leaders in employee protections.  The first, known as the Diane B. Allen Equal Pay Act (“Pay Equity Bill”), bans employers from paying women and other protected groups less than men for similar work.  The second, the New Jersey Paid Sick Leave Act (“Paid Sick Bill”), essentially guarantees all private employees, regardless of company size, paid sick leave/time off for certain qualifying situations.

New Jersey Pay Equity Bill

As previously blogged, on Equal Pay Day (April 10th), Governor Phil Murphy announced he would sign legislation known as the Diane B. Allen Act later that month.  On April 24, 2018, Governor Murphy signed what is considered to be the “most sweeping equal pay legislation in the nation.”

In short, the new law prohibits employers from paying any member of any protected class under the New Jersey Law Against Discrimination lower wages and benefits than their male counterparts.  If an employer pays one person more than another for “substantially similar work”, that employer will have to establish the basis for the pay discrepancy.  New Jersey’s law is for broader protections than other states in that it is not limited to gender only.  Damages for a successful claim include three (3) times the monetary damage for the violation in addition to back wages for up to six (6) years.  Critics of the new law have expressed concern that it departs from the federal standards and makes New Jersey unfriendly to businesses, especially in light of recent changes in the Federal Tax Code.

The Pay Equity Bill becomes effective July 1, 2018.

New Jersey Paid Sick Bill

Governor Murphy also recently pledged to sign the New Jersey Paid Sick Leave Act on May 2, 2018, which will make New Jersey the 10th state with paid sick leave legislation.

Once signed, all private businesses, despite their size, that employ individuals in the State are required to comply with the Paid Sick Bill.  Unlike other legislation, there is no minimum number of hours an employee must work to be eligible for leave under the new law.

Leave can be used for an employee’s own qualifying need or that of a family member,  which is defined to include children, grandchildren, siblings, spouses, domestic partners, civil union partners, parents, and grandparents.  The definition of a “family member” also extends to any individual whose affiliation with the employee is the “equivalent of a family relationship.”  Leave may be used for, among other things: (1) the diagnosis, treatment, recovery, or preventative care of a mental or physical illness(s); (2) to seek counseling, relocation, legal services, and/or medical attention for an employee or family member that is a victim of domestic or sexual violence; and/or (3) to attend a school conference, meeting, or other child-education related event.  In some instances, advance written notice to the employer of the employee’s intention to take paid leave may be required.

Under the legislation, leave begins to accrue on the later of the employment date or the law’s effective date (currently anticipated to go into effect on October 29, 2018) at a rate of one (1) hour for every 30 hours worked. The law does not require employers to allow employees to accrue more than 40 leave hours in a consecutive 12 month period, with such period to be determined by the employer.

Alternatively, employers can provide employees with 40 leave hours on the first day of the benefit year as an alternative to accruing time.  If employers “front load” such leave, employees may carry over accrued but unused leave or employers must offer employees compensation for unused leave by the end of that benefit year.

Employers should consult with an attorney regarding the anticipated employer notice, posting, and record keeping requirements associated with the Paid Sick Bill, as well as determining employee eligibility and duration of waiting periods that may be implemented before leave can be used.

 

A bill introduced in the New Jersey Legislature on April 4, 2013, Assembly Bill 3970, seeks to prohibit enforcement of agreements restricting departing employees from competing, disclosing confidential information, or soliciting employees or customers if those employees are found eligible to receive unemployment compensation benefits.

The legislation is intended to remove barriers for those seeking new employment, but the language of the proposed statute is broad and provides that an unemployed individual found eligible to receive unemployment benefits “shall not be bound by any covenant, contract, or agreement . . . not to compete, not to disclose, or not to solicit.”  A copy of the bill can be found here.   Thus, even agreements allowing a terminated employee to work for a competing firm, but prohibiting the employee from soliciting customers or employees or disclosing trade secrets could be invalidated.

The proposed law, which would not apply to any agreement or covenant in effect before the law is enacted, raises a number of issues for employers and employees.  If enacted, employers may be reluctant to terminate underperforming workers because of fears the employer will not be able to adequately prevent such terminated employees from competing and soliciting their clients and employees.  The proposed legislation may also cause more employers to put such agreements in place before enactment of the statute, thereby increasing the number of employees currently subject to non-compete and non-solicitation agreements.

Under the proposed legislation, the enforceability of non-disclosure, non-competition, and non-solicitation agreements would turn on whether the terminated employee is found eligible for unemployment benefits.  The legislation, therefore, also could lead to more unemployment compensation disputes regarding the circumstances surrounding an employee’s departure, as employers seek to maintain contractual post-employment restrictions and employees seek to eliminate them.

Whether the proposed statute will be enacted is uncertain, but even given the prospect of such a significant change in the law, employers should look at their existing workforce, employment agreements, and workplace policies and procedures to evaluate whether the investments they have made in their business and employees are being adequately protected.