As soon as Senate Bill 121 (S121) was signed, employment attorneys were scratching their heads not only on how to interpret the law but also on how to comply with it. On a close reading, however, the law does not prohibit the very facts upon which it was based—a Stormy Daniels situation. There is no prohibition on anyone—including the very same employer who settled its claims—from buying the exclusive rights to the former employee's story. This is not necessarily bad news for anyone though. Employers still have an avenue to get confidentiality, and employees have the choice to take additional consideration to keep quiet or to go public with their allegations.

On March 18, 2019, Governor Murphy signed S121, which renders unenforceable, any provision in an employment contract or settlement agreement which had the “purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment.” That new law was effective immediately. Further, the new law required a new, specific statement in any “settlement agreement resolving a discrimination, retaliation, or harassment claim by an employee against an employer.” That statement, bold and prominently placed, was to provide notice that “although the parties may have agreed to keep the settlement and underlying facts confidential, such a provision in an agreement is unenforceable against the employer if the employee publicly reveals sufficient details of the claim so that the employer is reasonably identifiable.”

Although appearing simple in its goal, employment law attorneys on both sides of the aisle were left scrambling on what the meaning of “employment contract” or “settlement agreement” would be. More importantly, what exactly did “resolving a … claim” mean. Did a claim for discrimination, retaliation, or harassment have to exist prior to the settlement? If the settlement releases “all claims,” does that amount to “resolving a … claim”? If so, this law would apply to any settlement that released “all claims”—from products liability to contract claims. Would resolution of commercial disputes now have to state specifically that the settlement does not “resolve” claims of discrimination, retaliation, or harassment? Was it possible now to ever waive “all claims” between two parties and also provide for confidentiality?

Although those questions may have to await further development through regulations, court cases, or other guidance, there does appear to be a side street for employers to take if they wish to keep an employee from publicly disclosing “resolved” claims of discrimination, retaliation, or harassment.

The law only prohibits provisions in “any employment contract or settlement agreement which has the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment.” The law does not prohibit any purchase of the exclusive rights to someone's story. There appears to be nothing prohibiting the following scenario. An employer and an employee enter into a “employment contract” or a “settlement agreement” which includes no provision for confidentiality and includes the required disclaimer that the employer will be free to disclose its side of the story if the employee decides to go public. Once that agreement is binding—and therefore all claims of discrimination, retaliation, or harassment are wholly resolved—the employer and employee could bargain and contract for an additional agreement. The employer could purchase the exclusive rights to the employee's story of their time with the employer in order to prohibit the employee from going public with their claims.

Such an agreement would necessarily need additional consideration to be valid. Such an agreement also would require the employee to have kept the story quiet in the interim. No one would buy the rights to an already-public story. Therefore, the employer gets the benefit of a private resolution of claims by paying (a second time) for that privacy by buying the exclusive rights to the story.

Moreover, there appears to be nothing to prohibit the setting up of such a plan even before the “employment contract” or “settlement agreement” is signed. A plan could be laid out and two payments of consideration negotiated as a global settlement of the allegations before anyone signs the bottom line of either document. The employee gets the benefit of sufficient consideration to buy this supplemental right, and the employer gets the benefit of confidentiality.

Although such a process skirts the purpose of the new law—and may in fact go against the goal of the law—it is not necessarily bad news. Employers often desire to keep their reputation intact by prohibiting disclosure of alleged claims of discrimination, retaliation, or harassment. These employers have the option now, to “resolve” the employment claims and then enter a second agreement to buy the publicity rights. On the other hand, employees often have no interest in going public with a story—and the media attention and criticism that would go with that. Such employees now have the option for additional consideration in order to sell their story and agree not to go public. A win-win? Just might be the best of both worlds.

Jessica Jansyn is a partner with Laddey Clark & Ryan in Sparta. She focuses her practice on commercial litigation, employment and labor law, and government services.