Many businesses include non-disparagement clauses in employment contracts and settlement agreements to prevent former employees or contractors from making negative remarks about the company. However, the enforceability of these clauses in New Jersey is now in question. In May 2024, the New Jersey Supreme Court ruled that non-disparagement clauses in employment or settlement contracts are unenforceable if they prevent an employee from discussing claims of discrimination, harassment, or retaliation. In the case of Savage v. Township of Neptune, the Court found that non-disparagement clauses are not allowed under the New Jersey Law Against Discrimination (NJLAD) if they attempt to silence discussion of claims under the Act. Employers and businesses should take note of this decision to tailor their preparation of non-disparagement clauses or provisions.

Background

In 2019, the New Jersey Legislature amended the New Jersey Law Against Discrimination in the wake of the “#MeToo” movement to render any provision in an employment contract or settlement agreement unenforceable if it had the “purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment (hereinafter referred to as a “non-disclosure provision).”

In the Savage case, Christine Savage had worked for the Neptune Township Police Department as a police officer.  In December 2013, Savage brought suit against the Department, the Township, and various individuals alleging sexual harassment, discrimination, and retaliation.  That suit was settled in 2014.  In 2016, Savage filed a second suit against a number of the same defendants alleging that they had violated the settlement agreement and had engaged in ongoing intensified sex discrimination, harassment and retaliation.  That action was also settled.  Although the second settlement agreement did not contain a confidentiality or non-disclosure provision, it did contain a non-disparagement provision prohibiting the parties from making, or causing others to make, prohibiting statements “regarding the past behavior of the parties” that would “tend to disparage or impugn the reputation of any party.” Shortly after executing that agreement, Ms. Savage gave an interview to a local television station during which she and the interviewer made comments regarding her claims. Thereafter, the Police Director for the Township and the Chief of the Police Department, both of whom were parties to the second litigation and settlement agreement, filed a motion to enforce the second settlement agreement arguing that Savage violated the non-disparagement provision in that interview.

The trial court found that although the NJLAD prohibited non-disclosure and confidentiality clauses, it did not prohibit non-disparagement clauses and that Savage had violated the terms of the non-disparagement clause in her interview.  Savage appealed.  In 2022, the Appellate Division reversed the order of the trial court.  The respondents sought certification, which was granted by the Supreme Court.

The Savage Decision

The NJ Supreme Court held that the non-disparagement clause conflicted with the NJLAD’s prohibition against prohibiting disclosure of details relating to a claim of discrimination, retaliation, or harassment, and thus, was unenforceable.  In language that may be somewhat chilling to employers, the Court noted that “Survivors of discrimination, retaliation, and harassment now have a legal right to tell their story – a right that cannot be taken away by a settlement agreement.”

Not All Non-Disparagement Clauses Are Unenforceable

It’s important to note that the Savage Court did not find all non-disparagement clauses unenforceable. Non-disparagement clauses can still be enforced, but with a crucial condition: they must not seek to prohibit disclosure of the details underlying discriminatory conduct.  It is hoped that this limitation originally set by the legislature and now highlighted by the Supreme Court will protect employees from being subject to discrimination.  However, it also limits the relief available to employers through settlement, which may have the unintended effect of having more discrimination claims go to trial.

What This Means For Employers and Businesses

Some businesses or employers may be concerned that they have recently used agreements or releases with questionable confidentiality, non-disclosure, or non-disparagement provisions. Employers may also be worried that a standard provision in their employment contracts, severance agreements, and releases may be deemed to be unenforceable with regard to discrimination claims.  These employers and businesses should consult an attorney to review these contracts and get advice on proceeding. For help reviewing contracts of all types, contact Carol Harding at 856-354-7700 or csharding@earpcohn.com.

Carol Harding represents businesses, public entities, and individuals in employment-related matters. In addition to her litigation experience, she evaluates her clients’ policies and procedures to avoid future legal liability.