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June 12, 2024
The New Jersey Supreme Court recently held that a non-disparagement provision in a settlement agreement was unenforceable under the New Jersey Law Against Discrimination (LAD). This decision will affect the use of non-disparagement provisions for New Jersey employees.
In Savage v. Township of Neptune, 2024 N.J. LEXIS 377 (May 7, 2024), a female police officer sued the township on two occasions for sex discrimination, retaliation, and harassment under the LAD. Both cases settled. The second settlement agreement contained a non-disparagement provision that provided that the parties would not make any statements “regarding the past behavior of the parties” that “tend to disparage or impugn the reputation of any party.” The provision also contained a carve-out that stated, “[n]othing herein shall be construed as prohibiting or precluding in any way testimony or statements of Plaintiff related to other proceedings including lawsuits.” After the second settlement agreement was executed, the plaintiff stated during an interview with a television news show that the township, among other things, “abused me for about eight years” and “[t]hey don’t want women there.” The township sued to enforce the non-disparagement provision.
Significantly, a section of the LAD was enacted in the wake of the #MeToo movement in 2019 to remove barriers that made it difficult for employees to discuss abuse. The new section of the statute provides as follows: “[a] provision 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 (hereinafter referred to as a ‘non-disclosure’ provision) shall be deemed against public policy and unenforceable against a current or former employee.” N.J. Stat. Ann. § 10:5-12.8(a).
Much of the New Jersey Supreme Court’s decision in Savage focused on the statutory language referring to a “non-disclosure provision” because the township argued that a non-disparagement provision was different. The New Jersey Supreme Court did not agree. The New Jersey Supreme Court noted that the LAD is to be liberally construed and its intent is to bar provisions having the effect of concealing the wrongdoing. Because the non-disparagement provision in this case was far-reaching and prevented the plaintiff from discussing her claims under the LAD, the New Jersey Supreme Court found that the provision was unenforceable. The New Jersey Supreme Court also concluded that the carve-out in the second settlement agreement (related to other proceedings including lawsuits) did not save the provision because victims of discrimination, retaliation, and harassment have the right to speak about their experience in many ways.
Notably, the New Jersey Supreme Court did not conclude that a non-disparagement provision is per se unenforceable under the LAD. Rather, the New Jersey Supreme Court stated that the provision “would have to be narrowly drawn to ensure the details relating to the claims listed in section 12.8 could be revealed publicly.”
Therefore, employers should review their employment contracts and settlement agreements to determine if they have the effect of stifling a New Jersey employee’s ability to discuss a claim of discrimination, retaliation, and harassment. If they do, employers should re-draft these provisions to more narrowly protect their interests while permitting employees to discuss claims under the LAD.
This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice. Always consult an attorney with specific legal issues.
