New Jersey Employers Face New Restrictions on Non-Disparagement Clauses

Many settlement agreements contain non-disclosure and/or non-disparagement clauses to deter employees from revealing information about their claim and causing further damage to an employer. However, several states have restricted these provisions in recent years for employment discrimination claims. 

New Jersey enacted legislation to address non-disclosure clauses but left an open question about whether non-disparagement clauses were also prohibited. The New Jersey Supreme Court recently ruled on this issue, making it harder for employers to prevent claimants from speaking out after a settlement. 

New Jersey Law Against Discrimination

In 2019, New Jersey enacted a law that prohibited employers from including a provision in an employment contract or settlement agreement that had “the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment.” N.J.S.A. § 10:5-12.8(a).

The provision did not expressly mention non-disparagement clauses, which left open whether employers could use a non-disparagement provision to deter a claimant from making statements related to the case that impugned the reputation of the employer.

Savage v. Township of Neptune

The New Jersey Supreme Court case involved a female police officer who filed a lawsuit against the Neptune police department, the township, and other parties alleging sexual harassment, sex discrimination, and retaliation. The first lawsuit settled as did the second one a few years later. However, the agreement settling the second lawsuit contained a non-disparagement clause stating:

The parties agree to not make any statements written or verbal, or cause or encourage any others to make statements, written or verbal regarding the past behavior of the parties, which statements would tend to disparage or impugn the reputation of any party. The parties agree that this non disparagement provision extends to statements, written or verbal, including but not limited to, the new media, radio, television, . . . government offices or police departments or members of the public.

After signing the agreement, the plaintiff made comments to the news media indicating that the department’s treatment of women “ha[s] not changed, not for a minute. It’s not gonna change, it’s the good ol’ boy system.”

Defendants filed a motion to enforce the non-disparagement provision, which was granted by the trial court, affirmed in part and reversed in part by the Appellate Division, and then appealed again to the state Supreme Court. 

The Decision

The state Supreme Court held that the Law Against Discrimination prohibits any provision that has the effect of concealing the details related to a claim of discrimination, retaliation, or harassment, including non-disparagement provisions. However, the Court did not broadly ban non-disparagement clauses, reasoning that these provisions could be narrowly tailored to apply to statements unrelated to the discrimination claim.

The clause in question was found to be unenforceable because it had the effect of concealing the plaintiff’s discrimination claims.

Takeaways for Employers

If you have New Jersey-based employment contracts or settlement agreements with non-disparagement clauses, you should consult an experienced attorney to discuss whether they can or should be revised to comply with the Court’s decision.

Please feel free to contact any of our attorneys if you have questions about the decision or need assistance evaluating what changes you may need to make to your agreements.

NOTICE: Material provided on this website has been prepared by Kauff McGuire & Margolis LLP solely for general informational purposes, and it is not intended to and does not constitute legal advice. Material provided on the website is not privileged and does not create an attorney-client relationship with the Firm or any of its lawyers.