In Savage v. Neptune Township, the New Jersey Supreme Court determined that the New Jersey Law Against Discrimination’s (NJLAD) prohibition in N.J.S.A. 10:5-12.8(a) on nondisclosure or confidentiality provisions (i.e., NDAs) in employment contracts or settlement agreements extends to non-disparagement clauses that have “the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment.”
Lower Court Decisions
In this case, the plaintiff brought a complaint against the Township, the police department, and individual police officers, claiming discrimination, harassment, and retaliation under the NJLAD. In July 2020 the parties entered into a settlement agreement which included the following mutual non-disparagement clause:
- The parties agree not to make any statements written or verbal, or cause or encourage others to make any 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 news media, radio, television, internet postings of any kind, blogs, social media …, consumer or trade bureaus, other state, county or local government offices or police departments or members of the public. Neptune Township will respond to inquiries from prospective employers with dates of employment and positions held. The parties agree that non-disparagement is a material term of this Agreement and that in the event of a breach, the non-breaching party may seek enforcement of the non-disparagement provision and damages for its breach, and that the filing of any such action would not be deemed a breach of this Agreement. Nothing herein shall be construed as prohibiting or precluding in any way testimony or statements of [p]laintiff related to other proceedings including lawsuits.
Just days after receiving the settlement payment, the plaintiff interviewed with a television news reporter and made comments about Defendants which could be viewed as disparaging, including referring to them as “good ol’ boys.” Subsequently, the defendants filed a motion to enforce the settlement arguing that the plaintiff’s actions violated the non-disparagement clause.
The trial judge granted defendants’ motion and found that the NJLAD prohibition only barred confidentiality or non-disclosure agreements and “if the Legislature had intended to include non-disparagement provisions in the statute it would have done so.” Further, the trial court found that both parties had extensively negotiated the agreement and the non-disparagement clause was a “material term of this settlement.” Further, the trial court found that it was an acceptable agreement as it was a “mutual and reciprocal obligation” that “protected both the plaintiff, as well as the defendants in this matter.” Thus, the trial court determined that the plaintiff violated the non-disparagement clause in the agreement when she gave her interview, granted the defendants’ motion to enforce the settlement and subsequently awarded the defendants counsel fees and costs for breach of the non-disparagement clause.
On appeal, the Appellate Division found that the non-disparagement provision in the settlement agreement was enforceable and not against public policy because the plain language of the statute did not address non-disparagement provisions and the legislative history does not indicate an intent to prohibit the enforcement of non-disparagement provisions.
However, when considering whether the plaintiff’s statements actually violated the terms of the settlement agreement, the Appellate Division noted that the parties agreed “not to make any statements written or verbal, or cause or encourage others to make any statements, written or verbal regarding the past behavior of the parties, which statements would tend to disparage or impugn the reputation of any party.” In this matter, the court reasoned that the plaintiff’s comment that women were “oppressed,” that the department did not “want women there,” and that the department had “not changed,” would not change, and was “the good ol’ boy system,” are statements about present or future behavior, not comments about past behavior prohibited under the plain language of the agreement.
Thus, while the Appellate Division determined that the non-disparagement clause was enforceable, it also found that the plaintiff’s statements during the televised interview did not actually violate the terms of the settlement agreement.
New Jersey Supreme Court
On appeal to the New Jersey Supreme Court, Savage argued that the Appellate Division’s analysis was flawed as it focused “on the label used in the settlement agreement in this case – ‘non-disparagement provision’ — instead of the clause’s purpose and effect,” such that the Appellate Division “mistakenly upheld a provision that will ‘allow[ ] employers to silence victims of discrimination, retaliation or harassment through’ the use of similar non disparagement clauses.” According to Savage, that outcome would violate the NJLAD and its express language.
On the other hand, defendants contended that the NJLAD prohibition did not apply here because the statute’s language only addresses non-disclosure provisions and neither addresses nor prohibits non-disparagement clauses. In addition, defendants maintained that Savage “blatantly ignored the non-disparagement clause during” the interview with NBC News. Defendants also argued that eliminating non-disparagement clauses “would discourage settlement by both employers and employees.”
In evaluating the statute at issue, the New Jersey Supreme Court considered that the NJLAD bars provisions in employment contracts or settlement agreement that have “the purpose or effect of concealing details relating to a claim of discrimination, retaliation, or harassment” and noted that such provision are “against public policy and unenforceable.” Thus, the court reasoned that the law extends to non-disparagement provisions that “would conceal details about discrimination claims.” While the Court noted that the plain language of the NJLAD expressly references particular types of clauses that might be barred such as non-competition agreements and nondisclosure agreements, the fact that the Legislature did not exempt non-disparagement clauses did not limit this. The Court noted that the NJLAD’s language bars the concealment of details relating to a claim of discrimination, retaliation, or harassment and supports a broad reading and interpretation of the statute.
The Court did take notice of the fact that “[i]n theory, parties can agree not to disparage one another by disclosing information that has nothing to do with ‘details relating to … claim[s] of discrimination, retaliation, or harassment.’ … For example, parties could agree not to disclose details about their personal lives or matters unrelated to a discrimination claim — like ‘my employer drinks heavily at work’ or ‘cheats on his taxes.’ Such an agreement, however, would have to be narrowly drawn to ensure that details relating to the claims listed in section 12.8 could be revealed publicly.”
Further, the Court considered the Legislative history of the NJLAD which was “enacted in the wake of the #MeToo movement to protect individuals who suffer sexual harassment, retaliation, and discrimination from being silenced by settlement agreement and employment contracts.” Applying this to the clause at issue, the Court noted that “Paragraph 10 of the settlement agreement uses expansive language that encompasses speech about claims of discrimination, retaliation, and harassment.” Thus, the Court determined that the agreement “encompasses and would prevent employees from revealing information that lies at the core” of what the NJLAD protects which is details as about the claims of discrimination and thus directly conflicts with the NJLAD. As such, the Court held the non-disparagement clause in the settlement agreement “against public policy and unenforceable.”
Takeaways
Employers should be mindful of this case when drafting settlement agreements and/or employment contracts and make sure that such agreements comply with the NJLAD. When drafting such agreements, the parties should understand that provisions that include non-disparagement provisions that violate the NJLAD’s prohibition on nondisclosure or confidentiality provisions in employment contracts or settlement agreements that have “the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment,” will be unenforceable. If the parties seek to enter a non-disparagement agreement not to disclose details about their personal lives or matters unrelated to a discrimination claim, the parties should ensure that this provision is narrowly drawn to ensure that details relating to discrimination, harassment, or retaliation claims as referenced in N.J.S.A. 10:5-12.8(a) could be revealed publicly.
This summary is for informational purposes only and is not intended to constitute legal advice. This information should not be reused without permission.
