Non-disparagement clauses not covered by New Jersey law

Non-disparagement is not the same as non-disclosure. It sounds simple and straightforward, except when it’s not. This was the case with Savage v. Township of Neptune.

It was only a matter of time before New Jersey courts would begin issuing judgment on the March 18, 2019, amendment to New Jersey’s Anti-Discrimination Law (“NJLAD”) preventing the enforcement of nondisclosure agreements in employment contracts and settlement agreements. In 2019, experts and practitioners questioned the scope and scope of this NJLAD supplement. Three years later, in Savage vs. Neptunethe New Jersey Appellate Division has now clarified that the non-disparagement provisions are not covered by or included in the prohibition of non-disclosure provisions in employment contracts and settlement agreements.

Yet it’s easy to see how two fundamentally different clauses – non-disparagement and non-disclosure – can be blurred, and that’s precisely what happened in Savage vs. Neptune. In underlying litigation, the plaintiff, a sergeant with the Neptune Police Department, alleged that the township engaged in sex discrimination, harassment, and unlawful retaliation in violation of NJLAD. The parties eventually settled this dispute and entered into a formal written settlement agreement which contained a non-disparagement provision, but not a non-disclosure provision. The non-disparagement clause, which was reciprocal, provided:

The parties agree not to make any written or oral statements, or to provoke or encourage others to make any statements, written or oral, concerning the past conduct of the parties, which statements would tend to disparage or undermine the reputation of a party. The parties agree that this not[-]disparagement provision extends to statements, written or verbal, including but not limited to news media, radio, television, internet postings of any kind, blogs, social media (e.g., Facebook, Instagram, Twitter, etc.), consumer or trade offices, other state, county or local government offices or law enforcement agencies or members of the public. The Township of Neptune will respond to inquiries from potential employers with dates of employment and positions held. The parties agree that non-disparagement is an essential 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 filing such an action would not be considered a breach of this Agreement. Nothing herein shall be construed as prohibiting or in any way excluding Plaintiff’s testimony or statements relating to other proceedings, including lawsuits.

After the case was settled, the plaintiff interviewed a reporter for NBC news. During this interview, the applicant was interviewed and answered questions about the case and the police department. Among other things, the complainant stated that she had been abused for approximately eight years, slapped with false disciplinary charges and arbitrarily deemed unfit for work, that women in the police department were oppressed and that it was a “good old system”. The Township of Neptune then decided to enforce the settlement agreement against the plaintiff on the basis that she had violated the non-disparagement provision of the agreement when she commented during the television interview that the service police hadn’t changed and was still a good old boys club. The judge hearing the motion ruled against the plaintiff and awarded Neptune Township $4,917.50 in attorneys’ fees and costs arising from the plaintiff’s breach of the non-disparagement clause.

The plaintiff appealed, arguing, among other things, that the non-disparagement provision was contrary to public order and unenforceable under NJSA 10:5-12.8(a), the 2019 NJLAD statutory amendment prohibiting the application of nondisclosure provisions in employment settlement agreements against plaintiffs. The complainant argued that the non-disparagement provision prohibited her from making statements about the past conduct of the police department and, therefore, had the effect of concealing details of her allegations of employment discrimination, retaliation and harassment, thus putting the design of the NJLAD Statutory Amendment squarely at issue in the case.

Although the Appeals Division found that the trial judge erred in finding that the plaintiff had in fact breached the terms of the non-disparagement clause of the settlement agreement during the television interview and , therefore, set aside the lower court’s order granting the township’s motion to enforce the settlement agreement, the Appeals Division expressly rejected plaintiff’s argument that the non-disparagement clause was contrary to public order and unenforceable. To the contrary, the Appeals Division specifically held that the terms of the non-disparagement clause were in fact enforceable and did not violate NJSA 10:5-12.8(a), Amended Section of NJLAD Statute.

In making its decision that non-disparagement provisions are not excluded from inclusion in employment settlement agreements, the Appeals Division first reviewed the plain language and intent of the 2019 Statutory Amendment to NJLAD. This statutory amendment reads as follows:

A provision of any employment contract or settlement agreement that has the purpose or effect of concealing details relating to an allegation of discrimination, retaliation or harassment (hereinafter referred to as a “non-disclosure provision”) shall be deemed contrary to public order and unenforceable against a current or former employee. . . who is a party to the contract or settlement. If the employee publicly discloses sufficient details of the claim for the employer to be reasonably identifiable, the non-disclosure clause will also be unenforceable against the employer.

According to the Appeals Chamber:

  • The plain language of the law provides that it applies to a “non-disclosure provision”;

  • There is a difference between a non-disparagement provision, which is permitted under the NJLAD, and a non-disclosure or confidentiality provision, which is contrary to public policy and unenforceable under JSA 10:5-12.8(a);

  • If the New Jersey legislature had intended to include non-disparagement provisions in the statute, it would have;

  • The plain language of the law indicates that it was intended only to prevent employers from compelling employees to enter into agreements to conceal the details of their NJLAD claims; and

  • The purpose of the non-disparagement clause in the parties’ settlement agreement was to mutually prohibit the parties from making derogatory statements about each other, not to “hide” details relating to the NJLAD claims from the plaintiff, which would have violated JSA 10:5-12.8(a).

The Appeals Division held that the “effect” of the non-disparagement clause was not to prevent the plaintiff from speaking out on the details of her claims. This would have been unenforceable under the NJLAD. Rather, the “effect” of the non-disparagement provision was to prevent the plaintiff from making defamatory statements about members of the police department and the township, which was an essential term of the agreement. settlement of the parties.

The court recognized that while there could certainly be an overlap between a plaintiff making derogatory statements after the settlement about his current or former employer and the plaintiff post-settlement disclosing the details of his NJLAD claims, it’s not usually what isn’t – disparagement provisions are designed to protect (or prevent). Indeed, Neptune Township acknowledged that the complainant was free to discuss the facts, circumstances and details of her allegations of discrimination against the police department, and that she did not breach the non-disparagement provision by doing. Rather, the township objected to the plaintiff’s derogatory statements that were not directly related to her claims of discrimination (that’s to say were not statements of past facts, circumstances and details of his claims) but rather negative statements intended to attack the defendants and damage the reputation of the township, and related more generally to his impression of the behavior present and future of the canton.

The decision of the Appeal Division – and this distinction – is of crucial importance. The Appeals Division preserved an employer’s ability to include non-disparagement provisions in employment contracts and settlement agreements and enforce them against violation by current or former employees. Additionally, while it is easy to blur the lines between past derogatory comments relating to an employee’s NJLAD claims and current derogatory remarks that are not directly related or related to an employee’s claims, the Appeals Division established safeguards and benchmarks to distinguish between the two. When drafting employment agreements or settlements, employers should consult competent legal counsel on strategies to ensure the enforceability of any non-disparagement provisions contained in such contracts. For example, employers should recognize the court-drawn line that distinguishes an employee’s comments about past events from an employee’s comments about present and future behavior. Additionally, employers might consider including a clause stating that nothing in the non-disparagement clause is intended to violate NJSA 10:5-12.8(a).

About Marjorie C. Hudson

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