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NJ Supreme Court rules non-disparagement clause unenforceable in discrimination/harassment/retaliation settlement agreement

6/3/24

By: Kaitlyn Grajek

Earlier this month, the Supreme Court of New Jersey entered a unanimous decision in the matter of Savage v. Township of Neptune, et al. limiting the enforceability of non-disparagement clauses in employment contracts and settlement agreements.  

This decision follows a #MeToo-era amendment to the New Jersey Law Against Discrimination (“NJLAD”) that prohibits any provision in an employment contract or settlement agreement having “the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment.” In essence, a plaintiff cannot waive the right to discuss details underlying a NJLAD claim by agreement, even if those details constitute “disparagement.” 

In the Savage matter, an employee and her employer settled claims of sexual harassment, sex discrimination, harassment and retaliation pursuant to an agreement containing a non-disparagement provision. Following her execution of the agreement, the employee sat for an interview with a local news channel and discussed the details underlying her foregoing NJLAD claims. At issue before the New Jersey Supreme Court was whether the employee violated the non-disparagement clause of the parties’ settlement agreement.  

Ultimately, the Court held that the non-disparagement clause in the at-issue settlement agreement was unenforceable as it was broad enough to encompass the “details relating to a claim of discrimination, retaliation, or harassment,” which is against public policy in New Jersey.  

Notably, a non-disparagement clause prohibiting disparaging statements on topics not falling into the foregoing category could still be enforceable. Thus, non-disparagement clauses are not universally prohibited in New Jersey employment settlement agreements. However, employers should be careful regarding the breadth of such provisions going forward. 

Employers seeking assistance to ensure that their employment and/or settlement agreements comply with existing New Jersey law, or who would like more information, should contact Kaitlyn Grajek at kaitlyn.grajek@fmglaw or your local FMG lawyer.