By: Ty Hyderally, Esq., Francine Foner, Esq.

Earlier this month the New Jersey Supreme Court unanimously held that a non-disparagement agreement in a settlement agreement that resolved claims of sexual harassment, gender discrimination and retaliation was contrary to the public policy and therefore unenforceable. Savage v. Twp. of Neptune, 2024 N.J. LEXIS 377, *3 (May 7, 2024).   This decision has the potential to significantly impact the use of non-disparagement provisions in settlement agreements of employment discrimination and retaliation cases in New Jersey.

In July 2020, Christine Savage, a female Sergeant for the Neptune Township Police Department, reached a settlement agreement of her claims of sexual harassment, sex discrimination, and retaliation against the police department and other individuals. The settlement agreement contained a mutual non-disparagement provision that barred the parties from making any statements that would “tend to disparage or impugn the reputation of any party.”  In August 2020, Sergeant Savage appeared on a television news show in which she made statements about defendants’ discriminatory conduct against females. For example, Sergeant Savage stated “I really don’t think you’re ever going to see another female sergeant, lieutenant, captain or above…. Because we’re oppressed. They don’t want women there” and “It has not changed, not for a minute. It’s not gonna change, it’s the good ol’ boy system.”  The defendants then moved to enforce the settlement agreement based upon their contention that Sergeant Savage’s remarks violated the non-disparagement provision of the settlement agreement.

Sergeant Savage argued in the Trial Court that prohibiting her speech regarding defendants’ discriminatory and harassing conduct based upon the non-disparagement provision ran afoul of the ban on non-disclosure provisions (“NDAs”) in settlement agreements resolving discrimination and retaliation claims, contained in the New Jersey Law Against Discrimination (“LAD”).  The LAD was amended, effective March 18, 2019, to provide that: “a provision in a settlement agreement that “has the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment . . . shall be deemed against public policy and unenforceable.” N.J.S.A. 10:5-12.8(a) (“Section 12.8”). However, the Trial Court did not agree with Sergeant Savage, holding that the LAD barred only non-disclosure and confidentiality agreements and that Sergeant Savage instead violated a non-disparagement clause. The Trial Court further “directed Sergeant Savage to refrain from making any further statements, or conducting any further interviews, which disparage the Defendants in violation of the settlement agreement” and awarded defendants $4,917.50 in counsel fees and costs. Id. at *15.

The Appellate Division affirmed the Trial Court’s holding that the non-disparagement clause at issue was enforceable but reversed the Trial Court’s finding that Sergeant Savage had violated it. The Appellate Division opined that the Legislature intended the LAD’s NDA ban to apply only to non-disclosure and confidentiality agreements, not non-disparagement provisions. However, the Appellate Division found that Sergeant Savage’s statements did not violate the non-disparagement provision because her statements were “about present or future behavior,” not “past behavior,” and that the “plain language of the agreement” barred only the latter. Id. at *16-17. Therefore, the Appellate Division also vacated Defendants’ award of attorney’s fees and costs.

The New Jersey Supreme Court reversed the Appellate Division’s holding that the non-disparagement provision in the settlement agreement was enforceable. The New Jersey Supreme Court held that the broad scope of the non-disparagement provision in the settlement agreement made it unenforceable.  The Court reasoned that because the non-disparagement provision prohibited all statements that would tend to disparage a person, it would encompass providing details about discrimination, retaliation or sexual harassment. Therefore, the Court held that such a non-disparagement provision would “prevent employees from revealing information that lies at the core of what section 12.8 protects — details about claims of discrimination. [which] directly conflicts with the LAD.” Id. at *27-28.

The Court’s opinion did not provide a ban on all non-disparagement provisions. Rather, the Court ruled that “the non-disparagement clause in the agreement is against public policy and cannot be enforced.” Id. at *10. (emphasis added). Thus, it remains to be seen to what extent this decision will be applied to future non-disparagement provisions in settlement agreements resolving claims of discrimination, harassment and retaliation in violation of the LAD. The language of the opinion gives the impression that the Court reached its conclusion based upon its view that the Legislature enacted this amendment to the LAD to prevent employers from silencing individuals who have been subject sexual harassment and discrimination and retaliation related to sexual harassment. The Court stated that this amendment to the LAD “was enacted in 2019 in the wake of the “#MeToo” movement” and that “[t]hrough those words, the Legislature removed barriers that previously made it difficult for individuals to report abuse. Survivors of discrimination, retaliation, and harassment now have a legal right to tell their story — a right that cannot be taken away from them by a settlement agreement.” However, the Court did not limit its opinion to cases of sexual harassment or sex discrimination.

However, Section 12.8 is not limited to sexual harassment or gender discrimination. Rather, by its clear terms it applies to “a claim of discrimination, retaliation or harassment.”  Under the LAD, claims of discrimination in employment are prohibited based upon several protected categories, which include race, religious beliefs, color, national origin, ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, pregnancy or breastfeeding, sex, gender identity or expression, disability or atypical hereditary cellular or blood trait of any individual, military status, refusal to submit to genetic testing. N.J.S.A. 10:5-12. Thus, although the Court’s opinion involved a case of sexual harassment and sex discrimination, there is no reason why it should not be applied to non-disparagement clauses in settlement agreements involving other types of discrimination and harassment.

In addition, the Court analyzed the language of the non-disparagement clause in this particular settlement agreement and concluded that because it was so broad, it could have the effect of concealing the details of discrimination and retaliation claims. Thus, it remains to be seen whether a more narrowly drafted non-disparagement agreement could survive judicial scrutiny. A practice pointer may be for parties to consider including a carve out for statements that concern  past, present, or future discrimination and retaliation claims from a non-disparagement clause.

The takeaway from this decision is that employers cannot do an end run around Section 12.8 by inserting a non-disparagement provision in a settlement agreement that effectively silences victims of discrimination. Thus, this opinion is sure to result in a change in the manner in which non-disparagement provisions in settlement agreements are drafted to take this important decision into account.

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