New Jersey Court Declares Non-Disparagement Provisions Valid

​In a decision that may be useful to employers drafting severance and litigation settlement agreements in New Jersey, a panel of the New Jersey Appellate Division found that provisions requiring parties to not disparage one another may be included in settlement agreements in employment-related cases.

On May 31, in Savage v. Township of Neptune, the appellate court rejected the notion that non-disparagement clauses are against public policy and unenforceable under New Jersey law.

Christine Savage, who had been employed as a police officer by Neptune Township since 1998, brought an action against the township and its police department in 2013, alleging sexual discrimination, harassment, and unlawful retaliation in violation of New Jersey's Law Against Discrimination (LAD).

The parties settled that case in May 2014, pursuant to which the defendants agreed to promote Savage to sergeant and provide her with access to training.

In a second action, Savage filed a complaint in April 2016 and an amended complaint in September 2018 against the township and the police department, alleging continuing sex discrimination and harassment, retaliation, and aiding and abetting discrimination in violation of the LAD, and violations of the New Jersey Civil Rights Act and the state constitution.

On July 23, 2020, after engaging in three months of extensive negotiation and mediation, the parties executed a comprehensive settlement agreement and general release.

The settlement agreement included the following mutual non-disparagement provision: "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."

In September 2020, the township and police department filed a motion to enforce the settlement, arguing that Savage had violated the non-disparagement provision during a television news interview. New Jersey prohibits provisions in any employment contract or settlement agreement that have the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment.

The trial judge granted the defendants' motion, finding that the law only barred confidentiality or nondisclosure agreements, and that Savage violated the non-disparagement provision in the agreement when she commented during the television interview that the Neptune Police Department had not changed and was still a "good ol' boys system."

Savage appealed the order enforcing the non-disparagement provision of the settlement agreement. The New Jersey Appellate Division analyzed whether the non-disparagement provision was against public policy and unenforceable under N.J.S.A. 10:5-12.8(a) and whether Savage had violated the terms of the non-disparagement provision during the televised interview.

Appellate Court's Analysis

The appellate panel reversed the order granting the defendants' motion to enforce the settlement agreement and found that, although the terms of the non-disparagement provision were enforceable and properly adjudicated by motion, the trial judge had erred in finding that Savage had violated the terms of the non-disparagement agreement during the televised interview.

The crux of the appellate panel's decision was based on its interpretation of N.J.S.A. 10:5-12.8(a). To interpret the statute, the panel looked at both the plain language of the statute and the legislative history. The panel found that N.J.S.A. 10:5-12.8(a) barred nondisclosure agreements and did not affect non-disparagement agreements.

While the appellate panel found that the terms of the non-disparagement agreement were enforceable under New Jersey law, the panel also found that Savage's comments during the televised interview did not violate the terms of the non-disparagement agreement barring remarks regarding the "past behavior of the parties."

Specifically, the panel found that Savage's comments that the department had not changed were about present or future behavior, not comments about past behavior prohibited under the language of the agreement.

Key Takeaways

In response to the Appellate Division's ruling, two New Jersey state senators recently introduced legislation to close the loophole and expand prohibitions in employment contracts to include certain nondisclosure and non-disparagement provisions. New Jersey employers may want to carefully monitor this proposed legislation.

Non-disparagement provisions can be an effective tool for dissuading former employees from speaking negatively about a former employer, post-employment or post-settlement.

New Jersey employers may want to carefully draft any such provisions to ensure that they are not construed as nondisclosure agreements related to a claim of discrimination, retaliation, or harassment, but broad enough to cover any reasonably foreseeable disparaging comments from former employees.

Mark Diana is a lawyer with Ogletree Deakins in Morristown, N.J. Darius Walker, Jr. is a lawyer with Ogletree Deakins in Nashville. © 2022. All rights reserved. Reprinted with permission.