The New Jersey Supreme Court’s recent ruling in Savage v. Township of Neptune, places limits on the enforceability of non-disparagement clauses in settlement agreements. The court unanimously held that such clauses are unenforceable if they prevent employees from discussing details related to claims of discrimination, retaliation, or harassment, aligning with protections under the New Jersey Law Against Discrimination (LAD).

Christine Savage, a former police sergeant, filed a lawsuit in December 2013 against the Neptune Township Police Department, alleging sexual harassment, sex discrimination, and retaliation. The parties entered into a settlement agreement which included a non-disparagement clause. In 2016, Savage filed another lawsuit against the same defendants, claiming they continued their discriminatory and retaliatory conduct. This second lawsuit was settled in July 2020, also with a non-disparagement clause in which both parties agreed not to“make any statements … regarding the past behavior of the parties, which statements would tend to disparage or impugn the reputation of any party.”

After signing the settlement agreement with the above clause, Savage discussed her experiences with a news reporter, including describing years of alleged actions taken against her and sharing her belief that the Department would continue to discriminate against women, commenting in part that “[i]t’s not gonna change, it’s the good ol’ boy system.” The Township sought to enforce the non-disparagement clause. At issue was whether the 2019 amendments to the LAD, which deemed “nondisclosure provisions” unenforceable if they had “the purpose or effect of concealing the details relating to a claim of discrimination, retaliation or harassment,” also encompassed non-disparagement clauses. The trial court found that that a non-disclosure provision was different than a non-disparagement provision and enforced the non-disparagement provision. The Appellate Division affirmed, though it disagreed on the violation itself.

The New Jersey Supreme Court reversed the lower courts’ decisions, finding that the statute’s definition of “nondisclosure provision” was broad, and that where the “effect of [the] non-disparagement clause [] is to conceal details relating to claims of discrimination, retaliation, and harassment” it is “directly contrary to the LAD” and therefore against public policy and unenforceable. In light of this ruling, employers must limit any non-disparagement provision so that a former employee may still discuss claims and allegations relating to discrimination, retaliation, and/or harassment. 

This decision significantly curtails an employer’s ability to limit commentary relating to claims made by an employee under the LAD, even where those allegations may be vigorously disputed. It remains to be seen whether this decision will deter some employers from agreeing to settle matters based on disputed allegations where there is limited means to control continued discussion of the disputed claims.

We will continue to monitor developments in this area. We recommend you consult with your Reed Smith Employment attorneys to carefully draft non-disparagement provisions that are narrowly tailored to comply with the law.