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New Jersey restricts non-disparagement clauses in employment contracts

On May 7, 2024, the New Jersey Supreme Court unanimously ruled Savage vs Township of Neptune that employers cannot enforce non-disparagement or other provisions in an agreement that result in the withholding of details of allegations of discrimination, retaliation, and harassment. With this decision, the Court clarified the scope of the 2019 amendment to the New Jersey Law Against Discrimination (NJLAD).

In the wake of the #MeToo movement, New Jersey passed an amendment to the NJLAD that removed barriers to employees speaking out about discrimination, retaliation, and harassment in the workplace. Specifically, NJSA 10:5-12.8(a) states: “[a] A provision in an employment contract or settlement agreement that has the purpose or effect of concealing details relating to a claim of discrimination, retaliation or harassment (hereinafter referred to as a confidentiality clause) is contrary to public policy and unenforceable against a current or former employee.” The amendment did not clarify whether the term “confidentiality clause” includes non-disparagement clauses.

In 2020, the Town of Neptune attempted to enforce a non-disparagement clause in a settlement agreement between it and former police officer Christine Savage, who had discussed her case and made statements on a television news segment about those she believed had harassed her. The trial court granted the town's motion to enforce the provision, finding that the NJLAD amendment only excluded non-disclosure and confidentiality agreements and that Savage had violated an enforceable non-disparagement clause. The appeals court also ruled that the town could enforce the non-disparagement clause.

The Supreme Court of New Jersey disagreed with the two lower courts and ultimately ruled that any provision, including a non-disparagement clause that results in the withholding of details of allegations of discrimination, retaliation and harassment, is unenforceable. As a result, the Supreme Court ruled that the non-disparagement clause in Savage's settlement agreement was unenforceable.

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The Supreme Court did not go so far as to ban non-disparagement clauses entirely. However, to be enforceable, non-disparagement clauses must be narrowly drafted and limited to matters unrelated to an employee's discrimination, retaliation or harassment claims. Employers should consider reviewing their standard contracts, including settlement and separation agreements, to ensure compliance with this new ruling.

Anna Harden

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