NJ Supreme Court Limits Use of Non-Disparagement Provisions in Employment Settlement Agreements

In a unanimous opinion, the New Jersey Supreme Court recently held that a non-disparagement provision in a settlement agreement that prevented a former employee from revealing details about allegations of sexual harassment, sex discrimination and retaliation was against public policy and cannot be enforced.

The plaintiff, a former police sergeant, appealed a trial court order enforcing a non-disparagement provision in a 2020 settlement agreement reached in her employment discrimination case. Under the non-disparagement clause, the plaintiff was barred from making any statements “regarding the past behavior of the parties” that would “tend to disparage or impugn the reputation of any party.”  The agreement clearly stated that the provision extended to statements to the media, government offices and the general public.  After the settlement was reached, the plaintiff was interviewed by a reporter for NBC’s Channel 4 News, where she stated that the police department had not changed because “it’s the good ol’ boy system,” among other things.  The department and various officers then filed a motion to enforce the non-disparagement provisions of the agreement.

The trial court granted the defendants’ motion, ordering the plaintiff not to give further interviews or to make disparaging statements.  The judge declined to award the roughly $23,000 in damages sought by the defendants but awarded counsel fees of $4,917.50 for the plaintiff’s breach of the clause.  The Appellate Division affirmed in part and reversed in part, holding that while the terms of the non-disparagement provision were enforceable, the plaintiff did not break them during the television interview.

On appeal, the New Jersey Supreme Court pointed to Section 12.8 of the New Jersey Law Against Discrimination (“LAD”), enacted in 2019 in the wake of the #MeToo movement, which states that any 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.”  According to the Court’s opinion, the scope of the parties’ settlement agreement was quite broad, and barred all statements that would “tend to disparage,” and thus was in violation of Section 12.8 because accusing someone of discrimination is a form of disparagement.  Because the scope of the non-disparagement clause of the settlement agreement had the effect of precluding plaintiff from describing the employer’s alleged discriminatory conduct, it was against public policy and could not be enforced.

As the Supreme Court’s opinion demonstrates, employers can no longer attempt to impose gag-order provisions on employees to prevent them from freely discussing claims of LAD violations.  It is important that employers looking to resolve discrimination and harassment claims are represented by seasoned counsel to assure that any non-disparagement clauses included in any settlement or severance agreements are compliant with the LAD’s requirements.