New Jersey Appellate Division Declares Nondisparagement Provisions Valid Under State Law

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 not to disparage one another may be included in settlement agreements in employment-related cases. On May 31, 2022, in Savage v. Township of Neptune, the appellate panel rejected the notion that nondisparagement clauses are against public policy and unenforceable under New Jersey law.

Background

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 nondisparagement provision:

10. 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. The parties agree that this non[-]disparagement provision extends to statements, written or verbal, including but not limited to, the news media, radio, television, internet postings of any kind, blogs, social media …, consumer or trade bureaus, other state, county or local government offices or police departments or members of the public. Neptune Township will respond to inquiries from prospective employers with dates of employment and positions held. The parties agree that non-disparagement is a material term of this Agreement and that in the event of a breach, the non-breaching party may seek enforcement of the non-disparagement provision and damages for its breach, and that the filing of any such action would not be deemed a breach of this Agreement. Nothing herein shall be construed as prohibiting or precluding in any way testimony or statements of [p]laintiff related to other proceedings including lawsuits.

In September 2020, the township and police department filed a motion to enforce the settlement, arguing that Savage had violated the nondisparagement provision during a television news interview. The trial judge granted the defendants’ motion, finding that New Jersey Statutes Annotated (N.J.S.A.) 10:5-12.8(a)—which 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— only barred confidentiality or nondisclosure agreements (also referred to as “NDAs”), and that Savage violated the nondisparagement 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 nondisparagement provision of the settlement agreement. The New Jersey Appellate Division analyzed whether the nondisparagement 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 nondisparagement provision during the televised interview.

The New Jersey Appellate Division’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 nondisparagement provision were enforceable and properly adjudicated by motion, the trial judge had erred in finding that Savage had violated the terms of the nondisparagement 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 nondisparagement agreements.

While the appellate panel found that the terms of the nondisparagement 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 nondisparagement 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, S2930, to “close the loophole” and expand prohibitions in employment contracts to include certain nondisclosure and nondisparagement provisions. New Jersey employers may want to carefully monitor this proposed legislation. Nondisparagement 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.