New Jersey Supreme Court Rules That Non-Disparagement Clauses in Discrimination Settlements are Against the Law

For purposes of this article, the plaintiff in the case will be referred to as C.S.

Employers often have contractual provisions that prohibit employees from revealing information about employment settlement agreements. One provision that employers use to prevent employees from revealing information about employment settlement agreements is a “non-disparagement clause.” Employers often include non-disparagement clauses in employment settlement agreements that bar plaintiffs from describing the employer’s alleged conduct. A non-disparagement clause prevents designated parties from making critical, negative, or disparaging statements about the releasing party or one another. These clauses are used in employment settlement agreements to prevent plaintiffs from bad-mouthing former employers or discussing the claims that led to the settlements. However, a recent New Jersey Supreme Court decision has changed this practice. In a recent case, the New Jersey Supreme Court ruled that using non-disparagement clauses in discrimination, harassment, and retaliation settlements is against the law.

About the Case

The claimant in the recent New Jersey Supreme Court decision was a police officer since 1998. C.S. filed a lawsuit against the police department in 2013, claiming that she was a victim of severe sexual harassment, harassment, and retaliation. The case was settled in 2014, with the settlement agreement promising future promotions and training for C.S. However, according to C.S., the unlawful acts intensified. This led to her filing another lawsuit in 2016, alleging she was still experiencing the same issues as before. On top of that, C.S. claimed that the police department had breached the original settlement agreement by failing to comply with its terms. This second lawsuit was settled in 2020. The second settlement agreement included a broadly worded non-disparagement clause that prevented the parties from discussing the claims that led to the agreement.

After the signing of the second settlement agreement, C.S. discussed the discrimination she endured at the police department during a TV interview. The police department considered C.S.’s actions a violation of the non-disparagement clause, leading to another legal dispute over whether C.S. had the right to speak out under the New Jersey Law Against Discrimination (NJLAD). The trial court ruled in favor of the police department, but C.S. appealed, arguing that the non-disparagement provision violated Section 12.8 of the NJLAD. The Appellate Division found that while the non-disparagement clause was enforceable, the trial court made a mistake when it ruled that C.S. had violated its terms during the TV interview.

The New Jersey Supreme Court overturned both rulings and declared that the non-disparagement provision was broad enough to violate the NJLAD. The Court ruled that the police department used the non-disparagement clause to silence C.S.’s protected conduct. According to the New Jersey Supreme Court, the non-disparagement provision contained language protected by Section 12.8 of the NJLAD.  

While the New Jersey Supreme Court did not outright declare that all non-disparagement clauses are illegal under the NJLAD, the Court warned that such provisions would need to be narrowly tailored to ensure they don’t contain speech protected under the NJLAD.  

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