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What Does the Recent NJ Supreme Court Ruling on Non Disparagement Clauses Mean for Senior-Level Employees and C-Suite Executives?

by | May 23, 2024 | Employment Law |

A non-disparagement clause aims to prevent employees from taking any action that paints the company in a negative light. Commonly found in a variety of contracts, these clauses are often a core component of settlements and employment severance agreements signed by all levels of employees. A recent ruling against the use of such clauses by the New Jersey Supreme Court puts senior level employees and C-suite executives on notice. The ruling clearly states that employers cannot silence employees from speaking about their experiences in areas of discrimination, harassment, or retaliation.

What the New Jersey Non-Disparagement Clause Means for Employers

Under a ruling by the New Jersey Supreme Court, the use of non-disparagement clauses in any settlement or employment agreement is a violation of public policy. More so, they are considered unenforceable if an employee is speaking out about discrimination, harassment (including sexual harassment), or retaliation.

The ruling is a type of clarification of the Law Against Discrimination (LAD) that was put into place in New Jersey in 2019. That law prohibits  unlawful employment discrimination based on a person’s race, creed, color, national origin, nationality, ancestry, age, sex, familial status, marital/civil union status, religion, domestic partnership status, affectional or sexual orientation, gender identity and expression, and more. It is seen as a way to protect employee rights and limit poor treatment under any circumstances considered discriminatory.

The new ruling states that, in Section 12.8 of the LAD, the law makes 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.” With that, they noted that even though accusing someone of sexual harassment or discrimination is a form of disparagement, any contract provision that prevents the victim from speaking about it is unenforceable.  

The Backstory: Savage v. Township of Neptune

Former sergeant Christine Savage brought a case to the New Jersey Supreme Court related to her unfair treatment within the local police department. She stated that the Neptune Police Department and specific people within the Department engaged in prohibited types of sexual harassment, harassment, and retaliation against her. She entered into a settlement with the Department, but that settlement included a non-disparagement clause.

After that initial settlement, Savage made claims that the department “didn’t want women there” and that it’s a “good ol’ boy system.” The defendants in the case argued her statements were a breach of the non-disparagement obligations within the settlement agreement. A lower court upheld that ruling, backing the police department and named defendants.

The New Jersey Supreme Court did not agree, noting that such clauses were, in fact, a way to silence her and against public policy. It noted that “the effect of this non-disparagement clause…is to conceal details relating to claims of discrimination, retaliation, and harassment, which is directly contrary to the LAD.”

What This Means to C-Level and Senior-Level Leaders

Employers simply cannot take any action to stop a person who suffered any type of discrimination or harassment discussed within LAD from talking about it, assuming what they say is factual. New Jersey sexual harassment claims, therefore, must be taken seriously, and even when a settlement is reached with the victim, a non-disparagement clause cannot limit the employee from discussing the harassment with others.

For any company leader or HR manager, this is a critical change in the way they operate when claims like this occur. Because of this, when employee contracts are designed and settlements are agreed to after claims, it is critical to limit the use of such clauses and, when possible, come to an amicable outcome. Working with a workplace retaliation lawyer may be a critical step within that process.

The LAD does not allow employers to silence victims of any type of harassment or discrimination, and employers must create agreements and contracts that do not aim to limit this communication and right to speak freely about their experiences. That is, including a New Jersey non disparagement clause in a sexual harassment settlement is simply not going to prevent that person from speaking out about what they experienced.

Rather, the Court’s ruling signals that any carve-outs to a New Jersey non-disparagement clause must be very clear with outlined expectations that are understood fully. More so, employers cannot prevent employees from communicating the details of their discrimination, harassment, or retaliation.

NJ Law and Non Disparagement Clauses: What Employers Must Do

With this ruling comes a very different way forward for settlement agreements when harassment claims occur. Senior leadership aiming to quietly settle such matters can no longer prevent the claimant from providing others with details about what occurred in matters related to discrimination, retaliation, or harassment. That includes any allegations that led to such agreements.

This decision does not mean that the claimant can do and say what they want, though. Claimants still cannot defame the employer or any other person with inaccurate or misleading information.

For employers in difficult situations related to New Jersey sexual harassment or discrimination claims, who may believe the allegations are untrue, simply pursuing the “easy way out” by settling the case with such clauses to minimize the reputational impact is no longer beneficial. The employee may continue to make statements against the organization, limiting any benefit.

Employers resolving such matters, then, should consider that employees have the freedom to speak about their reality in these challenging situations and that employers do not have a way of restraining them. All clauses and details within any settlement or severance agreement must comply with the requirements of the LAD.

Because of the complexity and serious limitations such agreements can now possess, executive leadership must consider each allegation seriously and, in some cases, may need to work to prove their inaccuracy to protect their reputation. A non disparagement clause is no longer enough to protect the organization. It is against public policy and, as a result, there is no legal manner for the company to enforce it within the state of New Jersey.

What Should I Do if I’m a Victim of an Unlawful Non Disparagement Clause?

Victims of such non-disparagement clauses may wish to speak to a workplace retaliation lawyer to discuss what they faced and their right to discuss their experiences with others before doing so. The Hamilton Law Firm is well versed in employment law for executives and can navigate the intricacies of new laws regarding non-disparagement clauses. Contact us for a comprehensive consultation.