Yes, it’s still ok in NJ to have a non-disparagement provision when settling discrimination claims.

Back in March 2019, the State of New Jersey passed a law that makes any non-disclosure provisions in an employment contract or settlement agreement that have the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment unenforceable against a current or former employee who is a party to the contract or settlement. I wrote about it here.

But let’s say that an employer getting sued for discrimination in New Jersey settles with the plaintiff, and the two sides enter into an agreement that contains a non-disparagement provision but not a non-disclosure provision. Is the non-disparagement language enforceable? Or is it essentially a variant of a non-disclosure provision and therefore prohibited by law?

Late last month, the Superior Court of New Jersey’s Appellate Division concluded that the non-disparagement provision is enforceable. Here was the court’s rationale:

The plain language of the statute provides that it applies to a nondisclosure provision. The statute does not include or exempt “nondisparagement provisions,” although it specifically exempts non-competition and proprietary information provisions. Notably, as the trial judge found, there is a difference between a nondisclosure or confidentiality clause and a non-disparagement clause. A nondisclosure or confidentiality clause is a “clause prohibiting the parties to an agreement from disclosing to nonparties the terms of the agreement and, often, anything related to the formation of the agreement.”…The Legislature could have, but did not, prohibit the enforcement of non-disparagement provisions…That omission is noteworthy given that both non-disclosure and non-disparagement provisions are often included in employment agreements… Instead, the plain language of the law indicates that it was only intended to prevent employers from compelling employees to enter into agreements to
conceal the details of their LAD claims. 

As a belt and suspenders, the court went back and checked the amendment’s legislative history and could find nothing to indicate that the Legislature intended the ban on non-disclosure agreements to reach non-disparagement provisions too.

Therefore, NJ employers can still use non-disparagement provisions in their settlement agreements. Just make sure not to include any language with the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment. Not only are those provisions unenforceable against employees, but employers who try to enforce them must pay the employee’s attorney’s fees and costs.