As most New Jersey employers are already aware, since 2019, the State’s Law Against Discrimination (LAD) prohibits employers from enforcing contract provisions that have the effect of preventing an employee or former employee from discussing any allegations of discrimination, harassment or retaliation. N.J.S.A. § 10:5-12.8(a). Since this amendment to the LAD, employers and their counsel have been limited in their ability to require broad non-disclosure obligations from employees, including as a result of the settlement of legal claims.
On May 7, 2024, the New Jersey Supreme Court held, in Savage v. Township of Neptune, that under the same amendment, non-disparagement provisions having the same effect of stifling employees from publicizing their allegations of discrimination, harassment or retaliation are unenforceable under the LAD. The Court’s ruling confirms that employers and their counsel need to keep several important points in mind when considering the scope of any contemplated restrictions on employees’ speech or settling legal claims.
Takeaway #1: Labels Do Not Matter
At the core of the Savage decision was the Court’s finding that even though the provision at issue was labeled as a non-disparagement clause, it operated in practical reality as an unenforceable non-disclosure provision under the LAD.
The Court’s finding reiterates that how the parties may agree to label a restriction is for most intents and purposes irrelevant; rather, any contractual restriction should be evaluated based upon the actual scope of the activities protected.
This concept continues into a variety of different contexts and types of restrictions. For example, a restrictive covenant labeled as a non-solicitation provision that has the substantive effect of preventing an employee from working for certain other businesses may be evaluated as a non-competition provision.
Takeaway #2: Tailor Restrictions Narrowly
Although the Savage Court found that the non-disparagement provision at issue was unenforceable given its terms and the speech the employer attempted to restrict, the Court reiterated that if a non-disclosure or non-disparagement provision is narrowly tailored to not restrict the type of speech protected under the LAD, it may be enforceable.
For example, the Savage Court observed that if a non-disparagement clause only seeks to prevent an employee from disclosing personal details outside of discrimination such as that their boss drinks at work or cheats on their taxes, the LAD would not come into play, and the restriction may be enforceable.
Similarly, even though the LAD prevents employers from stifling employees from disclosing the facts and circumstances of any allegations of discrimination, harassment or retaliation, the statute directly recognizes an employer’s right to contractually protect its proprietary and non-public business information. N.J.S.A. § 10:5-12.8(c).
Employers should avoid unnecessarily broad restrictions and should focus on the specific information and conduct they are trying to protect or prohibit. Thinking through and scrutinizing these interests before an employee ever signs an agreement will allow an employer to specifically identify the legitimate interests it is seeking to protect and lead to much better chances of the restrictions being enforced.
Takeaway #3: Reconsider Your Form Agreements
As a corollary to Takeaway #2, New Jersey employers and their counsel should immediately dust off their form employment and separation agreements and scrutinize them – particularly if they have not been updated since the LAD’s amendment in 2019. Although in certain circumstances a court can sever (i.e., “cross out”) unenforceable contractual provisions and enforce the remainder of the agreement, it is uncontroversial that employers are best served by utilizing agreements they believe to be fully enforceable in the first instance.
