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It Depends on the Language – The Non-Disparagement Clause

How enforceable is a non-disparagement clause in an agreement? As is always the case with any contract or agreement, it depends on the language.

On May 31, 2022, the Appellate Division in a published decision affirmed the enforceability of a non-disparagement clause, but at the same time, held that the party was not in breach of the non-disparagement clause. Christine Savage v. Township of Neptune, et al., Docket No. A-1415-20, slip op. at 29 (App. Div. May 31, 2022).

In this matter, Plaintiff had filed suit against her employer, primarily alleging violations of the New Jersey Law Against Discrimination (“LAD”), N.J.S.A. 10:5-1 to-50. After an extensive mediation, the parties agreed to a settlement agreement that included a non-disparagement clause.

After entering into the settlement, Plaintiff was interviewed by the news about the conclusion of the lawsuit. Subsequently, Defendants filed a motion to enforce the settlement agreement, alleging that Plaintiff had breached the non-disparagement clause. In response, Plaintiff argued that the non-disparagement clause was against public policy and implicitly unenforceable under N.J.S.A. 10:5-12.8(a). The trial court held that the non-disparagement clause was enforceable and that Plaintiff had breached the clause with her statements during the interview.

On appeal, the Appellate Division agreed that the non-disparagement clause was enforceable. Although LAD at N.J.S.A. 10:5-12.8(a) barred confidentiality and non-disclosure agreements, the Court held that a non-disparagement clause is not the same as a non-disclosure agreement. While a non-disclosure clause prevents any discussion of the terms of the agreement and typically anything related to the formation of the agreement, a non-disparagement clause simply prevents a party from communicating anything negative about the other.

The Court held that if the Legislature had wanted to prohibit the enforcement of non-disparagement provisions, the legislature would have explicitly added such a prohibition to the statute. Here, it was clear that the LAD was only intended to prevent employers from compelling employees to enter into agreements to conceal details of a LAD claim.

Having found that the clause was enforceable, the question became did Plaintiff breach the non-disparagement clause. Here, the non-disparagement clause prohibited the written or verbal statements “regarding the past behavior of the parties” which would negatively affect the reputation of the other party.

In reviewing the interview, the Court found that Plaintiff’s comments were all statements of present or future behavior, and not comments about past behavior. Meanwhile, other statements that were alleged to be in breach were made by the reporter, who was not a party to the agreement, while other statements were from prior interviews that occurred prior to the parties entering the settlement agreement. Therefore, the Court held that Plaintiff did not breach the language of the non-disparagement clause.

The question of if a party is in breach of the settlement agreement will ultimately depend on the plain language of the agreement. Even the smallest word that may not seem important may make the difference in how to interpret the language of the contract.

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