NJ Supreme Court Issues Key Rulings On Non-Disparagement Provisions, Wage & Hour Claims

The New Jersey Supreme Court recently issued two decisions of import. The salient points from both rulings are summarized below.

On May 7, 2024, the Court ruled in Savage v. Township of Neptune that non-disparagement provisions in employment discrimination settlement agreements are unlawful. The basis for this ruling is Section 10:5-12.8(a) of the Law Against Discrimination. This provision, enacted "in the wake of the '#MeToo movement'", as the Court puts it, provides that provisions in employment contracts and settlement agreements that have the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment are against public policy and are therefore unenforceable against current or former employees. The provisions are also unenforceable against employers if the employee publicly reveals sufficient details of a claim such that the employer is reasonably identifiable. It had been widely understood that this provision applied to standard confidentiality provisions, but whether it also barred non-disparagement provisions had been uncertain until the Supreme Court clarified the issue.

The purpose of the amendment was to remove barriers that made it difficult for individuals to report abuse. The case before the Court arose when a local TV new program aired an interview with the plaintiff who discussed her claims that gave rise to the settlement. The employer claimed that the content of the interview barred the settlement agreement's non-disparagement provision. The Court reasoned that the challenged broad non-disparagement clause would prevent the plaintiff from providing details about the employer's conduct in a manner that the statute was designed to avoid. Based on this ruling, employers can no longer attempt to limit employee speech by using broad non-disparagement provisions. It remains to be seen whether any form of non-disparagement clause might be enforceable, such as a provision that states clearly that the employee's speech is not restricted as to about any facts having to do with discrimination, retaliation, or harassment, but that the employee will not otherwise disparage the employer. The Court's opinion offers dictum on that issue but does not decide it. But it appears certain that any such provisions would be closely scrutinized and should therefore be "narrowly drawn."

The second ruling of note was issued on May 15, 2024, in Maia v. IEW Construction Group. The Court held that 2019 amendments to the Wage Payment Law and Wage and Hour Law – referred to as Chapter 212 - were not retroactive. Chapter 212 enables employees to recover liquidated damages for certain wage violations and also extends the statute of limitations from two years to six years. New Jersey follows a rule of statutory construction that favors prospective application of statutes and assumes that retroactive application is usually unfair. The Court held that retroactive application of Chapter 212 would be improper because the legislature stated that they "shall take effect immediately."

Based on this ruling, the amendments apply prospectively to conduct that occurred on or after August 6, 2019. This ruling will be helpful in defending New Jersey wage and hour claims going forward because it eliminates any ambiguity about what statute of limitations applies and what remedies will be available.