Non-Disparagement Clause

A contractual clause, sometimes found in employment contracts and, more frequently in severance-of-employment agreements and settlements, and with respect to former owners and managers in acquisition agreements, to the effect that the person bound will not disparage their former employer or business. Anti-disparagement clause is a synonym for non-disparagement clause. Such clauses may often be reciprocal and contain an obligation on the employer not to denigrate the former employee (and indeed agreed reference terms.) These clauses are contractual in nature and different from the tort of disparagement and as such can be much broader.  Moreover, they often define disparagement broadly, for example as:

‘disparage” shall mean any negative statement, whether written or oral, about….’

        or

‘in any way publicly disparage, call into disrepute, defame, slander or otherwise criticise the other Party …. or any of their products or services, in any manner that would damage the business or reputation of such other party, their products or services or their subsidiaries, affiliates…’

In certain contexts too broad a non-disparagement clause may have legality issues, especially where, for example, it prevents a person from reporting illegal activity to law enforcement or exercising certain civil rights. Thus courts have held non-disparagement clauses unenforceable when, for example, under US Federal Law they preclude employees who brought successful Fair Labor Standards Act (FSLA) claims for wage theft from discussing truthfully their experiences, claims and success in the lawsuit; require prior notice to a former employer’s general counsel before whistleblowing to the United States Securities & Exchange Commission (SEC); employees from disclosing workplace safety issues to the Occupational Safety & Health Administration (OSHA.) Similarly, it could prove problematic if a clause prevented an employer from reporting a former employee to a professional licensing body in the case of lawyers, accountants, doctors and other license holding professionals. Indeed, to the extent that clause would preclude reporting criminal acts, even seeking such a clause could be viewed as a criminal act, i.e., obstruction of justice or concealment of crime.

It is therefore wise to draft such clauses so as not to preclude reporting to any regulatory agency with valid jurisdiction over the employer or employee. An exception-clause such as:

‘The foregoing shall not be violated by truthful statements in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings) and reporting to any regulatory agency, department or law-enforcement agency having proper jurisdiction over the Parties,’

 should, at least, usually be included.

Anti-disparagement clauses also have the potential to be very embarrassing and thus, in practical terms, impossible to enforce. One example were the clauses demanded of renown sexual harasser Harvey Weinstein – which managed to do even more damage to his personal reputation and that of Miramax his former employer, and similar clauses used by Fox with respect to its serial sexual harassers; after being heaped with criticism and opprobrium, both had to publicly announce that they were releasing former employees from these clauses. Some consideration should therefore be applied to whether an employer wants to be known to have imposed a ‘gag’ clause on someone – because it very likely would become public if an effort was made to enforce it.