“Sticks and stones can break my bones, but names can never hurt me…” Should Non-Disparagement Provisions be Included in Employment Agreements?
March 16, 2022
By: Colin A. Walker
In a non-disparagement agreement, a party agrees not to disparage, or make negative comments about, another party. This is broader than the protection provided by libel, slander, and defamation laws because these claims requires malice and other elements not required to prove a breach of a contract like a non-disparagement agreement.
For many years, non-disparagement agreements have been common in separation agreements and settlement agreements because the employee and employer are parting ways, often with hard feelings or legal claims against each other. In an effort to achieve an amicable separation or resolution of a dispute, it is often in both parties’ interests to agree not to make negative comments about each other and, since they will have no ongoing relationship, there is usually no reason for them to say anything about each other in the future.
However, in recent years some employers have started to include non-disparagement clauses in employment agreements. In my opinion, this does not make sense. Unlike the case of a separating employee, an employee signing an employment agreement is just beginning (not ending) his or her relationship with the employer. As part of his or her job, the employee may need to make negative comments about the employer. For example, an employee may need to take responsibility for a mistake in a conversation with a customer like this:
Employee: I am sorry we didn’t deliver the product on time. Our people screwed up and we take full responsibility for it. We will do our very best to make sure it doesn’t happen again.
Customer: Thank you. This caused a big problem for us, but since you have taken responsibility for it, we’ll chalk it up to a bad day and continue our relationship. Thanks for being honest.
The employee has saved an important customer relationship by being honest about a mistake made by his or her employer, but, to do so, had to say something negative about the employer. This would violate a non-disparagement clause.
I know what you’re thinking: an employer would never enforce a non-disparagement agreement under these circumstances. But, if you are not going to enforce it, why have it? And, if you are not going to enforce it consistently, you could expose yourself to discrimination claims. Overly-broad non-disparagement agreements could also expose an employer to liability under such laws as the National Labor Relations Act, which, among other things, prohibits taking action against employees for discussing unfair workplace practices such as unfair pay, benefits, working conditions, etc. (“concerted activity”). Furthermore, conscientious employees will know that they are prohibited from making negative comments and this might cause them to hesitate to have the honest conversation with the customer. Do you want your employees to hesitate to have a conversation that might save a valuable customer relationship? Of course not.
These risks can be mitigated by including exceptions for such things as concerted activity, compliance with subpoenas, and other activity required by law. However, even thoughtful drafting cannot anticipate every situation that might be a proper exception. And, there are likely to be many proper exceptions because, unlike a departing employee, an employee signing an employment agreement will have an ongoing future relationship with the employer (and hopefully a long one).
The better practice is to not include non-disparagement clauses in employment agreements and discipline or fire employees who make inappropriate negative statements about the employer. In egregious cases, the employer may be able to assert claims against the employee such as defamation or breach of the duty of loyalty.
If you are going to have a non-disparagement agreement, like any contract or legal document, it should be carefully drafted. Enforcement is difficult and drafters should consider specific remedies such as injunctive relief and liquidated damages. Scope can be tricky, especially for corporations or other organizations comprised of many employees, which should not be bound by any statement by any low-level employee. Competent legal counsel should be consulted.