What is a Non-Disparagement Agreement?
A non-disparagement agreement is an agreement in which one or both parties agrees to refrain from making disparaging comments about the other. In fact, the comments, remarks or statements contained in a non-disparagement agreement tend to be similar to the underlying agreement but instead of encompassing the written word, the comments, remarks or statements are oral and are any form of communication about the parties and/or underlying agreement.
From a plaintiff or employee’s perspective, one of the reasons for entering into a non-disparagement agreement is to ensure that if the employee or party involved in the agreement is later applying for another position, or maybe seeking to form a similar business, the party with whom the employee entered the non-disparagement agreement with will not disclose disparaging remarks or comments that the party has made about the employer or competitor . Generally speaking, employers would prefer removing the risk of that individual enter the non-disparagement agreement with them to reduce liability.
For example, let’s say you are an employer seeking to do business with a potential customer and you learn that they have had negative experiences with your business partner. The potential customer may be hesitant to work with you due to your business relationship with the partner. In order to alleviate the potential customer’s negative attitude towards your business partner, your business partner and you may want to enter into a non-disparagement agreement to resolve the disagreement amicably without conflict.
Key Features of a Non-Disparagement Agreement
While elements of any agreement can be negotiated, a few provisions are standard, and most non-disparagement agreements address:
Scope of prohibited statements. Key questions in deciding the scope include: what type of statements are considered "disparaging"? What third parties may not be disparaged or defamed (e.g., members of the management or human resources departments)? What forums are being discussed (e.g., web postings, discussions with customers)? Are statements to former colleagues prohibited during a business lunch or dinner? The answers depend on the particulars of your situation and the individuals involved.
Parties. Who is obligated under the agreement? Is it just the employee or former employee? Are previous employers covered by anyone who still works for the company? If the person who is responsible for the hiring of the employee later discloses the existence of the non-disparagement agreement to a reporter, does that give rise to liability for breach against the employer?
Exceptions. Non-disparagement agreements may contain exceptions for statements made in the course of the employee’s performance of their job duties or due to legal obligations, such as after receiving a subpoena.
Duration. Non-disparagement agreements typically last indefinitely, while non-disclosure agreements might last only for a certain period of time.
Legal Advantages of a Non-Disparagement Agreement
Utilizing a non-disparagement agreement has several legal benefits. For the employer, it secures a promise that the former employee will restrain from disparaging them, which helps to prevent reputational harm from potentially damaging employee reviews on sites like Glassdoor and Indeed. If a business employee were to violate this agreement, then the company may have a potential breach of contract claim against the employee. Further, such an agreement may deter any lawsuits on similar grounds.
On the employee side, it will discourage the individual from bringing a lawsuit for termination under California Government Code Section 12940 et seq. or any other claims without fear that their disparaging comments about the employer might be used as evidence to support a potential lawsuit. In addition, it holds the business accountable for allowing the departing employee a certain amount of time to secure new employment, so that they are not left jobless.
Possible Downsides
Context is key when it comes to drafting non-disparagement agreements. The potential drawbacks in these types of agreements are numerous and can result in adverse consequences for both parties if not addressed upfront. One such drawback is enforceability. Depending on state or local laws, you may be unable to enforce non-disparagement agreements altogether. In some jurisdictions, such as California for example, employers are unable to request that employees or candidates refrain from disparaging employers, unless it is made specifically within the context of a severance agreement and only when certain other requirements are met. Some states have even passed laws in recent years that prohibit nondisclosure and non-disparagement covenants with respect to harassment, discrimination, and retaliation allegations in settlements. Other jurisdictions have begun making changes to limit the applicability of these covenants.
Further, overly broad terms in non-disparagement agreements can lead to a finding of unenforceability. Too many non-solicitation and non-disparagement agreements that follow a "kitchen sink" type of approach risk non-enforcement. A party might choose to not enforce all or part of an overly broad form of non-disparagement language for fear of having a court declare all or part of it unenforceable due to these overbroad provisions. This could actually work against the party seeking to have the other party comply with the non-disparagement agreement.
In addition, Courts across the country may interpret non-disparagement agreements to mean that while strictly negative comments about the other party are prohibited, expressing opinions about the company and its products in an unflattering light (e.g., on social media) may not be construed to be a violation of the non-disparagement agreement.
Another potential issue is if one party is found to have disparaged the other – and litigation ensues to enforce the non-disparagement agreement, the other party may find himself/her self the subject of discovery requests for all his/her prior social media communications. That discovery may be increased if the other party is a public figure. The scope of discovery seems to have no bounds when it comes to litigation.
How to Draft a Non-Disparagement Agreement Template
The process of creating a non-disparagement agreement template may seem daunting, but it can be broken down into a few comprehensive steps.
The first step is to outline the basic components you want in your template. For instance, who are the parties involved? What associations, companies, positions, or assets relate to that party? What is the exact language used for the "Non-Disparagement" section? Next, you’ll want to list the "Terms and Conditions" for your agreement, including how long it lasts, what it applies to, any required dispute resolution mechanisms, and so on. Finally, you’ll want to include guiding parameters for "Termination." While it’s absolutely fine to use prefabricated text for the first stage of your template , it’s important to be diligent and specific when creating your final document.
Don’t be afraid to make your non-disparagement agreement template as short or long as you desire, depending on the needs and circumstances of your business and its employees. A friendly reminder is to avoid gap language – meaning that even situations that could possibly be construed as "disparagement" should be covered in the text. As previously mentioned, it’s never a bad idea to err on the side of caution if you feel uncertain about whether or not a statement may be protected speech or legally protected under local laws. One way to ensure that your non-disparagement agreement is as comprehensive as possible is to consult with a legal professional or an attorney, who can advise you on how best to set up a solid non-disparagement agreement template.
Common Pitfalls
Lack of Clarity: One of the biggest mistakes in non-disparagement agreements is the failure to clearly define the types of disparaging remarks that are prohibited. A vague statement like "employee shall not make any statements that may discredit employer" can lead to misinterpretation. It is important to be as specific as possible and to include examples if necessary.
Overly Broad Agreements: While it is crucial to be specific about what is prohibited, it is equally important to avoid being overly broad. An agreement which seeks to prohibit any and all statements made by an employee may not hold up in court. It can also be perceived as an attempt to silence an employee and could result in retaliation claims.
Failure to Address New Media: With the rise of social media in today’s workplace, it is essential for employers to address this issue in their non-disparagement policies or agreements. Failing to maintain an updated and relevant policy or agreement could leave an employer vulnerable to damaging comments made online.
Inconsistent Enforcement: It is important to ensure that all employees subject to a non-disparagement agreement are aware of and understand the policy. A failure to consistently enforce the policy can lead to claims of discrimination among different age groups or ethnicities.
Inadequate Training: If your organization has a non-disparagement policy or agreement in place, ensure that all employees are properly trained on the terms and implications. Failure to effectively communicate the specifics of the policy to employees can lead to miscommunication and misunderstanding.
Wrapping Up: Seeking Legal Guidance
The Most Effective non-disparagement agreements and non-disparagement agreement templates are the ones that are drafted specifically for your individual needs after a comprehensive consultation with an attorney experienced and familiar with California non-disparagement agreements, as well as other states (if you happen to have work-related issues across state lines or jurisdictions). Whether you are dealing with either the drafting of a non-disparagement agreement , or you are having problems with enforcing such an agreement, you should never assume you know enough about the intricacies of such contracts to adequately protect yourself. There are so many creative ways to protect oneself from the potential land mines and traps that either may be drafted into or may affect your non-disparagement agreement, that your best bet is to consult a qualified employment attorney to properly advise you.