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Navigating the complexities of corporate contracts is a common challenge in today’s job market, and one critical aspect to understand is the non-disparagement clause.
Before signing any document, it’s essential to grasp its implications fully. This article demystifies what a non-disparagement clause entails, its usage, and the potential repercussions of violating it. Additionally, we provide real-world examples of non-disparagement clauses to illustrate their typical language.
Key Takeaways
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Non-disparagement clauses are frequently included in employment contracts, both at hiring and termination.
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Such clauses prohibit employees from making negative statements about the company.
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While enforceable, non-disparagement clauses have certain limitations.
What Is a Non-Disparagement Clause?
A non-disparagement clause is a provision in an employment contract that prohibits employees from speaking negatively about their employer in any form of communication.
This means you cannot publicly criticize your current or former employer, their management, products, or services. For instance, sharing negative opinions with friends, posting grievances on social media, or discussing corporate practices with the media is typically restricted.
Classified as a “restrictive covenant,” non-disparagement clauses are often grouped with other agreements such as non-compete and non-solicitation agreements. By agreeing to this clause, you restrict your ability to voice criticisms about the business, which is often a condition for securing employment or receiving a severance package.
Disparagement vs. Defamation
Disparagement differs from defamation. Disparagement can include truthful statements about the company, while defamation pertains to false statements. For example, if you claim that your company’s products are harmful when they are not, that would be defamation. In contrast, discussing legitimate concerns, such as workplace mistreatment, constitutes disparagement if true.
Non-Disparagement Clause Examples
The following examples, sourced from LawInsider.com, illustrate typical non-disparagement clauses. While they may appear complex, we’ve simplified the explanations for clarity.
Non-Disparagement. The Executive shall not, at any time during the Term and thereafter, make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage the Bank or the Company or any of its subsidiaries or affiliates or their respective officers, directors, employees, advisors, businesses or reputations. Notwithstanding the foregoing, nothing in this Agreement shall preclude Executive from making truthful statements that are required by applicable law, regulation or legal process.
Non-Disparagement. The Executive covenants and agrees that Executive shall not engage in any pattern of conduct that involves the making or publishing of written or oral statements or remarks (including, without limitation, the repetition or distribution of derogatory rumors, allegations, negative reports or comments) which are disparaging, deleterious or damaging to the integrity, reputation or good will of the Company, its management, or of management of corporations affiliated with the Company.
Mutual Non-Disparagement. The Director and the Company mutually agree to forbear from making, causing to be made, publishing, ratifying or endorsing any and all disparaging remarks, derogatory statements or comments made to any party with respect to either of them. Further, the parties hereto agree to forbear from making any public or non-confidential statement with respect to any claim or complaint against either party without the mutual consent of each of them, to be given in advance of any such statement.
Mutual Non-Disparagement. The Company and subsidiaries agree, and the Company shall use its best efforts to cause its respective executive officers and directors to agree, that they will not make or publish any statement critical of the Executive, or in any way adversely affecting or otherwise maligning the Executive’s reputation. The Executive agrees that he or she will not make or publish any statement critical of the Company, its affiliates and their respective executive officers and directors, or in any way adversely affecting or otherwise maligning the business or reputation of the Company, its affiliates and subsidiaries and their respective officers, directors and employees.
When Is a Non-Disparagement Clause Used?
Employers typically require employees to sign a non-disparagement clause in two primary scenarios: upon hiring or upon termination.
Non-Disparagement Clauses When You’re Hired
If you don’t scrutinize your employment contracts, you may overlook the inclusion of a non-disparagement clause, as they are often embedded within broader agreements covering non-compete and non-solicitation terms.
You might encounter non-disparagement clauses in:
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Stock or benefits agreements
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Your employment agreement
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The employee handbook
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Contractor agreements
Companies prefer employees to sign these contracts during the hiring phase when the relationship is positive, minimizing the likelihood of negative remarks. This practice safeguards the organization should the relationship deteriorate later on.
Non-Disparagement Clauses When Your Employment is Terminated
Upon leaving a company, you may be asked to sign a separation agreement that includes a non-disparagement clause, particularly if your departure is contentious—whether due to termination, layoff, or resignation under challenging circumstances.
Typically, companies will not present a non-disparagement clause without offering compensation. Your severance pay and benefits often depend on your agreement to these terms. If you receive a substantial severance package, the company expects you to refrain from making negative statements about them.
Before signing any termination documents, carefully review the contents to understand your obligations fully.
Should You Sign an Agreement With a Non-Disparagement Clause?
Deciding whether to sign a non-disparagement clause is subjective and depends on several factors:
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Is signing necessary for the job? If signing a non-disparagement clause is mandatory for securing a desired position, you may choose to sign it if you are willing to forgo the right to express negative opinions. However, if it is not essential for employment, consider avoiding such commitments.
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Is it required for severance? If a severance package is contingent upon signing a non-disparagement clause, evaluate its worth. Consider the financial implications and duration of benefits to determine if signing is in your best interest.
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Will the company reciprocate? A typical oversight with non-disparagement clauses is that companies often do not agree to reciprocal terms. This means they can still make negative statements about you if they choose.
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What is the timeframe of the clause? Ensure the non-disparagement clause explicitly states that it only applies to future communications; you should not be held accountable for any negative comments made prior to signing the contract.
While we are not legal experts, if you have concerns regarding a non-disparagement clause, consult with a qualified legal advisor. An attorney specializing in employment law will provide insight into your obligations and rights.
What Happens if You Break a Non-Disparagement Clause?
Violating a non-disparagement clause typically leads to financial consequences; the company may seek to recover all or part of your severance pay, especially if it was contingent upon your agreement to the clause.
Additionally, you might be liable for damages if the company can demonstrate that your comments caused them financial harm. However, quantifying such damages can often be challenging for employers.
To address this, many organizations include a “liquidated damages clause,” specifying a predetermined amount for each violation. For instance, if you publicly criticize your former employer on multiple platforms, you may be required to pay for each instance along with forfeiting your severance pay.
Limitations of Non-Disparagement Clauses
There are specific scenarios where an employee may legally disparage their employer despite having signed a non-disparagement agreement:
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If filing for workers’ compensation. If your injury occurred due to the company’s negligent practices, you are permitted to discuss the incident truthfully.
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If a government agency is investigating the company. Employees can freely communicate with authorities regarding unlawful practices, ensuring that non-disparagement clauses cannot shield companies from scrutiny.
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If discussing matters with a trusted friend or family member. While non-disparagement clauses are legally binding, enforcement can be difficult in private conversations, and companies are unlikely to pursue action against personal disclosures.
However, it is crucial to adhere to the spirit of the agreement; avoid publishing any tell-all revelations about your former employer’s practices.
Non-Disparagement Clause FAQ
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Are non-disparagement agreements enforceable?
Yes, non-disparagement agreements are enforceable. These legal documents carry the same weight as any other contractual agreement. Therefore, it is crucial to thoroughly read and comprehend all employment-related documents before signing.
Breaking a non-disparagement agreement can lead to consequences such as termination or significant financial penalties. Ignorance of the terms does not absolve you of responsibility, as you are expected to understand what you are signing.
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What is a disparaging statement?
A disparaging statement is any negative statement. Such statements can be true or false but are inherently negative. Non-disparagement clauses are designed to protect companies from negative remarks regarding their operations, products, or personnel.
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Are non-disparagement clauses enforceable in California?
Yes, non-disparagement clauses are enforceable in California, with specific limitations. These clauses cannot be used to cover unlawful acts, such as sexual harassment or discrimination, as employees retain the right to report such behaviors.
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How do you prove disparagement?
Disparagement is proven through documented evidence, including written statements and recordings. With the rise of social media, it has become more straightforward for companies to substantiate claims of disparagement through online posts and comments, making it easier to hold individuals accountable.
Author
Matthew Zane is the lead editor of Zippia's How To Get A Job Guides. He is a teacher, writer, and world-traveler that wants to help people at every stage of the career life cycle. He completed his masters in American Literature from Trinity College Dublin and BA in English from the University of Connecticut.
