This article originally appeared in the October 2024 issue of Security Business magazine. Don’t forget to mention Security Business magazine on LinkedIn and @SecBusinessMag on Twitter if you share it.
Let’s say you have a dispute with someone – perhaps an employee, a vendor, or a competitor. Once the dispute is resolved, you want peace of mind that the other party will not undermine or disparage your business going forward. Non-disparagement clauses – often included in settlement or severance agreements – do just that. They aim to prevent one or both parties from making negative comments about each other or from doing anything that would convince someone else not to do business with the other.
A general non-disparagement provision can be as simple as "Employee agrees that Employee will not disparage the company or any of its officers, directors, or employees." That said, such a basic provision could risk being deemed overly broad. Further, what is deemed disparaging is not uniform. It depends on the circumstances. Where appropriate, parties should give the provision some context to aid its enforceability.
Here is a more specific example: Plaintiff and Plaintiff’s counsel agree not to make or cause to be made any public statements (regardless of medium) intended to disparage the defendant or intended to discourage any person or entity from doing business with the defendant. This paragraph shall not be construed, however, to prevent Plaintiff or her counsel from disclosing information to any attorney, accountant, or tax advisor with whom Plaintiff may consult for the purpose of obtaining professional advice or services, or to any governmental taxing authority, or to any court or judicial officer, or pursuant to any court order.
Sometimes such a provision is also used in conjunction with a confidentiality or nondisclosure provision: Notwithstanding the confidentiality of the settlement, Plaintiff’s counsel shall be permitted to state the following on his law firm’s website and social media: “Personal Injury Victim reaches settlement before trial with defendant for $XX in case venued in XYZ Court. Neither the case title of the litigation nor the name of the parties or any defining characteristic of any of the parties will appear in said statement.
At their core, non-disparagement clauses restrict speech; therefore, some incorrectly consider them inconsistent with basic principles of free speech. The First Amendment restricts the government from infringing on free speech, not private actors. In other words, if two private parties (i.e., non-governmental) agree between themselves to restrict one or the other’s speech, they are free to do so (assuming the particular language of the restriction is otherwise enforceable).
Other than general enforceability, the challenge for non-disparagement clauses is how to discover a violation. You must have evidence that the counterparty violated the restriction. In the old days, that was more challenging. Now, because of email, text messages, social media, and the ubiquity of voice recorders/cameras, violations may be easier to discover.
If a violation is discovered and the non-disparagement is enforceable, that can potentially void the underlying settlement/severance agreement or form the basis for a separate action for breach of that agreement. In either case, the damages could be substantial – depending on the specific language in the agreement, the severity of the disparagement, the scope of its publication, and other factors.
You worked hard to earn your business reputation and you need to work hard to protect it. Similarly, if you agree not to disparage a counterparty, you must abide carefully by your agreement lest you be on the wrong side of a claim that you disparage them.
