Introduction to Non-Disparagement Agreements
Non-Disparagement Agreements are an increasingly common feature of the modern workplace. In essence, they are contractual performance obligations in which one (or both) of the parties agrees to refrain from making disparaging remarks about the other party. You might sometimes hear such a contract referred to as a Non-Disparagement Clause or Non-Disparagement Agreement.
Businesses have a number of reasons for utilizing Non-Disparagement Agreements. One reason is that they help maintain a positive workplace . Because Non-Disparagement Agreements often bind employees after they leave the company, they can help companies avoid troublesome situations regarding the reputations of former employees or executives. Companies also want to avoid reputational risk among customers or shareholders. By entering into Non-Disparagement Agreements with their employees, companies can prevent negative information about the company from being released, which may hurt their business. In the case of mergers or acquisitions, a buyer can protect itself from the risk that a seller’s current employees will make disparaging comments about the buyer and deter key employees from potentially leaving the company.
Essential Components of a Non-Disparagement Agreement Template
Parties:
Prior to beginning the drafting process, the parties to the agreement must be clearly identified. In any non-disparagement agreement template, all parties who will be bound by the agreement are required to be named. In these situations, common parties include current or former employees, their family members, and the company.
Scope of Non-Disparagement:
Any template should also define the parameters of the non-disparagement clause. For instance, it may specify that the agreement prohibits slanderous or libelous comments, or even just derogatory remarks either spoken or written by the parties to the agreement in question.
Duration:
This portion outlines when the agreement will begin and when it will last until. A longer duration is generally more preferable for the employer, but must be reasonable in order to be enforceable.
Exclusions:
These are provisions and exceptions to the non-disparagement requirement that are laid out in the agreement. They may include anything from disclosures of the agreement itself to statements made in an investigation or as a result of a legal proceeding.
Advantages of Implementing a Non-Disparagement Agreement
The objective of any non-disparagement agreement is to ensure that former, current and potential employees do not make any derogatory statements about the company. This is typically done by way of written policy, or a non-disparagement clause contained in a separate separation agreement signed by the employee. In some circumstances, it can be helpful to have a more formal, stand-alone non-disparagement agreement between certain employees and their employer.
A non-disparagement provision in an employment agreement or separation agreement should be broad enough to prevent any slash-and-burn comments about the company, but detailed enough that it protects the company’s valuable reputation but not so broad that it binds a company’s limited ability to discuss a former employee’s performance or terms of employment, if contacted by a prospective employer.
In addition to protecting its reputation, a non-disparagement agreement can be useful because it allows an employer to quickly and discreetly stop (and ultimate prevent) negative publicity.
Common Mistakes and Issues
Given the prevalence of non-disparagement regarding the "restricted" covenants, courts have had years of experience dissecting the difference between what is enforceable and what is not. For example, non-disparagement covenants must clearly delineate between confidential and public information. They also cannot require a party to remain silent as the cost of living one’ life. Additionally, non-disparagement, particularly in employment agreements, must have a temporal limit. The California Supreme Court decided that a perpetual non-disparagement "is so indefinite and uncertain as to be unenforceable." Edwards v. Arthur Anderson LLP, 44 Cal. 4th 937, 958 (2008). And, a bright line ban on discussing any aspect of a case with anyone is non-enforceable. Schaffer v. California Dept. of Corrections and Rehabilitation , 179 Cal. App. 4th 986, 1006 (2009). Without a time limitation or a bright line rule, a court may find the non-disparagement provision to be void as against public policy.
Because non-disparagement often requires that a person "shall not" disclose information or make comments about a party, many of the same issues apply for the need clear language. Sections that prohibit parties from discussing anything that relates to any incidents or anything related to such incidents, "subject only to the requirements of law." In Wong v. Ring, 226 Cal. App. 4th 228 (2014), the California Court of Appeal held that "because the agreement as drafted allows Wong to comment on anything, it is unenforceable." The takeaway from Wong is that if non-disparagement has any duration, the time must be specifically stated. If there is no time limitation, the agreement is "perpetually unenforceable." Wong at 246.
How to Modify a Template for Specific Requirements
In order to create a non-disparagement agreement that is right for your business, it’s essential to modify the non-disparagement agreement template found online to reflect the specific requirements of your business as well as any legal constraints you may be subject to. Some important points to keep in mind when modifying a non-disparagement agreement to suit your business needs include:
- ensure you have a clear understanding of when and how the agreement will be used. A generic non-disparagement agreement template may be too wide-ranging or too narrow based on how you intend to best employ it .
- ensure that you incorporate clear language prohibiting any disparagement. Leaving any ambiguity may render your agreement useless.
- make sure you have considered whether you’d like to include additional points or provisions such as including mandatory arbitration provisions or any deadlines that would apply to the person signing the agreement.
- ensure that when you are drafting the agreement that you have kept yourself within the bounds of employment law and have not prohibited what would be illegal under federal or state law.
Legal Implications and Considerations
When formulating non-disparagement clauses into an agreement, litigants must be aware of and in compliance with many state and federal laws. For example, Section 7 of the National Labor Relations Act ("NLRA") gives every employee the right "to engage in other concerted activities for the purpose of . . . mutual aid or protection." 29 USC §157. Section 502 of the Labor Management Relations Act ("LMRA") permits an employee "[t]o strike or support strikes, etc." 29 USC §185. Sections 201(c) and 1628 of the Labor Management Reporting and Disclosure Act ("LMRDA") further give union workers the right "to assemble freely with other labor organization[s]." 29 USC §§411(c), 1626. These sections of the NLRA confer to all laborers the right to interact and engage with others in regard to their grievances, and any clause or agreement that impinges on this right runs afoul of federal law. See e.g., Sanders v. Robert Bosch Corp., No. 6:09-CV-611, 2010 WL 3506457, *4 (W.D. La. 2010). Moreover, in some situations, overly broad non-disparagement agreements have been deemed void as against public policy. See e.g., Telmar Network Svc.s Inc. v. Anzalone, 937 A.2d 1114, 1119 (Del. Ch. 2007)(holding that overly broad non-solicitation and non-disclosure agreements of former employee within covenant not to compete were void as against public policy); Sailors v. Gregory, 343 P.3d 523, 526 (Wash. Ct. App. 2015)(also holding same). A violation of the terms in a non-disparagement agreement can result in an array of remedies, such as injunctions or equitable relief, as well as statutory damages in some cases.
Alternatives to Creating a Non-Disparagement Agreement
Rather than enforcing a non-disparagement clause, you might be better suited to respond to unfair or critical comments about your business by having a solid corporate policy in place. If customers’ first experiences when doing business with your company are positive, they will be less inclined to disparage you in the future. Likewise, if employees feel that they are treated fairly and have their concerns heard, the temptation to disparage you – or allow their friends to do so – will be greatly diminished.
You should also consider making conflict resolution a part of your corporate policy. This intrinsically gives employees a route by which they can make their grievances known. If employees are given a chance to speak up, it will lessen the likelihood of them doing so via social media sites. By and large, people tend to go online and reach for their smartphone when they are under a lot of stress and are not in a calm frame of mind. If they can talk to you first, there is a chance they will not do so afterward.
If you do not have a formal employee handbook, you should look into doing so. A well-made handbook will address professional attitudes and behaviors, including how an employee’s message reflects on the brand itself. This will help create a corporate culture in which employees are well aware that they might be disciplined for disparaging the company.
Conclusion and Recommended Practices
Best practices for drafting and implementing a non-disparagement agreement effectively may seem somewhat obvious, but they are critical to the success of these agreements. First, it should go without saying that an employer must actually have the legal authority to enter into such agreements. For example, in many unionized workplaces, collective bargaining agreements will expressly prohibit non-disparagement agreements and employers contemplating cuts to their workforce would be ill-advised to attempt to persuade disgruntled employees to sign off on such agreements.
Assuming the employer does have a legal right to enter into these non-disparagement agreements, drafters should ensure that no legal rights are waived or potentially are waived under the non-disparagement agreement except as expressly set forth in the agreement . Furthermore, for employees who are not in management (or outside officers), most courts will construe the agreements in favor of employees to the extent there is any ambiguity. So, while the employer should make sure that the intent of the non-disparagement agreement is clear, it must also make certain the non-disparagement agreement does not contain unnecessary ambiguities.
Finally, best practices dictate that employers should use as simple and plain language as possible within the confines of the judicially crafted rules of interpretation that protect non-disparagement agreements.