What is a non disparagement clause?
Is this type of clause enforceable?
What happens in the event of a breach?
In this article, we will break down the notion of “non disparagement clause” so you know all there is to know about it!
We will look at what is a non disparagement, what are its legal ramifications, is it enforceable, what happens in the event of a breach of contract, mutual non disparagement clauses, defamation vs non disparagement, where do you see it, sample clauses and more!
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What is a non disparagement clause
A non disparagement clause (or anti-disparagement clause) is a contractual provision where one party or more agrees to refrain from saying something negative or discrediting a product, service, person or company or other.
In other words, a non disparagement clause will impose an obligation on a contracting party not to make statements that may damage the reputation or credibility of another contracting party, a business, product, service or other.
To understand the obligation of non disparagement, the first question to ask is: what is disparagement anyway?
According to Dictionary.com, disparagement is defined as:
Something that derogates or casts in a bad light, as a remark or censorious essay
Based on this definition of disparagement, we can conclude that the act of disparaging is to say something “derogatory” or present someone or something in a “bad light”.
Disparagement vs defamation
It’s also important to differentiate disparagement from defamation.
The term “disparagement” and “defamation” may appear to be similar but they are different and mean different things.
Defamation is making “untrue” or “false” statements about someone, product or service, publicly in an attempt to discredit them, attack their reputation or smear them.
There is malicious intent behind defamation.
On the other hand, disparagement is broader in scope.
To say that you will not disparage someone is to say that you will not make “any” statements about a person, company or organization (whether the statement is true or not) that may affect the other person’s credibility, product or service.
Where do you find non disparagement provisions
Non disparagement clauses are actually more common than you might think.
You can find non disparagement clauses:
- Employment agreement
- Settlement agreement
- Contractor agreement
- Severance agreement
- Mutual release agreement
Generally, non disparagement provisions are presented along with a:
- Non-compete clause
- Non-solicitation clause
- Confidentiality clause
- Mutual release and non disparagement agreement
- In the context of a broader agreement
In the context of a settlement agreement with a former employee, the employer demands that the employee execute a disparagement clause.
The non disparagement obligation is embedded in a settlement agreement, severance agreement or other (contractual clause part of a broader agreement).
Non disparagement obligations can also be presented as a standalone agreement (non disparagement agreement).
In this context, the entire scope of the agreement is the obligation of a person not to disparage another person, entity, product, service or something related to them.
Should you agree to non disparagement obligations
Agreeing to non disparagement provisions or to enter into a non disparagement agreement depends on your context and how it is presented to you.
In the context of a fair settlement of a lawsuit or an employer agreeing to fair severance payment to an employee, the non disparagement provision may be fine and even standard to a certain extent.
In this context, the contractual obligation is presented as part of the conclusion of a fair settlement and an outcome that both parties are satisfied with.
However, suppose a person, employer, company or business entity imposes a non disparagement obligation without giving anything or little in exchange or looking to keep you quiet on something profoundly disturbing to you or some violation of the law.
In that case, that’s a whole other story!
A non disparagement provision is intended for the contracting parties to part ways without smearing or attacking one another’s reputation or credibility.
The goal is to part ways in a peaceful way and prevent future disputes.
However, if you were subjected to physical abuse, psychological harassment, bullying, assault or something similar, and get presented with a non disparagement or non defamation clause, that can be quite disturbing, wrong and perhaps illegal.
Mutual non disparagement clause
A mutual non disparagement clause is when both parties to the contract agree not to disparage one another.
In the context of a lawsuit settlement, this makes a lot of sense.
The parties will typically settle “without admission of responsibility” and, as such, they agree not to disparage one another to ensure that the public does not attribute responsibility to one party or another (based on public opinion) and of course to ensure nothing bad is said about them.
In some other instances, mutual non disparagement clauses may be more problematic.
For instance, if an employer agrees with a former employee to a mutual non disparagement clause in a severance agreement, then both the employer and employee must not make negative statements about one another.
This can be difficult as the employer may not be able to control all its employees to ensure that nobody says anything bad about the former employee.
It’s important to look at the context of the non disparagement obligation to ensure it’s fair and that you can comply with it.
In some cases, you may need to sign a unilateral non disparagement clause but in other cases a mutual non disparagement clause can work just fine.
Non disparagement clause enforceable
Generally, a non disparagement clause is a valid and legally binding obligation.
You can enforce a non disparagement contract or agreement in court and seek damages in case of the violation of non disparagement language.
There are exceptions, however.
Some states have laws and statutes preventing parties from including non disparagement clauses in their agreements as they violate public policy.
For instance, some states prohibit employers from including non disparagement provisions preventing employees from publicly disclosing acts of sexual harassment.
We have to admit that saying “I will not disparage you” or “I will not say something negative about you” is broad, confusing and can lead to interpretation as to what it truly means from a legal point of view.
What does it take for a statement to cross the permissible lines to the breach of the non disparagement terms?
How do you disparage someone or something?
Essentially, the “what”, “how” and “when” questions about non disparagement will all depend on the factual circumstances of the case a judge or court will need to evaluate.
Can you defend yourself against a non disparagement lawsuit using the freedom of speech argument (typically referred to as the First Amendment argument)?
The short answer is no.
The court will not interfere in private contracts or in situations when the state was not involved or took action with the First Amendment freedom of speech arguments.
Breach of non-disparagement clause
Violating a non-disparagement clause or non-disparagement agreement can result in adverse legal consequences.
Typically, the consequences of breaching non-disparagement clauses are damages in the form of compensatory damages (monetary or financial compensation).
When can you be considered as having breached your non-disparagement contract?
From a purely legal standpoint, once you sign a non-disparagement, you are legally prohibited from making any written or verbal statements, adversely affecting the other party’s business, behaviour, conduct, reputation, or other.
However, it’s not feasible for the beneficiary of the non-disparagement obligation to file a disparagement lawsuit for every single instance that you may have made a statement about them.
If you talk negatively about your former employer to your neighbour, your mom or close friends, your former employer may probably not pursue you for damages.
However, if your statement gets important public visibility, reaches your former employer’s network of clients, partners, suppliers or others, then you may be exposed as your statement may have caused damages to your former employer.
Just like any legally binding agreement, you should respect the terms of your obligation to avoid being put in breach or being sued for damages.
Sample non disparagement clause
Let’s look at a couple non-disparagement clauses to get a better sense of how they are worded in a contract.
Example 1: Non disparagement clause employment agreement
Each of the parties agrees not to make any statements, written or verbal, or cause or encourage others to make any statements, written or verbal, that defame, disparage or in any way criticize the personal or business reputation, practices, or conduct of the other party, its employees, directors, officers, attorneys, consultants, or agents relating to or arising out of the employment agreement (“Employment”). The parties acknowledge and agree that this prohibition extends to statements, written or verbal, made to anyone, including but not limited to, the news media, investors, potential investors, any board of directors or advisory board or directors, industry analysts, competitors, strategic partners, vendors, employees (past and present), and clients.
Example 2: Non disparagement settlement agreement
The Plaintiff covenants and agrees not to, directly or indirectly, make or cause to be made to anyone any statement, orally or in writing, criticizing or disparaging the Defendant, or making negative statements or comments about the Defendant. The Parties agree that this non-disparagement provision is an essential consideration for Defendant in settling this matter and any violation of this non-disparagement provision shall lead to Plaintiff’s forfeiture of the Settlement obtained hereunder.
Non disparagement clause FAQ
Are non-disparagement agreements enforceable
Yes, a non-disparagement agreement is enforceable in law.
Just like any legally binding contract, if you enter into a non disparagement contract, you must respect its terms.
What qualifies as disparagement
The term “disparagement” is quite broad and can include many things.
The idea is not to talk bad or negatively about someone.
The first step is to look at the non disparagement language or terms used in the contract.
In many cases, the non disparagement clause will qualify the type of acts (written or verbal) and the medium used to make a statement (social media, public etc).
The second aspect is to use your judgment in case the contract does not specifically qualify an act as disparaging.
If you are talking negatively about the other contracting party to your family, then probably nobody will care.
Suppose you are talking negatively to a reporter who is your friend and there’s a chance that he or she may write something in the papers or online with mass visibility.
In that case, you may have breached your obligation to a point where the other party may consider suing you.