What is a non disparagement agreement? A non disparagement agreement is one that prevents an employee from making disparaging remarks about their employer once they separate from the organization. Usually, the nondisparagement clause is part of severance and settlement agreements. It stipulates that the ex-employee will not make negative remarks about their employer, and they also give up their right to sue the employer instead of compensation.
However, what constitutes disparage is not clearly stated by the law. While it means to belittle or utter something negative about someone, the actual meaning depends on the state you are living in and how the local courts define the term. Some judges may be strict about what is disparaging, while others may be more lenient.
Hence, if you are signing a non disparagement agreement with your ex-employer, you should consult a lawyer before signing the contract. The lawyer will discuss with your employer to find out what constitutes disparagement, and you always have the right to accept or reject the nondisparagement clause in separation agreements.
Who Takes the Non Disparagement Agreement? – People Involved
Typically, agreement for nondisparagement is signed between an employer and an ex-employee. It is essential to note that just like the ex-employee cannot say anything negative about their ex-employer, the organization also cannot disparage the ex-employee. So, when you sign a nondisparagement agreement, you and the ex-employer are bound by the terms and conditions of the agreement.
The agreement can also be signed between a contractor and an organization using the services of the contractor.
Purpose of the Non Disparagement Agreement – Why Do You Need It?
Organizations use a non disparagement agreement as a way to manage their brand reputation. Anything negative about the organization could harm its bottom line and also result in talent shying away to work with them. Hence, organizations and institutions often include a non-disparagement clause in settlement and severance agreement. This is because they do not want ex-employees saying or writing negative things about them, so they often use as a way to gag the ex-employee, who cannot say or write anything defamatory about the company, its shareholders, top management and customers or clients.
However, anyone signing such an agreement should be clear about what the organization considers disparaging. It should be mentioned clearly in the agreement, which should not try to stop an ex-employee from stating the truth and voicing their opinions.
When both parties sign non disparagement agreement, they are bound by it and will be unable to:
- Say anything negative about each other in public
- Post negative comments or reviews about each other in any public forum, be it online or offline
- Publish anything that can damage the other party’s reputation
- Create negative publicity about one another
If you are an individual, you should understand the depth of the agreement or clause before you accept it.
Contents of the Non Disparagement Agreement – Inclusions
Some of the details that are part of a non disparagement agreement template include the following:
- Name and address of the two parties signing the agreement
- The date from when the agreement will come into force
- It should state that the ex-employee cannot disparage against the company, its executives, employees, products or services
- What constitutes disparaging comments?
- What would happen if either party infringes on the agreement?
- What recourse does the party have should the other say or publish anything disparaging?
- The penalties should the offending party would have to pay if they breach the agreement. It could include paying the other party’s legal costs
- The date when the agreement is signed
- Signature of the two parties signing the agreement
It is prudent to remember that when you sign a non disparagement agreement, the settlement and the terms of the agreement cannot be discussed with a third-party who was not privy to it. This clause, too, would be mentioned and included in the agreement.
Non disparagement clause in separation agreements has to be reciprocal for it to be enforceable. If the clause is not reciprocal, it will be difficult for either party to enforce the terms and conditions. That is why before signing such an agreement, it is advisable to consult an experienced attorney who will explain the pros and cons of the agreement and also negotiate the terms and conditions of the agreement on your behalf so that you get compensated at an acceptable level when leaving or separating from the organization.
How to Draft the Non Disparagement Agreement?
When you are drafting a nondisparagement agreement, you need to take a lot of care as the term disparage is open to interpretation by individual courts and judges. Some of the things that you should consider while drafting the agreement are as follows:
- Which parties will be covered by the agreement? In case of an organization, the agreement should cover not just the brand reputation, but also top executives, the ex-employees supervisor, colleagues and coworkers, shareholders, customers and clients, and products and services
- What is the actual meaning of disparagement as per the contract? It should be clearly stated as opinions and views that fall under the First Amendment should not fall under the purview of the agreement if they are not slanderous and negative
- What constitutes a breach of a non-disparagement clause? It should be clearly stated so that there is no scope for ambiguities and vagueness at a later stage
- The consequences of violating the agreement should also be mentioned, along with who will pay the legal costs of the aggrieved party
It is important to remember that, usually, employers and employees sign this agreement. A company cannot ask its customers to sign it as it would be against the Consumer Review Fairness Act. It is especially true in California. Adding a nondisparagement clause in California to consumer contracts is against the state law, and businesses could face a minimum fine of $2,500. Subsequent violations of the law could end up in fines of up to $10,000.
If you are an employee and your ex-employer asks you to sign a non disparagement agreement as part of your severance or settlement agreement, you can often negotiate higher compensation. It is indicative that the organization has something to hide and hence, will be willing to pay you more compensation. So, work from that angle to wrangle out more money. You can also negotiate the terms and conditions of the agreement. It is best to involve an attorney who will work to get you the best deal.
Benefits & Drawbacks of the Non Disparagement Agreement
Some of the advantages of a non disparagement agreement include:
- It protects the organization if an employee’s services have been terminated in a controversial manner. The agreement protects the organization from future lawsuits should the employee decide to sue
- The agreement helps to protect the reputation of the employee and employer. As the ex-employee cannot make the terms and conditions public, they cannot speak about their termination or separation. It also deters the ex-employee from disparaging the organization
- The compensation that the ex-employee gets at the time of separation from the business can help lighten the financial blow they receive when they leave the organization
Some of the disadvantages of the agreement are:
- The employee can view the agreement as a way to negotiate. Due to protracted negotiations, it can prolong a situation that is already quite unpleasant for both parties
- An organization cannot force an employee to sign the non-disparagement agreement. So, if an employee refuses to sign the agreement, there is nothing the organization can do. Should this happen, it could legitimize the claims of the employee, who can go public with the contract, resulting in damage to the reputation of the company
- If an employee is being terminated due to sexual harassment charges or other infraction, the agreement can reinforce that the behavior is acceptable by the company
- Offering compensation as a part of the agreement can be expensive for the company
What Happens in Case of Violation?
Breach of non disparagement clause can prove to be quite expensive for an individual. If you have signed a nondisparagement agreement with your employer, you will not be able to speak about the settlement or the contract. Should you violate the agreement(1), the company can sue for it. And, depending on the terms and conditions of the contract, you may have to repay any compensation you received by the organization at the time of signing the contract. Also, if the company takes you to court, you will be liable to pay the costs and the lawyer’s fee.
Remember, different jurisdictions view nondisparagement agreement differently, as there is no fixed definition of what is disparaging. So, if you breach the agreement and have to face a lawsuit, the outcome will depend on the judge.
So, if you are thinking about signing such an agreement, make sure you ask sufficient questions to understand the impact of the disparagement clause. It is advisable to consult a competent attorney, especially if you are more likely to disparage the other party signing the agreement. Remember, you should agree to the terms and conditions. An attorney can explain the implications of signing the agreement. This legal advice could protect you from an expensive lawsuit further down the line.
Many organizations and startups have a nondisparagement clause in their employment agreement, severance, and settlement agreements. It is important that the moment you see this clause, you consult an attorney to understand the gravity of the matter. You can always retain your right to disparage the organization or speak of your time as an employee by not signing the contract.
The EEOC has voiced concerned that a nondisparagement agreement goes too far and could be illegal as they prohibit employees from filing legitimate charges against their employers. Hence, it is best to ask your employer if there are exceptions for filing charges before you sign the agreement.
If you would like to understand more about this agreement and what it contains, check online as you will find be able to find a good nondisparagement clause sample. To understand the terms and conditions of the clause and study its significance.