Non-Disparagement Clauses: What You Cannot Say
What Is a Non-Disparagement Clause?
A non-disparagement clause prohibits one or both parties from making negative, critical, or derogatory statements about each other. These clauses are common in employment agreements, severance packages, settlement agreements, and business contracts.
Why They Exist
Businesses use non-disparagement clauses to protect their reputation. When an employment relationship or business deal ends, especially on difficult terms, there is a natural risk that one party may publicly criticize the other. Non-disparagement clauses aim to prevent this.
Recent Legal Developments
The legal landscape around non-disparagement has shifted significantly:
- NLRB ruling (2023). The National Labor Relations Board ruled in McLaren Macomb that overly broad non-disparagement clauses in severance agreements can violate the National Labor Relations Act by chilling employees' Section 7 rights to discuss working conditions.
- Consumer Review Fairness Act. Federal law prohibits contract provisions that restrict consumers from posting honest reviews.
- State variations. Several states have enacted laws limiting non-disparagement clauses in specific contexts, particularly in settlement agreements involving discrimination or harassment claims.
What to Watch For
- One-sided clauses. If only you are restricted from making negative statements while the other party is free to say what they want, the clause lacks balance.
- Vague definitions. What counts as "disparaging"? Without clear definitions, even honest criticism or factual statements could be alleged as violations.
- Scope that covers truthful statements. A clause that prohibits you from making truthful statements to government agencies or in legal proceedings may be unenforceable.
- Excessive penalties. Some non-disparagement clauses include steep liquidated damages or forfeiture of severance benefits for any violation.
When to Consult a Lawyer
Consider consulting an attorney before signing a non-disparagement clause in a severance or settlement agreement, especially if you may need to cooperate with government investigations, file regulatory complaints, or discuss your experience publicly.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.