The Problem with Non-Disparagement Clauses
“If I am going to have to pay her a severance, I want to make sure that she doesn’t go around bad mouthing me or my company,” is not an unusual plea from an employer who is parting ways with a difficult employee. The employment lawyer’s most common response to this concern is to add a non-disparagement clause to the separation agreement. While enforcement of non-disparagement clauses can be tricky, most employment lawyers will tell you that they have never had to enforce one, suggesting that the clauses do serve as effective deterrents on disgruntled former employees’ criticisms of their former employer or boss.
Notwithstanding their psychological effect on terminated troublemakers, non-disparagement clauses can be problematic. For one, the inclusion of a non-disparagement clause often invites a request from the ex-employee’s lawyer that the clause’s obligations be mutual. Agreeing to such a request can prove challenging because it is very difficult to guarantee that no one employed at the company will speak ill of the former employee.
Additionally, much like overly broad confidentiality agreements, non-disparagement clauses can run afoul of recently enacted state laws that prohibit employers from including non-disclosure provisions that prevent employees from publicly discussing sexual harassment and other claims against the employer. An employer could also lose its ability to deduct costs from its federal taxes associated to settlement of sexual harassment claims if the settlement were subject to a “non-disclosure agreement,” which a non-disparagement clause arguably is.
Ultimately, however, employers are probably better served by narrowly drafted and neutral-sounding confidentiality clauses. Rather than telling the employee that she cannot say “bad things” about her former employer, a well-drafted and neutral-sounding confidentiality clause is likely to be more palatable to the recently fired employee.
Finally, recognize that many terminated employees disparage their ex-employers as a defensive measure. They think that the ex-employer will be disparaging them. Therefore, an employer telling a terminated employee that they hope that the ex-employee finds a job that is a better fit can go a long way in discouraging the employee from disparaging that employer. Even if it is not spelled out in the separation agreement, a company should assure the terminated employee that the company will not be bad-mouthing them and will follow its usual policy of providing only neutral references. While the ex-employee may still be unhappy, she is more likely to realize that it is in her best interest not to disparage her former employer.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.