What is a non-disparagement clause?
“Disparage” has been defined by dictionaries and U.S. Courts as “bringing discredit or reproach upon, to dishonour, discredit; to lower in credit or esteem”, “to depreciate by indirect means”.
Companies use non-disparagement clauses to make sure their customers, former employees, contractors, etc. do not discredit the company online, which would cause damage to the company’s reputation and business. Simply put, a person who signs a non-disparagement clause cannot say negative things about the company. This includes publishing negative comments in the press or the media, or any other material, in written or electronic format, publicly talking negatively about the company, in speeches, interviews, or public statements regarding the company’s operations, clients, employees, product, and services.
Disparagement differs from defamation, as defamation applies to false statements. Disparagement applies to statements that are true: the company wants to protect itself from bad publicity, even if the facts depicted by the person disparaging the company are true.
Who can make you sign a non-disparagement clause?
Usually, an employer can make you sign a non-disparagement clause with your employment contract or with your termination contract. In both cases, it protects the company if the employee leaves his job: he won’t be able to publicly criticize the company.
Customers are protected by the law, therefore companies cannot prohibit a customer to The Consumer Review Fairness Act of 2016 protects consumers who post negative reviews, online, in the newspapers, etc. It prohibits companies from including non-disparagement provisions in form agreements (general terms of sale, terms and conditions). This act also prohibits clauses that impose a penalty or fee if the customer writes a negative review.
The goal behind this Act is to allow people to share their honest opinions about a product, service, or company in general. Prohibiting consumer’s honest reviews, or threatening to take legal actions against them if they post opinions that are not positive, harms other consumers as they cannot benefit from reliable opinions. It also harms businesses that only earn positive reviews, as consumers will not know whether the lack of negative reviews is a consequence of the company’s great work or its policy prohibiting positive reviews.
What kind of non-disparagement is legally enforceable?
Companies are allowed to include clauses that prohibit customers from revealing confidential and private information, from publishing reviews that are libelous, vulgar, obscene, or inappropriate, unrelated to the company’s products or services, or that are false or misleading.
Should you sign a non-disparagement agreement?
Whether you should agree to sign a non-disparagement agreement depends on the benefits you gain from signing it. You should consider the pros and cons, and if the non-disparagement clause goes with financial compensation.
If you have been asked to sign a non-disparagement agreement and would like to obtain legal advice, or if you are accused of breaching a non-disparagement agreement, contact your experienced attorneys at EPGD Business Law.