Non-disparagement clauses are commonly used in contracts and agreements found in professional settings, such as between an employer and an employee or between two companies doing business together. They generally prohibit one party from making derogatory or damaging statements about the other party. This kind of agreement is often used in professional settings, such as between an employer and an employee or between two companies doing business together.
The purpose of a non-disparagement agreement is to protect the reputation of the parties involved. For instance, an employer might require an employee to sign a non-disparagement agreement to prevent the employee from making negative statements about the employer after their employment ends. Similarly, a company may include a non-disparagement clause in a contract with another company to prevent the other company from criticizing it in public.
Non-disparagement agreements may cover written and oral statements, and they often specify the penalties for violating the agreement, which could include legal action and monetary damages. However, the enforceability of these agreements varies depending on the jurisdiction, the specific circumstances, such as if to quiet a group of potential litigants in cases involving sexual harassment or sexual abuse, and include considerations of freedom of speech rights. Three examples are found below.
Federal “Speak Out Act”
For example, the federal “Speak Out Act”, as of December 7, 2022, prohibits the enforcement of pre-dispute nondisclosure and non-disparagement clauses in cases that involve sexual harassment or sexual assault (see SB 4524). The Act is intended to combat sexual harassment and assault in the workplace by ensuring that “victims and survivors have the freedom to report and publicly disclose their abuse” so that those responsible may be held accountable and workplaces may be “safer and more productive for everyone” (id. at § 2).
New York General Obligation Law
In New York, a 2019 amendment to the New York General Obligations Law, GOB §5-336, prohibits restricting employee communications relating to all forms of discrimination claims unless confidentiality is the employee’s stated preference (see CPLR 5003-b).
National Labor Relations Board (McLaren Macomb, 372 NLRB No. 58 [Feb 21, 2023])
In McLaren Macomb, which was decided on February 21, 2023, the National Labor Relations Board (“NLRB”) found that broad non-disparagement and confidentiality provisions are unlawful under National Labor Relations Act (see NLRA §§7, 8[a][1]) where they have “a reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their Section 7 rights.” Although it is not clear what impact this decision will have on non-disclosure agreements and non-disparagement clauses as a whole, it is clear that the Board intends to protect employees against unequal bargaining power at a time when they are at their most vulnerable. In essence, McLaren will prevent those situations when an employee is told if they do not take the settlement and keep quiet, they will get nothing, no severance, and no damages.
It’s generally recommended to seek legal counsel when dealing with such agreements because although the recent legislation and recent case law, there are exceptions. For example, the “Speak Out Act” applies only to non-disclosure and non-disparagement clauses signed before a dispute arises. The Act does not prevent the use of such non-disparagement and confidentiality provisions in settlement or severance agreements. Even in McLaren, which involved unionized employees, although the decision applies equally to non-unionized private employees, it does not apply to higher level employees, managers and supervisors (see 29 USC §152.11, NLRA §2[11]).
