Non-Disparagement Clause

Written by: Patrick Shaunessy

16 minute read

What is a non-disparagement clause?

A non-disparagement clause is a contractual provision that establishes one party’s agreement not to disparage another. In this context, the term “disparage” has a broad meaning and generally includes any statement, whether oral or in writing, that casts (or could be interpreted as casting) someone or their business, products, services, etc. in a negative light. Both true and false statements can be disparaging. The key is that they are damaging to the subject. While, technically speaking, the clause could theoretically apply to any situation in which, say, an employee criticizes their employer (i.e., even in a private conversation with a friend or family member), in practice most employers are concerned about situations where disparaging remarks are likely to cause more wide-spread damage to their reputation (e.g., badmouthing a current or former employer at an industry conference or via social media). Non-disparagement clauses are most often found in employment agreements, including those for ordinary employees, management and executives. Alternatively, they may be found in separation agreements, which set out terms and conditions regarding the end of an employment

Why does the non-disparagement clause matter?

In the ordinary course of business, most employers can manage matters relating to the terms of their employment contracts, including non-disparagement clauses, without much disruption to their operations. However, undergoing a restructuring, acquisition or other extraordinary event that may affect the employment of a large number of employees can pose challenges even for sophisticated employers. Given the negative feelings that can result from these kinds of large-scale termination events, employers will generally evaluate, among other things, the potential risk to their reputation and the measures they have in place to protect it. Being able to access the non-disparagement clauses in their contracts quickly and efficiently can be critical in such circumstances. It allows them to determine the extent to which they are already protected by the existing language and whether they may need to consider adding a non-disparagement clause to any separation agreements with affected employees (especially if there are employment contracts that do not already have this clause in them).

How do you review the non-disparagement clause in contracts?

When a non-disparagement clause appears in a clearly labelled section of a contract, it will be relatively easy to find. Alternative labels, such as “No Adverse Comments” in example 15 below, could make the clause a little more challenging to spot. Furthermore, in cases like example 14 below, where the clause is buried in the middle of a dense section of the agreement, careful review will be required to locate it. Fortunately, in many cases these clauses use some permutation of the word “disparage”, which can also help reviewers when searching for them.

After locating all the non-disparagement language in each agreement, some important things to focus on when reviewing these provisions include:

  1. Mutual or unilateral. Non-disparagement clauses can be mutual, in which case both parties (or all parties, as the case may be) agree not to make any disparaging remarks about the other(s); or, alternatively, they can be unilateral, in which case only one party promises not to disparage the other(s). For instance, examples 1, 3 and 4 below are mutual clauses; whereas, examples 2, 7 and 9 below are unilateral.
  2. Scope. In addition to the party or parties who are either bound by or protected by the non-disparagement clause, be sure to note whether the clause applies to any other person(s). In example 5 below, for instance, the non-disparagement obligation applies not only to the Executive and the Company but also to their respective representatives. In example 6 below, each of the Executive and the Employer is protected by the clause (since it imposes mutual obligations) as are the “Released Parties”. Another important element of the scope to consider is whether the clause applies to disparaging remarks made only on or after the date of the agreement or whether it could also apply to such remarks made in the past. If the clause is silent on this point, it may be worth confirming whether applicable law provides any guidance in this regard.
  3. Exceptions. The clause may also provide certain exceptions to the general non-disparagement ruIe that allow the party (or parties) bound by the clause to make otherwise “disparaging” statements in certain contexts. Example 15 below, for instance, states “…provided that the foregoing shall not be violated by truthful testimony in response to legal process, normal competitive statements, rebuttal of statements by the other or actions to enforce her rights”. Although exceptions like these can be beneficial, it’s important to consider the language used to describe them to assess whether there are potential interpretative issues - for example, what are “normal competitive statements” in the context of example 15 below? Furthermore, in addition to exceptions that are specifically set out in the clause itself, it’s also important to consider what applicable law says about issues like the interpretation or enforceability of non-disparagement clauses, as it may also reveal other exceptions to their application or, more generally, provide further guidance on how they are to be interpreted.
  4. Duration. Not all non-disparagement clauses have a limited duration. Indeed, some have no time limit whatsoever. Where the clause applies only for a certain period of time, take note of how that period is measured and what event(s), if any, start the clock running. In example 8 below, for instance, the parties’ mutual non-disparagement obligations apply throughout the Employment Period and persist for an additional five years after the Employment Period ends. Similarly, in example 15 below, the Executive is bound by the non-disparagement obligation for two years from the date of the separation agreement.

As with the review of any contractual provision, it’s also important to be aware of other provisions that may affect the interpretation of non-disparagement clauses. For example, if a non-disparagement clause contains defined terms that are important to its interpretation - such as “Released Parties” in example 6 below and “Employment Period” in example 15 below - reviewers should consult the defined terms section of the agreement to confirm the meaning of those terms. The term clause (and also the renewal clause) provides important information about the term of the agreement, which may be helpful if the duration of the non-disparagement clause is established with reference to the term of the agreement. Finally, if a party wants to know whether there have been any developments or changes in applicable law that may affect the interpretation or enforceability of the non-disparagement clause, the governing law clause establishes which jurisdiction’s laws apply to the contract.

Software that uses AI to identify and extract non-disparagement clauses (as well as other terms that may affect their interpretation) can accelerate the work of finding these provisions and enable a more comprehensive review than can otherwise be done manually.

Examples of the non-disparagement clause

Below are some examples of non-disparagement clauses from different kinds of agreements. While these examples do not necessarily cover the full range of non-disparagement clauses one may encounter, they are meant to illustrate the degree to which these provisions can vary from contract to contract. Where an example includes broader contextual language, the non-disparagement clause is highlighted in bold.

Example 1: From an Employment Agreement

Anti-Disparagement.

a. Unless otherwise required by a court of competent jurisdiction, pursuant to any recognized subpoena power or by any applicable law, rule or regulation, Executive agrees and promises that Executive shall not make any oral or written statements or reveal any information to any person, company or agency which (i) is materially negative, disparaging or damaging to the name, reputation or business of the Company or any of its Subsidiaries or affiliates, or any of their shareholders, directors, officers or employees, or (ii) has or would have a materially negative financial impact, whether directly or indirectly, on the Company or any of its Subsidiaries and affiliates, or any of their shareholders, directors, officers or employees; provided that this subsection (ii) shall not be deemed to have been violated by statements or releases of information by Executive during the period of his employment under this Agreement which Executive believes to be truthful and which are made in the performance of his duties under this Agreement.

b. Unless otherwise required by a court of competent jurisdiction, pursuant to any recognized subpoena power or by any applicable law, rule or regulation, the Company agrees and promises that neither it nor any of its Subsidiaries and affiliates shall make any oral or written statements or reveal any information to any person, company or agency which (i) is materially negative, disparaging or damaging to the name, reputation or business of Executive or (ii) has or would have a negative financial impact, whether directly or indirectly, on Executive.

Example 2: From an Employment Agreement

No Public Statements or Disparagement. Employee agrees that Employee will not make any public statements regarding the Employee’s employment or the termination of Employee’s employment (for whatever reason) that are not agreed to by the Company. The Employee agrees that Employee will not make any public statement that would libel, slander, or disparage the Company or any of its respective past or present officers, directors, employees or agents. Notwithstanding this Section, nothing contained herein shall limit or impair the ability of any party to provide truthful testimony in response to any validly issued subpoena.

Example 3: From an Employment Agreement

(f) The Executive agrees that, during the Term of Employment and thereafter (including following Executive’s termination of employment for any reason) he will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage the Company or any Subsidiary or their respective officers, directors, employees, advisors, businesses or reputations. The Company agrees that, during the Term of Employment and thereafter (including following Executive’s termination of employment for any reason) the Company will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may directly or indirectly, disparage Executive or his business or reputation. Notwithstanding the foregoing, nothing in this Agreement shall preclude either Executive or the Company from making truthful statements or disclosures that are required by applicable law, regulation, or legal process.

Example 4: From an Employment Agreement

Section 12. Non-Disparagement. Except to the extent required by law or in the context of a legal dispute between the Company and the Employee, each of the Company and the Employee agrees not to make any disparaging comments about the other to a third party.

Example 5: From an Employment Agreement

Non-Disparagement. The Company and the Executive agree that neither will disparage the other and that their representatives will not disparage either party hereto.

Example 6: From a Separation Agreement

Non-Disparagement. Executive and Employer agree that they shall not issue any communication or make any statement, written or otherwise, that disparages, criticizes or otherwise reflects adversely on or encourages any adverse action against the other or the Released Parties. Consistent with its normal practice, Employer will respond to employment inquiries concerning Executive only by confirming dates of employment, position, and salary.

Example 7: From an Employment Agreement

(b) Non-Disparagement. The Employee will not knowingly take any action or make any statement, whether written or oral, whether in public or private, that disparages or defames the goodwill or reputation of Avon or any of its associated companies, or of any of their directors, officers, and associates.

Example 8: From an Employment Agreement

E. Non-Disparagement. At all times during the Employment Period and for a period of five (5) consecutive years thereafter, Executive shall refrain from all conduct, verbal or otherwise, that materially disparages or materially damages, or could materially disparage or materially damage, the reputation, goodwill, or standing in the community of Company or any Company affiliates. At all times during the Employment Period and for a period of five (5) consecutive years thereafter, Company’s Board of Directors collectively and individually, as well as its senior executive (including, but not necessarily limited to Company’s CEO, COO, and CFO) shall refrain from all conduct, verbal or otherwise, that materially disparages or materially damages, or could materially disparage or materially damage, the reputation, goodwill, or standing in the community of Executive.

Example 9: From an Employment Agreement

Confidentiality and Non-Disparagement

Employee agrees to keep the facts and terms of this Release in strict confidence. Employee agrees not to disclose this document, its contents or subject matter to any person other than his immediate family, attorney, accountant or income tax preparer, or otherwise as required by law. Employee agrees that he will not denigrate, disparage, defame, impugn, or otherwise damage or assail the reputation or integrity of the Company or any Released Party.

Example 10: From an Employment Agreement

10.2 Non-Disparagement Covenants.

The Employee hereby covenants and agrees that he will not at any time make or publish any disparaging statements (whether written or oral) regarding the business of the Corporation, any of its products or any of the Protected Parties or their respective officers, directors, agents, employees or other representatives.

Example 11: From an Employment Agreement

5.8 Non-Disparagement. During the time that Executive is employed by the Company and thereafter, without limitation of time, Executive shall not at any time make, publish or communicate to any person or entity, including, but not limited to, the customers or suppliers of the Company or any of its affiliates, any Disparaging (as defined below) remarks, comments or statements concerning Company, any other equity holders of the Company, or any affiliates of any of the foregoing. The Company shall instruct its Directors and Officers not to make any Disparaging comments or statements concerning Executive. “Disparaging” remarks, comments or statements are those that impugn the character, honesty, integrity, morality, business acumen or abilities of the individual or entity being disparaged.

5.9 Nothing in this agreement prohibits or restricts the parties from contacting, assisting, responding to, providing truthful testimony to or filing charges with any regulatory organization, authority or agency (e.g., the EEOC, IRS, SEC or FINRA), or from complying with any court or administrative order or subpoena, or from providing any other disclosure required by law.

Example 12: From an Employment Agreement

(f) MUTUAL NON-DISPARAGEMENT. Employee agrees that the Company’s goodwill and reputation are assets of great value to the Company which were obtained through great cost, time and effort. Therefore, Employee agrees that during Employee’s employment with the Company and after the termination of Employee’s employment for any reason, Employee will not in any way disparage, libel or defame the Company or any of the Related Parties or any of their businesses or business practices, products or services, or employees, officers, directors or owners. The Company agrees to direct its executive officers and members of the Board, in each case, as of the date of termination, to not, while employed by the Company or serving as a director of the Company, as the case may be, make negative comments about the Employee or otherwise disparage the Employee in any manner that is likely to be harmful to the Employee’s business reputation. The foregoing shall not be violated by truthful statements in response to, or pursuant to, legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings), and the foregoing limitation on the Company’s executives and directors shall not be violated by statements that they in good faith believe are necessary or appropriate to make in connection with performing their duties and obligations to the Company.

Example 13: From an Employment Agreement

Non-disparagement. The Executive agrees and covenants that he will not at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning the Company or its businesses, or any of its employees, officers, directors, and existing and prospective customers, suppliers, investors and other associated third parties.

This Section 9 does not, in any way, restrict or impede the Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation or order. The Executive shall promptly provide written notice of any such order to Company’s EVP Legal.

Example 14: From an Employment Agreement

ARTICLE VII NONINTERFERENCE

In addition to Executive’s obligations under the Confidential Disclosure Agreement, Executive shall not for a period of one (1) year following Executive’s termination of employment for any reason, either on Executive’s own account or jointly with or as a manager, agent, officer, employee, consultant, partner, joint venturer, owner or stockholder or otherwise on behalf of any other person, firm or corporation, directly or indirectly solicit or attempt to solicit away from the Company any of its officers or employees or offer employment to any person who is an officer or employee of the Company; provided, however, that a general advertisement to which an employee of the Company responds shall in no event be deemed to result in a breach of this Article 7. Executive also agrees not to harass or disparage the Company or its employees, clients, directors or agents or divert or attempt to divert any actual or potential business of the Company. The provisions of this Article 7 shall survive the termination or expiration of the applicable Executive’s employment with the Company and shall be fully enforceable thereafter. If it is determined by a court of competent jurisdiction in any state that any restriction in this Article 7 is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.

Example 15: From a Separation Agreement

No Adverse Comments. For two (2) years, Executive agrees not to make, issue, release or authorize any written or oral statements, derogatory or defamatory in nature, about the Company, its affiliates or any of their respective products, services, directors, officers or executives, provided that the foregoing shall not be violated by truthful testimony in response to legal process, normal competitive statements, rebuttal of statements by the other or actions to enforce her rights. Nothing herein prohibits Executive from communicating, without notice to or approval by the Company, with any federal government agency about a potential violation of a federal law or regulation.