Tuesday, January 21, 2014

Why I don't like most non-disparagement clauses (and 3 tips to fix them)

Will Blythe recently penned an op-ed in the New York Times entitled, Fired? Speak No Evil. In this piece, Mr. Blythe chronicled his recent job loss, and why he refused to sign a separation agreement that included a non-disparagement clause.

Like Mr. Blythe, I don’t like most non-disparagement clauses. Theses causes are exceedingly common in separation and settlement agreements. But, familiarity does not breed sensibility. These clauses are hard to control, hard to enforce, and encourage more litigation, not less.

Yet, most employers will insist on including these clauses in their agreements to hedge against the dead speaking ill of them. For your consideration, here are a three drafting points for your next non-disparagement clause:

     1. Hard to control? Who does a non-disparagement clause bind? If it just says, “Employer,” how does the agreement define “employer?” Even if you’re a small organization, can you control what Joe-coworker says about your departing employee, and do you want to have to advise every employee in your organization about potential non-disparagement obligations, and control what they say? I have two suggestions to help ease the pain of this issue. First, define who, specifically, the clause covers; don’t leave it open-ended to bind your entire organization. Second, at least as job references are concerned, put some controls in place. Define who is to be contacted, and what that contact-person is permitted to say. Even consider a predetermined script to limit any potential violations.

     2. Hard to enforce? Most non-disparagement clauses say something like, “Employer [and Employer] agree not to disparage, or make any negative comments about, the other,” which simply begs the question, what do “disparage” and “negative comments” mean? If you are serious about including this clause, define the terms. For example, your state will have a well-developed body of case law discussing and defining the meaning of defamation. This case law is a great starting point (and, maybe, end point) for this definition.

     3. Encouraging litigation? If a separation leaves bad blood between the parties, a non-disparagement clause is an easy way for a spiteful ex-employee or ex-employer to drag the other back into court. Separation and settlement agreements are supposed to end the parties’ relationship and cease litigation, not act as a breeding ground for more. To cure this ill, tie a loser-pays clause to this provision. If a losing parties has to pay the other’s attorneys’ fees, one will think long and hard before exercising the right to sue for a breach of a non-disparagement clause.

Non-disparagement clauses are ripe for sloppy and vague drafting, which can result in parties ending up where they wanted to avoid—the courthouse. Following these three tips will help you shore up your language to create non-disparagement clauses that you can actually rely upon, and, if necessary, enforce.