Drafting a Practical and Enforceable Non-Disparagement Provision
More than once, an in-house counsel has called me up wanting to sue a former employee because s/he has been “bad-mouthing” the company despite having agreed not to disparage the company as part of a settlement or severance agreement. Nevertheless, I Often have had to give the client the bad news that, in light of the actual contractual language, there would be little chance of prevailing and/or, even if we did prevail, the legal fees probably would exceed the damages we might reasonably expect to recover. The good news for those of you reading this post, however, is that there are three simple steps you can take to greatly enhance the effectiveness and enforceability of any non-disparagement clauses you would like to implement in the future.
The typical non-disparagement provision that leads to in-house counsel heartburn generally is very straightforward and looks something like this:
Employee agrees that she will not disparage the Company or any of its officers, directors or employees.
Looking at this clause like a litigator would reveals the first problem: what does it mean to “disparage” someone? Unlike with “defamation,” there is no general definition of what it means to disparage someone. Sure, you always can argue that in your case the statements clearly are disparaging, but there is no guaranty that your judge or jury will agree with your view. Thus, when I use non-disparagement clauses, I add the following definition:
For purposes of this Section, “disparage” shall mean any negative statement, whether written or oral, about ________________[insert people, companies, products, etc.]
While perhaps not perfect in all contexts, such a clause may very well eliminate a potential defense that what was written or said does not rise to the level of being disparaging.
The second problem that often arises with respect to non-disparagement provisions deals with damages: how are you going to prove that you have been damaged at all, let alone in an amount that makes it worthwhile to sue?
One way to side-step this issue is by coupling the non-disparagement clause with a liquidated damages provision. In other words, tack on language after your non-disparagement clause that calls for the other party to pay a predetermined amount if s/he breaches. While drafting an enforceable liquidated damages provision has its own set of challenges (see How to Negotiate and Draft Enforceable Liquidated Damages Provisions), there is no reason why you should not be able to craft an enforceable liquidated damages provision in this context.
Finally, I recommend adding a provision at the end of your non-disparagement clause, saying that “the parties agree and acknowledge that this non-disparagement provision is a material term of this Agreement, the absence of which would have resulted in the Company refusing to enter into this Agreement.” While perhaps a bit of “belt and suspenders,” adding such a clause will only help secure the enforceability of your non-disparagement provision.
Taking these three simple steps not only will increase your ability to enforce a non-disparagement provision, but they also may make it much less likely that the party with whom you contract dares to violate it in the first instance.