Saturday, June 27, 2009

Non-disparagement Agreements

From go, let me state: this post does not address the provision as used in settlements, in the context of product disparagement, or as a term in an employment separation agreement. Rather, as between an employer and employee in the course of employment. Have you guys seen this? I reasonably imagined the provision existed, as a concept or theory, but only recently had a friend be subject to one. The non-disparagement agreement was presented in tandem with a confidentiality agreement, but was distinctly separate and was a one-way street (he could not disparage the employer, but no language protected him from the employer’s disparagement). His encounter startled both of us a little. While acknowledging a company’s interest in controlling its appearance, we wondered what an employee could possibly say that is not already actionable under defamation? And is truth a defense in light of a non-disparagement agreement? Too, if the employee is at-will, why the need for the agreement at all; simply dismiss them (or threaten to) and offer a negative reference. Further, how does the element of leverage factor into the enforceability of a non-disparagement agreement?

In New York, non-disparagement clauses or agreements are intended to protect the employer from misrepresentations about themselves, their product and services, or from unfair competition. C.f. To successfully plead breach of a non-disparagement clause or agreement, an employer must show it sustained damages as a result of the employee's statements. There is some case law addressing non-disparagement clauses as a term of separation agreements, where disparaging statements were made post-separation. It appears concurrent claims of defamation are made to the claim for breach of agreement, and traditional defenses apply. But a review of New York case law does not reveal discussion of agreements concurrent to employment. Employment law is not my practice interest, but I imagine a court would liken the enforceability of such a provision to the same reasonableness standard other restrictive covenants are subject to. For instance, the provision might be enforceable if the employee is: of such import to be sought after by competitors; has been generously compensated in relation to his peers and in the context of his industry; and is exposed to information that is a type of trade secret, or has otherwise been so integral to the employer's work that the employee necessarily has knowledge or know-how that would carry clients or next generation product away from the employer. Too, I imagine the agreement must be reasonable in terms of: the context it was agreed to; the type of, and examples of, such comments that are considered "disparaging" - to whom, about what specifically, in what detail; as well as the length of time the covenant applies (only during the course of employment? or is it presumed the provision applies upon separation as well?).
FWIW: my friend hasn’t told our circle about the agreement, and I have been “politely requested” not to mention his employer here. Whether it was a result of his signing the agreement or his sense of taste and professionalism, I guess, is subject to the perspective of the commenter.

( Photo courtesy of Rosenblumtv).

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