Non-Disparagement Clauses
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Joe Torre's recent memoir concerning his stint with the Bronx Bombers has prompted some in Yankee circles to suggest the need for non-disparagement clauses for players and managers. Typically, non-disparagement clauses appear in settlement and severance agreements. The idea is that in exchange for money a former employee will not bad mouth his or her former company.
Here is an example from a settlement agreement:
Non-disparagement. The Parties agree not to make any statements, written or verbal, or cause or encourage others to make any statements, written or verbal, that defame, disparage or in any way criticize the personal or business reputation, practices, or conduct of Defendant, its employees, directors, and officers. The Parties acknowledge and agree that this prohibition extends to statements, written or verbal, made to anyone, including but not limited to, the news media, investors, potential investors, any board of directors or advisory board or directors, industry analysts, competitors, strategic partners, vendors, employees (past and present), and clients.
The Parties understand and agree that this Paragraph is a material provision of this Agreement and that any breach of this Paragraph shall be a material breach of this Agreement, and that each Party would be irreparably harmed by violation of this provision.
The above is couched to support the application for an injunction, hence the "irreparably harmed" language. While wonderful in theory, (who wouldn't want to prevent an ex-employee from belittling the company) actually enforcing such an agreement is another matter. As with any breach of contract claim, the plaintiff will have to prove breach and damages. Proving damages in a non-disparagement case is akin to proving damages in a defamation case, both are difficult.
Quantifying a damage number based upon a written or oral communication is cumbersome. For that reason, some clauses attempt to tie a liquidated damage into any breach. In order to enforce a liquidated damage clause in Texas, the court must find: (1) that the harm caused by the breach is incapable or difficult of estimation, and (2) that the amount of liquidated damages called for is reasonable forecast of just compensation (not punitive).
Including a non-disparagement clause in a severance or settlement agreement is good practice, but enforcement of the clause is an entirely different matter. Every effort should be made to ensure that the language defining "disparagement" is specific enough to remove all doubt as to whether the statements are actionable. Whether an aggrieved party can quantify the the damage caused by the disparagement will be an uphill battle in most cases.
Now what fun would that be? I, personally, love Verducci & Torre's book.
Perhaps owners and organizations should act - not only within the law (see STEROIDS FEDERAL LAW) - but within their best interests...
If an organization knows they can fire a high profile employee without any repercussions - what incentive does the organization have to act in any moral or ethical way?
Maybe it's the lack of a disparagement clause that helps drive organizations to act within a certain code of ethics.
Furthermore, laws already exist for defamation.
If a non disparagement clause is signed with a company then is it a breach to inform the same company themselves of other employees (in the same company) unethical behaviors within the company. Or does it only relate to informing others outside the company?
Thanks, Bill
If a non disparagement clause is signed with a company then is it a breach to inform the same company themselves of other employees (in the same company) unethical behaviors within the company. Or does it only relate to informing others outside the company?
Thanks, Bill
If a very vague non-disparagement clause is signed between a former employee and a corporation... would it be a breach if the former employee mildly insulted or disparaged only an employee of the corporation in a simple conversation, and NOT the corporation in general in any way and it would not be public?