Hush money: When a worker leaves on bad terms, is a nondisparagement clause in order?

After Carol Bartz was fired from Yahoo! over the telephone in the fall of 2011, she uttered some choice words in an interview with Fortune magazine that made headlines around the world.

She characterized the then-troubled company’s board of directors as “doofuses” and employed a profanity to describe its treatment of her.

Just as newsworthy, however, was the speculation as to whether Bartz might lose $10.4 million in compensation—as well as vesting stock options—given that she was apparently bound by a non-disparagement clause intended to keep her lips sealed. The outcome was never made public.

Few professionals will experience such a dramatic public exit from their jobs. Even so, many will go on to sign a non-disparagement clause—a promise not to bad-mouth their former employer once they’re gone; the company may agree to reciprocate.

“Non-disparagement clauses are commonly found in a separation agreement between an employee and an employer,” says Jennifer Anderson, a partner at Jones Walker law firm. “By agreeing to non-disparagement, a party agrees not to publicize anything negative about the other, usually in connection with an agreement not to litigate any disputes in court.”

Often as part of a severance package, a company will pay an exiting professional a certain amount of money with the understanding that the employee will refrain from negative action, such as a lawsuit.

“Non-disparagement clauses are typically used by employers who want to make sure that an employee leaving the company doesn’t say anything derogatory or negative about the company after they leave,” says Joe Hugg, a partner at Breazeale, Sachse & Wilson law firm. “Otherwise, once you leave, they don’t have any control over you.”

Although the language may vary among agreements, non-disparagement clauses generally specify that the departing employee will not make any negative or disparaging statements, orally or in writing, about the company or its employees, stockholders, directors, products, services or business practices. Disparaging remarks could include statements such as “That company’s products are terrible, and their business is about to fall apart,” or “That company dumps hazardous materials into the river.”

Similarly, the company will not make any negative comments about the employee, including giving a negative reference.

Non-disparagement clauses are more common than one might think, including in the Capital Region.

“It’s inherent in any situation where there’s a separation that there can be some tension,” Hugg says. “Non-disparagement clauses are fairly standard, so there’s no reason to think the company or the employee did anything wrong.”

Indeed, non-disparagement clauses can be mutual, Anderson says. “An employee might want a non-disparagement clause if they leave under circumstances that aren’t favorable to them,” she says. Adds Hugg: “They’re not always one-sided. An employee will say, I’ll agree to not disparage the company, but I want the company to agree to not disparage me.'”

Non-disparagement clauses are used across all industries, in companies of all sizes and with employees at any position within the organization, although they are more common with higher-ranking employees or when mass layoffs occur.

Jay Stovall, a partner at Breazeale, Sachse & Wilson, says non-disparagement clauses are fairly standard in this region—particularly for professionals involved in sales. “When you sell products and goods to companies, such as chemical companies, relationships are important,” Stovall says. “So you don’t want a former employee saying toxic things that will hurt your business.”

Non-disparagement clauses share similarities with confidentiality clauses, and both “are standard boilerplate clauses used in separation agreements,” Anderson says. However, differences exist between the two.

“A confidentiality clause prevents an employee from disclosing any proprietary information they gained while working for the employer,” Hugg says. “A non-disparagement clause is not so much about protecting proprietary and confidential information as it is [averting] general disparaging remarks.”

One problem with non-disparagement clauses, however, is they are difficult to enforce.

“They’re commonly used, but actions to enforce them are less common,” Anderson says. “That could be because most parties honor their obligations or because people don’t learn about disparagement if it has occurred.” However, Anderson says, even if one party learns that the other is violating the agreement, proving that violation and its impact can be difficult.

“When an employer and an employee part ways, they will often publicly criticize each other,” says Stovall, who also serves as government affairs director on the Greater Baton Rouge Society for Human Resource Management board of “directors.

“But it’s very difficult to prove that someone is talking bad about you and causing damages, and [trying to prove it] can involve your customers. Most businesses don’t want to do that. So, proving that a former employee breached the agreement almost causes the business to invite what it is they’re trying to avoid: bringing the attention to the former employee’s negative comments.”

Hugg agrees. “By filing a public lawsuit about a disparaging comment that breached the agreement, you’re bringing attention to it,” he says, adding that the process can be “lengthy, burdensome and expensive.”

Still, if one of the parties feels that it can prove that very clear damage has been caused or is continuing to be caused as a result of a breach of the non-disparagement, that party can pursue the matter in court.

For example, if an employee with a lot of contacts in the industry leaves a company, signs a non-disparagement clause, then attends an industry conference where the company’s clients and partners are also in attendance and begins disparaging the company, that may cause enough damage that the employer will elect to sue.

As with many business issues today, social media have added a new layer of complexity to non-disparagement clauses. “Social media put a potentially large microphone in front of any employee,” Hugg says. “It’s much easier to spread disparaging comments now with social media.”

Stovall agrees. “Social media open up other complications,” he says. “If you put a disparaging comment on social media, it can get bounced around forever. It is as if it’s being published daily. Social media give the disgruntled employee a much broader forum to communicate negative comments.”

A Florida case recently made headlines when, just days after a former employee and his employer, a preparatory school, signed a settlement agreeing not to disclose the terms of the separation, the employee’s daughter posted about the settlement on Facebook. The school successfully sued the former employee for breaching the agreement.

The agreement did not include exceptions for anyone other than his attorneys, other professional advisers and spouse, which are typical exceptions included in non-disparagement clauses.

Also, federal agencies, particularly the National Labor Relations Board and the U.S. Equal Employment Opportunity Commission, have recently invalidated some non-disparagement clauses for violating employees’ rights under federal law.

They’ve noted that broadly worded employment contracts and separation agreements that prohibit or discourage employees from communicating violate an employee’s right to discuss pay or working conditions with colleagues, union organizers or government agencies, including federal, state or local antidiscrimination agencies.

Despite these concerns, non-disparagement clauses continue to be a tool used by both employers and employees who don’t want the possibility of the other party making negative or damaging remarks hanging over their head after parting ways.

“It’s very common for non-disparagement provisions to be in separation agreements,” Anderson says. “That doesn’t mean businesses are using separation agreements and non-disparagement clauses with every employee, but these types of agreements are alive and well in Baton Rouge and everywhere else in the country.”