Web Application

Powered by

Non-Disparagement

Non-Disparagement clause restricts individuals from taking any action that negatively impacts an organization, its reputation, products, services, management or employees. They are found in virtually all settlement agreements and about a quarter of executive employment agreements. Some examples briefly describe the prescribed actions; others build a thesaurus-like list.

These clauses are currently in the news following a dispute between Charlie Sheen, Warner Bros and CBS regarding the TV show "Two and a Half Men." Following a tirade, Sheen disparaged the show and its creator. In response, Warner suspended production with the agreement of CBS. Lawrence Cunningham, of asserts that: "Warner would be justified in suspending production, and free from payment duties, if their contract contains a non-disparagement clause." Sheen v. Warner: Loser under Non-Disparagement ClauseConcurring Opinions, March 1, 2011.

Standard Clause

Non-Disparagement. [During the Term and thereafter,] [Employee] agrees to take no action which is intended, or would reasonably be expected, to harm the Company or its or their reputation or which would reasonably be expected to lead to unwanted or unfavorable publicity to the Company.

1.1 Simple Clause

You [employee] agree that you will not disparage or comment negatively about the Company, its officers and management, and/or current or former employees. THE KONG FIRM BLOGNon-Disparagement Clauses: What's The Big Deal? August 23, 2009

1.2 Example Definition

Example Definition: "Disparaging remarks, comments or statements are those that impugn the character, honesty, integrity, morality or business acumen or abilities in connection with any aspect of the operation of business of the covered individual or entity." Settlement and Release Agreement, July 27, 2010.

1.3 Detailed Clause

Mutual Non-Disparagement.

(a) Each Investor agrees that, during the Standstill Period, neither it nor any of its Affiliates or Associates will, and it will cause each of its Affiliates and Associates not to, directly or indirectly, in any capacity or manner, make, express, transmit speak, write, verbalize or otherwise communicate in any way (or cause, further, assist, solicit, encourage, support or participate in any of the foregoing), any remark, comment, message, information, declaration, communication or other statement of any kind, whether verbal, in writing, electronically transferred or otherwise, that might reasonably be construed to be derogatory or critical of, or negative toward, the Company or any of its directors, officers, Affiliates, subsidiaries, employees, agents or representatives (collectively, the "Company Representatives"), or that reveals, discloses, incorporates, is based upon, discusses, includes or otherwise involves any confidential or proprietary information of the Company or its subsidiaries or Affiliates, or to malign, harm, disparage, defame or damage the reputation or good name of the Company, its business or any of the Company Representatives.

(b) The Company hereby agrees that, during the Standstill Period, neither it nor any of its Affiliates will, and it will cause each of its Affiliates not to, directly or indirectly, in any capacity or manner, make, express, transmit, speak, write, verbalize or otherwise communicate in any way (or cause, further, assist, solicit, encourage, support or participate in any of the foregoing), any remark, comment, message, information, declaration, communication or other statement of any kind, whether verbal, in writing, electronically transferred or otherwise, that might reasonably be construed to be derogatory or critical of, or negative toward, any Investor or any of its agents or representatives (collectively, the "Investor Representatives"), or that reveals, discloses, incorporates, is based upon, discusses, includes or otherwise involves any confidential or proprietary information of any Investor or its subsidiaries or Affiliates, or to malign, harm, disparage, defame or damage the reputation or good name of any Investor or Investor Representatives.

(c)Notwithstanding the foregoing, nothing in this Section 7 or elsewhere in this Agreement shall prohibit any Party from making any statement or disclosure required under the federal securities laws or other applicable laws; provided, that such Party must provide written notice to the other Parties at least two business days prior to making any such statement or disclosure required by under the federal securities laws or other applicable laws that would otherwise be prohibited the provisions of this Section 7, and reasonably consider any comments of such other Parties.

Settlement Agreement, October 20, 2010.

2.1 Time Period

The provision may either include a specified time period or leave it open. It is unlikely that courts will enforce an open-ended term too long after the end of the relationship.

2.2 Exception-Legal Proceedings or Governmental Investigation

Example: "Nothing herein shall prevent [Employee] from making any truthful statement in connection with any legal proceeding or investigation by the Company or any governmental authority."

2.3 Handling References

Covenant of Non-disparagement. Each of the Company and the Consultant covenants never to disparage or speak ill of the other party or any of their products, services, affiliates, subsidiaries, officers, directors, employees or shareholders, and will take reasonable steps to prevent and will not knowingly permit any of their respective employees or agents to, disparage or speak ill of such persons. Notwithstanding the foregoing, the Consultant expressly assumes all risk associated with listing any past or present Company employee, consultant or agent, or the Company itself, as a reference in connection with the Consultants pursuit of future employment or engagement, and the Consultant agrees that any such person whom the Consultant lists as a reference shall in response to any request for a reference concerning the Consultant be permitted to provide complete, truthful and accurate information concerning the Consultant without creating any liability for himself or herself, the Company, any affiliated entity, or any employee, consultant, agent or representative of any of the foregoing. (Settlement Agreement, December 30, 2010)

Note: Most non-solicitation provisions cover employees and do not mention consultants.

2.4 Related Clause: Non-Endorsement

ExampleNon-Endorsement. Executive shall not in any way, directly or indirectly, at any time during the Restricted Period endorse any Competitive Business or competing product, promote or speak on behalf of any Competitive Business or competing product, or allow Employee s name or likeness to be used in any way to promote any Competitive Business or competing product.

3. Discussion

An excellent discussion of non-disparagement clauses can be found in: Non-Disparagement Clauses: What's The Big Deal? THE KONG FIRM BLOG, August 23, 2009.

Comments