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Are Non-Disparagement Clauses Soon to Be Extinct?

Recent pronouncements by the National Labor Relations Board (the ‘NLRB”), and recently enacted state and federal laws indicate that non-disparagement clauses may soon go the way of the dinosaurs.

For a number of years, employment agreements that contained non-disparagement clauses have been found to violate Section 7 of the National Labor Relations Act (the ‘NLRA”), depending on the language of the same.  For example , in 2013, it was held that an  employment agreement that provided that the employee would not “publicly criticize, ridicule, disparage or defame the Company or its products, services, policies .  . . “ violated the NLRA.  SeeQuicken Loans, Inc., No. 28-CA-75857 (Jan. 8, 2013.)

And in 2019, the General Counsel for the NLRB issued an Advice Memorandum in a pending  case stating that the non-disparagement clause which provided that “Employee will not in any way criticize, ridicule, disparage, libel, or slander Law Firm, its owners, its partners, or any Law Firm employees, either orally or in writing,” was violative of the NLRA.  This, the General Counsel of the NLRB found to be the case even though the non-disparagement clause also contained a “savings provision” providing that it was not intended to prohibit activity protected by Section 7 of the NLRA.    See, Stange Law Firm,  Case 14-CA-227644 (Sept. 12, 2018).

Thus, the use of non-disparagement clauses in handbooks, employment agreements, non-disclosure agreements and similar agreements for existing employees has been an issue for some time.  More recently, however, the attack on non-disparagement clauses seems to have been expanded.  That is, in August 2021, General Counsel for the NLRB noted her desire to review areas of concern, including prior rulings upholding “separation agreements that contain confidentiality and non-disparagement clauses.”

Non-disparagement clauses in separation/severance  agreements were once thought likely  to be fair game to employers because of  a number of factors, including but not limited to the additional consideration given by the employer (by way of severance, for example) for the agreement and the cessation of the employee’s employment. Now, however, it appears that non-disparagement clauses in separation/severance agreements may also be violative of the NLRA, at least without careful drafting.

Employers should also take note that some states have also enacted legislation either curtailing or prohibiting non-disparagement and/or non-disclosure clauses, including those clauses in settlement or separation agreements.  Some of those states include but are not limited to California, Illinois,  Maine, Oregon, Washington, and New York.  Moreover, Congress recently passed the “Speak Out” Act in December 2022.   The Speak Out Act renders pre-dispute nondisclosure and non-disparagement provisions that include  sexual assault and sexual harassment claims unenforceable. See 42 U.S. Code Chapter 164.

Employers should thus take care in inclusion of non-disparagement clauses in almost all kinds of employment related agreements, including separation and/or settlement agreements. In addition, as a result of the current focus on such provisions in recent years, employers should review their handbooks and employment agreements and materials for potentially violative provisions.

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