Non-Disparagement Clause

Two businesses end a dispute and want to avoid public attacks after settlement, so they might agree not to make disparaging statements about one another. The exact words matter because a clause can range from false public insults to a broad prohibition on any criticism.

Identify who is bound, since the clause may cover the company, its officers, staff or affiliates and parties should define whose conduct they can lawfully bind. Set the subject and audience, because a narrow term may address public statements about the transaction while a broad term may reach private employee discussions or customer reviews.

Distinguish non-disparagement from confidentiality: one limits negative statements, the other controls disclosure of specified information, so a person might breach confidentiality without saying anything negative, or criticise conduct without revealing a secret. Truth does not automatically settle the contractual question, since defamation usually concerns false damaging statements but a non-disparagement promise may purport to cover truthful criticism, and the enforceable boundary varies and should be reviewed, especially in employment and consumer contexts.

Carve out legally protected activity, since cooperation with regulators, testimony, reporting suspected wrongdoing and exercising employment rights may be protected by law, and a clause should not imply that the signer must conceal misconduct or ignore a lawful request for information. US examples show why generalisation is risky: the National Labour Relations Board's McLaren Macomb decision addressed broad severance terms that could deter workers from exercising rights under the National Labour Relations Act, though this does not mean every business settlement in every country follows that rule.

Another US statute limits judicial enforcement of certain pre-dispute nondisclosure and non-disparagement clauses in sexual assault or harassment disputes. Make mutuality explicit if both sides intend it, because a mutual clause can appear fairer but the parties still need to define who speaks for an organisation.

Define the duration, since an indefinite ban can be difficult to justify or administer, and consider what legitimate interest needs protection and for how long, subject to applicable law. Specify what happens if there is a breach, without assuming every negative remark produces a fixed payment, because remedies may require proof of loss or meet contractual and statutory limits, and consider operational exceptions such as routine commercial explanations and internal reports.

Avoid trying to buy silence about a live legal problem: a business should fix the underlying conduct and follow reporting duties, since a clause cannot transform an unsafe practice into a harmless one by limiting criticism. Before signing, read related release and confidentiality terms, as a person may agree to settle claims, keep settlement amounts private and limit public comments in different provisions, each with separate legal effects.

Managers should not improvise enforcement: if a former employee posts a complaint, preserve the content and ask counsel whether it is protected, true, within scope and worth responding to. The clause should be written in ordinary language where possible, because 'No derogatory or adverse communication whatsoever' may sound strong but leaves practical questions about reviews, testimony and internal reports.

Precision is more useful than intimidation. For a business owner, the goal is to prevent unfair attacks while respecting lawful speech, so define parties, statements, duration and exceptions with local advice.