If you’ve settled, or are in the process of settling, a legal case against your employer, you may have been asked to agree to what lawyers call a “non-disparagement clause”. These clauses come in many different forms but at their core, they all ask the individual employee to agree, going forward, not to “disparage” their employer or former employer. In fact, some go further and also prohibit individuals from disparaging other employees who are also employed by the employer.
But what does a non-disparagement clause actually mean, and what does an employee give up by agreeing to one?
What is Disparagement?
On their face, non-disparagement clauses look severe. “To disparage” means to criticize or belittle someone or something or to represent them as being of little worth. Put simply, it means saying, doing, or writing something about someone that could cause a third-party to view that person in a negative way.
Disparagement is a lower standard than defamation. While defamation requires someone to have said something false and damaging, disparagement can also capture something that is true but still damaging.
Non-disparagement clauses can also apply to indirect actions, such as where an individual who has signed a non-disparagement agreement encourages someone else to make disparaging statements. Even statements made in later lawsuits have, in some cases, been found to be a breach of a prior non-disparagement agreement (see e.g. Antoncic v Ontario (Community Safety and Correctional Services)).
Limitations on Non-Disparagement Clauses
There are limits to non-disparagement clauses, however. An obvious but important limit is that non-disparagement clauses do not cover statements made before the clause was agreed to. This can be particularly important when the clause is agreed to as part of a settlement at the end of a long, combative legal fight, where both parties have likely already made negative statements about each other.
Another key limitation is that purely factual statements have often been found not to equal disparagement. For example, in Ibrahim v Hilton Toronto Hotel, the Human Rights Tribunal of Ontario found that a statement that an employee “lost his [human rights] case and did not receive a penny” was an incorrect summary of what had happened in the employee’s case but did not actually disparage the employee.
Other similar decisions have found that simply saying that a case was settled or that one person had sued another does not amount to disparagement. These decisions indicate that, where statements are factual and do not inherently imply anything negative about a party, they do not result in the breach of a non-disparagement clause.
The Cost of a Breach
Even though there are limits, once you agree to a non-disparagement clause, it is important to be careful to avoid violating that agreement. If a clause is breached, a decision-maker will often have the power to enforce the non-disparagement clause and award a remedy to the other party for the breach.
Many non-disparagement clauses will identify a specific penalty for a violation, such as returning any money that has been paid to you as part of the settlement.
Where no specific penalty is identified or where no money has been paid, a decision-maker will typically award general damages for the harm caused by the breach. The amount of damages will be determined on a case-by-case basis and will depend on the level of harm caused to the opposing party. In cases where no real harm has been caused, decision-makers have still awarded damages for the breach of the settlement agreement itself.
Although there are limits on what qualifies as “disparagement”, employees should think carefully when deciding whether to agree to a non-disparagement provision in a settlement. While these clauses will not harm employees in many cases, they will impact what employees can say about their employers or former employers, and it is important to fully understand that impact before signing off.
Where possible, employees should consider getting legal advice before agreeing to a non-disparagement clause or before taking any steps that they are worried might breach an existing clause. An employment lawyer may be able to help you negotiate different language for a non-disparagement provision or guide you on how to avoid an unintended breach.