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Non-Disparagement Clauses and Constructive Dismissal

Clauses and Constructive Dismissal

A non-disparagement clause is one of the many types of provisions that employers and employees may agree to in severance or settlement agreements. The clauses typically prohibit individuals from saying anything negative about the company (its products, services, or leadership) in any public forum. Such provisions are enforceable in most states, but courts and government agencies have been quick to strike them down when they are overly broad or infringe on freedom of speech.

These provisions are designed to prevent disgruntled employees from bad-mouthing the company after they leave. They may be included in an employee handbook, contract, or settlement agreement, and can cover everything from telling a friend that their boss is a jerk to posting a scathing take-down of the company on social media. They may even include an obligation to refrain from giving interviews to the press that shine a negative light on the business.

Having such a clause in place can be particularly helpful in cases of constructive dismissal, where an employee is being fired on bad terms and may feel inclined to air the company’s dirty laundry. However, it’s important to keep in mind that non-disparagement clauses can be incredibly difficult to enforce.

On their face, these clauses look severe, and they’re usually drafted in such a way that they appear to be almost impossible to breach. In general, the phrase will include a statement to the effect of “you agree not to disparage the Company or its officers, directors, employees, shareholders and agents in any manner likely to cause damage to its reputation.” In order to be considered a violation, a statement needs to have been made in a way that would cause a reasonable person to believe it was untrue.

Non-Disparagement Clauses and Constructive Dismissal

If you’re an employer, the most obvious place to include a non-disparagement clause is in a severance or separation agreement. Having an employee sign it up front while everyone is still on good terms can help to protect the company from being bad-mouthed in the event of a termination, says Mary Cheddie, division director for Society for Human Resource Management.

The other common place to see them is in a deed of release signed by an individual when they’re leaving a job on bad terms or after a long legal battle. The recent case of Network Ten Pty Ltd v van Onselen, for example, found that an individual who had signed such a deed could be found in breach for writing an article in The Australian newspaper that allegedly disparaged the company.

Many of these clauses also contain liquidated damages provisions, which are stipulated amounts that an employer can be paid if the individual violates the provision in question. This is done to limit speculation as to how much an individual might have actually been harmed by the alleged breach of the clause, and can avoid the need to go to court in order to determine actual damages.

It’s worth noting, though, that liquidated damages are unlikely to be a practical remedy in a constructive dismissal lawyer near me case. As a result, they’re generally only awarded if the former employee’s statements are particularly damaging or if they have been publicly published.


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