Like other restrictive covenants in employment agreements, non-disparagement clauses should be carefully drafted to achieve an employer’s business objectives without using overly broad language that a court may deem unenforceable. Non-disparagement clauses typically state that an employee may not disparage the company or any of its officers or employees.
What is Disparagement?
Determining exactly what constitutes “disparagement”, can be challenging, particularly if the contract does not provide a definition or the definition is not clear. An Arizona District Court faced this issue in FreeLife Int’l, Inc. v. Am. Educ. Music Publications Inc., 2009 WL 3241795 (D.Ariz. 2009). An employee agreed to a non-disparagement clause as part of an employment agreement, but the contract did not define what constituted disparagement.
The employee later criticized the company’s policies on his website, and the business sued him for violating the non-disparagement clause. The court upheld the clause, even with without an express definition of what constituted disparagement. In the absence of a detailed definition, the court relied on the “plain meaning” of the term. For this it cited the Oxford Dictionary’s definition of disparagement as “to bring discredit or reproach upon; to dishonour, discredit; to lower in credit or esteem.”
This may seem to give free reign to be vague and broad when drafting a non-disparagement clause, but other courts have come to different conclusions when examine these provisions.
An Ohio case provides an interesting perspective. In Ohio Educ. Ass’n v. Lopez, No. 09AP-1165 (Ohio App. Oct. 19, 2010), an employee allegedly disparaged his former employer by calling the Executive Director a “slimebag”. However, the court found that this comment did not breach the agreement, characterizing the comment as a “trifling figure of speech”.
Under the Oxford Dictionary definition, this would certainly seem to constitute “dishonoring” a former employer, but the court did not use this approach. If an employment agreement does not expressly define the term disparagement or the scope of a clause, it is more vulnerable dispute over what constitutes disparagement and leaves uncertainty as to what a court might do.
Non-Disparagement Clause May Violate NLRA
In another case, an administrative law judge found that a non-disparagement clause in a Quicken Loans employment agreement was overly broad, and violated an employee’s rights under the National Labor Relations Act (NLRA) Section 7 of the NLRA provides that employees have the right to engage in certain concerted activities, including discussing wages, benefits, and other terms and work conditions with other employees.
The non-disparagement clause was found to be overbroad. It improperly interfered with the employee’s rights under the NLRA, and was considered to be void as a result.
When drafting non-disparagement clauses, employers should be aware that certain employee actions are protected by law, and the language in an employment agreement should be narrow and specific.
Chernoff Law handles employment disputes in Arizona, including challenges to restrictive covenants. Call us at 480-719-7307 to discuss your employment dispute with one of our experienced business attorneys.