Thinking about a mutual non-disparagement provision in a separation agreement? Read this!

I’ve drafted plenty of employee separation agreements.

Many of them include non-disparagement provisions. Some of them include a mutual non-disparagement provision. But that mutuality is somewhat illusory.

For example, in this recent case, the employer and its former employee agreed that the employee would not disparage the employer (among others), and the employer “likewise” agreed to “direct” those officers, directors, and employees who knew about the separation agreement not to disparage the employee; “provided, however,” that nothing would prevent those individuals from making truthful disclosures to any governmental entity in litigation or arbitration.

And wouldn’t you know it? After signing the agreement, the employee claimed that one of the employer’s officers disparaged her to a third party. So, she sued for breach of contract.

The court considered the “crux” of the plaintiff’s claim was that “implicit” in the defendant’s promise to “direct” certain officers, directors, and employees not to disparage her was a promise that the employer itself would also not disparage her, at least through the statements those who signed the agreement.

The defendant countered that its only obligation would be to “direct” or tell others not to speak ill of the employee. Neither the employer nor its officers, directors, and employees had a corresponding, continuing duty not to disparage the plaintiff.

Unfortunately for the defendant, of the three judges deciding the case for the United States Court of Appeals, District of Columbia Circuit, two agreed with the plaintiff.

Here’s why:

1. Something titled “Mutual Non-Disparagement” suggests that neither party to the agreement should disparage the other.
2. The word “likewise” linked the parties’ duties. The plaintiff agreed not to disparage, and “likewise,” the defendant agreed not to disparage.
3. The “provided, however,” purported to allow the defendant’s employees, directors, and officers to disparage the plaintiff as part of litigation or arbitration proceedings. Why have that carveout, reasoned the court, if the defendant’s obligation was to direct others not to disparage the plaintiff?

I would’ve sided with the dissenting judge, who concluded that, on its face, the non-disparagement provision unambiguously required the defendant to direct others not to disparage the plaintiff, and nothing more. And if the plaintiff wanted more, she could have bargained for it.

Although I can count on zero fingers the number of times I have litigated this issue, this appellate court decision highlights the risks for employers of mutual nondisparagement provisions.

Even with “one-way” non-disparagement provisions, employers should be mindful that some states may prohibit, and the National Labor Relations Board will carefully scrutinize the breadth of the language.