Breaching a non-disparagement agreement in the United States typically exposes the violating party to a lawsuit for contract damages, a court injunction ordering them to stop, or both. Whether the breaching party actually pays depends on how the clause was drafted, which state governs the contract, and — critically for employees — whether the National Labor Relations Act Section 7 limits the clause's reach in the first place.
What a non-disparagement clause actually prohibits
A non-disparagement clause is a contractual promise not to make negative, harmful, or false statements about the other party. The clause appears in severance agreements, settlement agreements, executive employment contracts, and standalone post-employment agreements. Most clauses cover spoken statements, written statements, and social-media posts; some extend to interviews, reviews on platforms like Glassdoor, and communications with future employers.
The exact scope matters enormously for breach analysis. A clause that bars only "false statements of fact" is far narrower than one that bars any "negative comment." Courts read these provisions literally, so a former employee who posts a critical-but-accurate Glassdoor review may not breach the first version while clearly breaching the second.
Breach remedies: what the non-breaching party can seek
Liquidated damages
Many professionally-drafted non-disparagement clauses include a liquidated damages provision — a pre-agreed dollar amount triggered by each breach. Courts enforce liquidated damages when two conditions are met under the Restatement (Second) of Contracts § 356: the actual harm was difficult to estimate at the time the contract was signed, and the agreed amount is a reasonable forecast of that harm.
Reputational damage to a business or executive is notoriously hard to quantify, which is why courts often uphold liquidated damages clauses in this context. Amounts range from a few thousand dollars per incident to the full value of the settlement payment the employee received — clauses requiring repayment of a severance if the employee disparages the company are sometimes called "clawback" provisions and are generally enforceable.
Actual damages
When there is no liquidated damages clause, the injured party must prove actual harm caused by the breach. That burden is real: the plaintiff typically needs evidence that the negative statement reached a specific audience and caused a measurable economic consequence — a lost contract, a withdrawn investment, a drop in sales tied to the statement. Courts will not award speculative damages, so vague claims that "our reputation suffered" without supporting evidence routinely fail.
Injunctive relief
Courts can issue a temporary restraining order or preliminary injunction ordering the breaching party to remove a post, stop making statements, or refrain from further conduct. The plaintiff must show a likelihood of success on the merits and that money damages would be inadequate — the second requirement is often easy to satisfy with disparagement because each new harmful statement compounds the injury.
Attorney's fees
Most non-disparagement agreements are silent on fees, meaning each party bears its own costs under the American Rule. If the contract includes a fee-shifting provision, the prevailing party can recover. Employer-drafted severance agreements sometimes include these provisions, which increases the financial risk of breaching.
The NLRA Section 7 problem
In 2023, the National Labor Relations Board's decision in McLaren Macomb, 372 NLRB No. 58, changed the landscape for non-disparagement clauses given to rank-and-file employees. The NLRB held that a non-disparagement provision in a severance agreement violates the National Labor Relations Act when it is so broad that it would chill an employee's Section 7 rights — the right to engage in concerted activity, discuss wages with coworkers, file NLRB charges, or communicate with government agencies.
The NLRB's position is that any clause barring statements that could "harm the employer's reputation" without carving out protected activity is facially unlawful for covered employees. Employers responded by narrowing their language to exclude statements protected by the NLRA, NLRB charges, and communications with government authorities.
If a non-disparagement clause in a covered employee's severance is unlawfully overbroad, the employee may be able to argue the clause is void as contrary to public policy — which would gut the employer's breach claim entirely. Managers, supervisors, and independent contractors are not covered by the NLRA and face fewer obstacles on this point.
State law considerations
California
California Business and Professions Code § 16600 voids contracts that restrain someone from engaging in their trade or profession. While non-disparagement clauses are not outright non-competes, California courts have occasionally voided overbroad clauses that effectively prevented someone from discussing their professional experience. Senate Bill 331 (2021) also banned non-disparagement clauses in settlement agreements that prevent employees from disclosing factual information about harassment, discrimination, and retaliation claims. A clause that violates SB 331 is unenforceable.
New York
New York General Obligations Law § 5-336, first enacted in 2018, prohibits non-disparagement clauses in settlement agreements covering sexual harassment claims unless confidentiality is the complainant's preference. Senate Bill 4516, signed by Governor Hochul on November 17, 2023, extended similar restrictions to settlement agreements resolving discrimination and retaliation claims more broadly — and added that employers may not include clawback or liquidated-damages provisions penalizing an employee for violating a non-disparagement clause in such agreements. These provisions override any contractual term to the contrary.
Other states
Washington, Illinois, and several other states have passed comparable statutes limiting non-disparagement agreements in the workplace context, particularly for claims involving discrimination and harassment. The trend is toward state-level carve-outs that protect truthful statements about unlawful workplace conduct regardless of what the severance agreement says.
Whistleblower protections as a defense
Federal law provides additional protection in specific sectors. The Dodd-Frank Act, Securities Exchange Act § 21F, protects employees who report securities violations to the SEC. The CFTC and other agencies have similar rules. An employer who sues an employee for breaching a non-disparagement clause after the employee reported misconduct to a regulator risks a retaliation counterclaim — and SEC Rule 21F-17 directly prohibits contractual terms that impede SEC reporting. The SEC has levied fines against companies for using overbroad non-disparagement clauses that employees could interpret as barring contact with the agency.
Qui tam relators under the False Claims Act enjoy similar protections: a non-disparagement clause cannot be used to punish someone for participating in a government fraud investigation.
What to do if you receive a breach claim
If an employer or counterparty sends a demand letter alleging breach, the first step is to read the clause carefully and map the alleged statement against the exact contract language. Consider:
- Whether the statement was factually accurate (relevant to any damages calculation and to NLRA/public-policy defenses)
- Whether the clause excluded NLRA-protected activity, government reporting, or legal proceedings
- Whether the governing law is a state that restricts the clause's scope
- Whether the liquidated damages amount is actually a reasonable forecast or an unenforceable penalty
Under the Restatement (Second) § 356(1), a liquidated damages clause that sets an amount "unreasonably large in proportion to the harm" is void as a penalty. Courts have used this doctrine to strike down clauses demanding full repayment of a multi-year severance over a single tweet.
Employees should also consider whether an NLRB charge is appropriate if the non-disparagement provision appears on its face to violate McLaren Macomb. Filing a charge can put the employer's litigation position under scrutiny and, if the clause is declared unlawful, eliminate the contractual basis for any damages claim.
Drafting a clause that actually holds up
Forms-legal.com offers a free US non-disparagement agreement template that includes NLRA-safe carve-outs for government reporting, agency charges, and court proceedings — the language increasingly demanded by courts and the NLRB since 2023.
A clause that survives challenge generally does four things: defines "disparagement" with specificity rather than sweeping to any negative comment; carves out truthful statements made in legal proceedings; explicitly preserves NLRA Section 7 rights and government-reporting rights; and sets liquidated damages at a level tied to the actual value of the severance or settlement rather than an arbitrary multiplier.
The bottom line
A breached non-disparagement agreement can lead to real money liability, but collecting on that liability is harder than sending a demand letter. The plaintiff must prove a covered statement, causally connected harm, and a valid — not overbroad — clause. Employees in particular have multiple potential shields: the NLRA, state statutes protecting discussion of discrimination claims, and federal whistleblower rules. The strength of those defenses depends almost entirely on the specific clause language and the jurisdiction. If you are on either side of a potential breach dispute, reading the contract word by word against the applicable state and federal rules is the only way to assess the real risk.
Need the document itself? Download the free template →
This article is general information, not legal advice — see our accuracy & editorial policy. Confirm the cited law is current before relying on it.