Non-Disparagement Agreement

A Non-Disparagement Agreement in the United States governs the relationship between the parties by fixing what each must do.

The legal enforceability of Non-Disparagement Agreements in the United States rests on contract law principles applied at the state level. Because the First Amendment to the US Constitution only restricts government interference with speech, it does not bar private parties from voluntarily agreeing by contract to limit their own speech. Courts in California, New York, Texas, Delaware, and across all US circuits have consistently enforced non-disparagement provisions in settlement agreements and separation agreements as valid contractual restrictions on speech when supported by adequate consideration.

However, federal developments have significantly complicated the enforceability environment. The National Labor Relations Board's decision in McLaren Macomb, 372 NLRB No. 58 (2023), held that overly broad non-disparagement clauses in employee severance agreements that restrict workers from making statements about wages, hours, or working conditions — rights protected under Section 7 of the National Labor Relations Act, 29 U.S.C. § 157 — are unlawful. The NLRB applied this ruling to both current and former employees. Employers must therefore confirm that non-disparagement clauses in separation agreements include explicit carve-outs for Section 7 activity.

The Speak Out Act, 15 U.S.C. § 7001 et seq. (2022), renders pre-dispute non-disclosure and non-disparagement agreements unenforceable in cases involving sexual harassment or sexual assault. This federal statute applies to any agreement signed before a dispute arises and significantly limits what employers can require employees to agree to at the time of hiring or as a condition of continued employment with respect to these specific claims. Post-dispute settlement agreements resolving sexual harassment claims remain permissible.

State-level restrictions add further complexity. California Civil Code § 1001 prohibits employers from requiring employees to agree to keep sexual harassment or discrimination settlements confidential as a condition of receiving settlement proceeds. California AB 2770 expressly permits employers and former employers to make good-faith communications to prospective employers about whether a former employee was involved in a sexual harassment investigation. Washington, New Jersey, Illinois, and New York have enacted comparable statutes limiting non-disparagement provisions in consumer and employment contexts.

For business-to-business contexts, the Lanham Act, 15 U.S.C. § 1125(a), provides a separate federal remedy for false statements of fact about a competitor's products or services (commercial disparagement), operating alongside contractual non-disparagement provisions. Parties with valuable brand reputations — technology companies, professional service firms, franchise networks — frequently include Non-Disparagement Agreements in partnership, licensing, and vendor contracts to protect brand equity beyond what the Lanham Act covers.

A Non-Disparagement Agreement in the United States is needed whenever a party has a legitimate reputational interest that could be harmed by negative statements from a former employee, departing business partner, settling litigant, or commercial counterparty.

A Non-Disparagement Agreement is needed in employment separation contexts when an employer is paying severance to a departing employee and wants contractual protection against negative statements the employee might post on Glassdoor, LinkedIn, or other public platforms. Post-separation disparagement can harm employee morale, damage client relationships, and impair the employer's ability to recruit. A mutual non-disparagement provision — in which the employer also commits not to disparage the former employee — is increasingly expected by departing employees and their counsel and reflects good-faith separation practices.

The agreement is needed in litigation settlements resolving disputes between former business partners, franchisees and franchisors, clients and service providers, or any parties whose ongoing public dispute could cause continuing harm to one or both parties. Settlement agreements without non-disparagement provisions leave the settling parties free to continue criticizing each other publicly despite resolving the underlying legal claims.

Non-Disparagement Agreements are needed in the technology sector when licensing agreements, joint venture agreements, or distribution agreements are terminated. In the software industry, for example, former development partners may have detailed knowledge of a company's technical failures, security vulnerabilities, or product roadmap that could be weaponized through public statements. A well-drafted non-disparagement provision in the termination agreement protects against this risk.

For franchise systems, non-disparagement provisions in franchise agreements protect the franchisor's brand by preventing terminated franchisees from making negative public statements about the system, products, or support provided. Courts have enforced these provisions when they are narrowly drawn and supported by adequate consideration.

In executive employment agreements and CEO separation packages, non-disparagement provisions protect the departing executive's professional reputation while simultaneously protecting the company from public criticism of management decisions. Goldman Sachs Group, Inc. and other major public companies routinely include mutual non-disparagement provisions in executive departure agreements.

A Non-Disparagement Agreement under US law must contain several essential provisions to be enforceable and to achieve its reputational protection objectives.

The definition of prohibited statements is the most important drafting element. The agreement must clearly define what constitutes a 'disparaging' statement to give the restricted party fair notice and to allow courts to enforce the restriction. Overly vague definitions — such as 'any negative statement' — may be deemed unenforceable for lack of definiteness. A precise definition names specific categories: written or oral statements that are false, malicious, defamatory, or intended to harm the other party's reputation; negative reviews on platforms such as Glassdoor, Indeed, Google Reviews, Yelp, or Trustpilot; derogatory social media posts on Twitter/X, LinkedIn, Facebook, or Instagram; and statements made to customers, clients, investors, vendors, or media.

The identification of covered parties clause specifies who is protected by the restriction. For an employer, this typically includes the company, its parent and affiliated entities, its officers, directors, managers, and employees. For an employee, it covers their professional reputation and good standing in their industry. The agreement should define 'disparagement' consistently for both sides in a mutual agreement.

The carve-outs and exceptions clause is essential for enforceability in the current legal environment. Required carve-outs include: truthful statements made in legal proceedings or in response to a subpoena or court order; truthful statements made to government agencies such as the EEOC, NLRB, DOL, or OSHA in connection with an investigation; statements protected under Section 7 of the National Labor Relations Act, 29 U.S.C. § 157 (employees' rights to discuss wages and working conditions); statements protected under the Speak Out Act, 15 U.S.C. § 7001 (sexual harassment and assault claims); and protected disclosures to regulatory agencies in the financial services and public company sectors under SEC Rule 21F-17 and the Dodd-Frank Act, 15 U.S.C. § 78u-6.

The consideration clause must identify the specific consideration being exchanged for the non-disparagement commitment. In an employment separation agreement, this is typically the severance payment. In a settlement agreement, it is the settlement amount. Courts will not enforce a non-disparagement clause that lacks adequate consideration — a promise alone, without additional benefit beyond what the party is already entitled to receive, is insufficient.

The remedies clause should acknowledge that breach of the non-disparagement obligation may cause irreparable harm not compensable by money damages alone, entitling the non-breaching party to seek injunctive relief from any court of competent jurisdiction. The clause should also specify available remedies: damages for provable financial loss (lost business, cost of reputation management); liquidated damages per violation if the agreement specifies a fixed amount as a reasonable pre-estimate of harm; and in cases involving employment separation, potential forfeiture of unpaid severance if the employee breaches before all severance is paid.

The governing law and jurisdiction clause should specify the state law governing the agreement and the courts with jurisdiction over disputes. Delaware, New York, and California are the most common choices for governing law in commercial Non-Disparagement Agreements. The forms-legal.com Non-Disparagement Agreement template addresses these governing law considerations and includes the required NLRB-compliant carve-outs for Section 7 activity. Employers operating in California must additionally confirm the agreement does not violate California Labor Code § 1001 or California Civil Code § 1001 restrictions on non-disparagement in harassment and discrimination settlement contexts.