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What employers need to know about non-disparagement clauses

On Behalf of | Jun 7, 2023 | Business & Commercial Law |

California employers have had to keep up with a host of new laws in recent years that have limited the contractual restrictions they can place on their employees. For example, non-disclosure agreements (NDAs) can no longer be used to prevent employees from going public about sexual harassment and discrimination they’ve faced in the workplace. 

Nationwide, non-compete agreements are facing criticism up to the top levels of government. Of particular concern are those used unnecessarily (for example, by fast-food chains) that prevent low-wage employees from getting another job in the same industry.

The new NLRB rule

A ruling by the National Labor Relations Board earlier this year takes aim at the use of non-disparagement agreements or clauses by private employers – particularly those that are broad in scope. The NLRB ruled that non-disparagement clauses are illegal in most employment and severance agreements because they violate protected activities.

Non-disparagement clauses have commonly been used along with confidentiality clauses to prevent people from saying or writing negative things about a current or former employer. These days, a negative tweet or social media post can go viral in minutes and take a heavy financial and reputational toll on a business. However, the NLRB’s general counsel says employees should be able to speak both publicly and privately about their working conditions, including illegal behavior such as discrimination as well as health and safety issues.

Exceptions to the rule

Of course, if what a current or former employee says about a company, its leadership or its employees is untrue, it’s not protected speech and can be considered defamation. Therefore, people don’t have free rein to trash a boss or business on social media or spread rumors if the information isn’t (or may not be) accurate.

Employers may still be able to include non-disparagement clauses in the contracts of higher-level employees. However, it’s wise to have legal guidance in drafting or revising all contracts to ensure that they’re valid under current laws.

The NLRB rule been finalized, so there could be some changes. For example, the rule as announced says it’s retroactive to all employee contracts, no matter when they were signed. It’s possible that this (and other details) could change.

Getting a regular legal review of all of your contracts can help you avoid unnecessary and costly legal issues. It’s also crucial not to make exceptions or modifications in a contract without first seeking legal guidance.