NON-DISPARAGEMENT PROVISION IN SEPARATION/SEVERANCE AGREEMENT

BY G. A. FINCH

Many executives and professionals will face termination of employment in their careers.  Termination may result from a firing or lay off or voluntary resignation.  Frequently, a separation agreement with severance provisions will be part of the termination.  Whatever the reason for termination, one often overlooked provision in the separation/severance documents is a non-disparagement provision.  Both executive and employer may inadvertently omit this critical provision. 

From the employer side, the employer does not want a disgruntled former executive trashing the company thereby diminishing the brand, reputation, and goodwill of the company.  The executive certainly does not want her ability to find new employment to be precluded by negative comments being made about her by personnel at her old employer.

In agreeing to a non-disparagement provision, the employer has to be careful in limiting the number of persons who would fall under the application of the non-disparagement provision.  Obvious persons such as the C-suite executives and the board of directors and the HR Director could be controlled.  The provision obviously should not apply to everyone in a company comprising 10,000 employees.

The scope of the application to the employee is much easier as the employee should be able to control himself and his spouse.

Many times the non-disparagement provision is missing from the separation agreement and, if there is one, it usually is one-sided in favor of the employer.

When I recommend a non-disparagement provision to a client, whether an employer or an employee, I invariably get a why-didn’t-I-think-of-that response.

From a risk management perspective, it is a way of reducing defamation and libel lawsuits.

In most cases, a non-disparagement provision is a win-win in an executive termination.

2 responses

    • Mr. Lovett,

      Your query is an excellent one. You would want the spouse to be a signatory and to pay him or her a nominal sum to establish legal consideration in a non-disparagement agreement. One attorney colleague of mine even suggested an employer’s issuing to the spouse a single share of stock of the employer corporation or unit of interest in the employer LLC, as the case may be, could also possibly work to constitute sufficient legal consideration to bind the spouse in a non-disparagement agreement. Another tack possibly to take is to provide that if a spouse has been determined to have disparaged the former employer, then, under the non-disparagement agreement, the former employer can claw back whatever payments have been made to the departing employee. Thanks for the thought provoking questions.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: