Non disparagement clause

Sample clause

a settlement between Saltbush Brewing, a fictional craft brewery in Ballarat, and a departing venue manager

1. Mutual Non Disparagement. Neither party may make any public statement that is disparaging of the other party, or of the other party's business, products or personnel. 1.1 For the Employer, clause 1 applies to statements made by its directors and by its managers, and the Employer must take reasonable steps to ensure they comply. 2. Exceptions. Clause 1 does not apply to: 2.1 a statement made to a court, a tribunal, a regulator, a work health and safety authority or the Fair Work Ombudsman; 2.2 a statement made to obtain legal, medical or financial advice; 2.3 a truthful statement made in response to a lawful request for a reference; or 2.4 a statement made to the party's immediate family. 3. Agreed Statement. If either party is asked why the employment ended, that party may say only that the parties separated on agreed terms. 4. No Admission. Nothing in this clause is an admission by either party of any fact or liability.

Sample wording, not legal advice.

Variants

What to negotiate

• Whether it is mutual

  A one way promise given by a departing employee or a smaller supplier is common and is the version most often resisted. Making it mutual costs the stronger party little, since it rarely intends to comment anyway, and it changes how the document reads. Where the promise stays one way, the party giving it usually asks for a narrower scope in exchange.

• Who the promise binds inside an organisation

  A company cannot control what every employee says, so a clause binding the company for all statements by any employee is unworkable. The usual settlement names the people it covers, commonly directors and senior managers, and adds an obligation to take reasonable steps to ensure they comply. That is enforceable and does not promise the impossible.

• The exceptions that must be there

  Statements to a court, a regulator, a work health and safety authority or the Fair Work Ombudsman, disclosures protected by law, and statements made to obtain professional advice all need to sit outside the clause. A clause without them may be unenforceable and can look like an attempt to suppress a lawful complaint, which is worse for the party that asked for it.

• What each side may say if asked

  Silence invites speculation, so many settlements include an agreed statement, such as that the parties separated on agreed terms. Both sides then have something accurate to give a third party. Where a reference is likely to be requested, agreeing its wording at the same time removes the most common source of later argument.

The risk of leaving it out

Without the clause each party is free to describe the relationship and its ending however it likes, limited only by defamation law and by any confidentiality obligation that survives. For a business, the practical exposure is a detailed public account of a dispute it settled precisely to avoid, published by someone with nothing further to lose.

What the clause cannot stop

A non disparagement promise does not override statutory rights. In Australia the general protections provisions of the Fair Work Act 2009 protect a person exercising a workplace right, which includes making a complaint or inquiry in relation to their employment, and a clause used to punish someone for doing so creates a separate problem for the employer. Disclosures to work health and safety authorities and to regulators sit outside as well, as do statements made under compulsion in legal proceedings. Drafting exceptions for these is not a concession, it is what keeps the rest of the clause credible, and a clause without them invites the argument that the whole provision was aimed at suppressing a lawful complaint.

Honest reviews and consumer facing contracts

In a consumer or small business contract, a term stopping the other party from publishing an honest review is difficult to defend. The unfair contract terms regime in Schedule 2 of the Competition and Consumer Act 2010 applies to standard form contracts of that kind, and a term restricting one party's right to say something true about the goods or services it received is the sort of imbalance the regime is aimed at. Making a refund or a remedy conditional on removing a review is a separate problem again. The safer drafting limits the promise to statements that are knowingly false or made without a reasonable basis, which protects against genuine damage without reaching honest feedback.

Where it sits in a generated document

The document generator writes an agreement as numbered content, so a non disparagement clause usually appears near the confidentiality and release provisions, with the exceptions listed as sub clauses. The generated text is written from the description it is given and it never prints citations, so any reference to a regulator or a statute in a draft has to be checked before the document is used. Where the document ends in a signature block, each party in that block becomes one signer, which is worth noting when a company and an individual both sign a settlement.

Documents that carry this clause

Termination letter template that shows the final payA termination letter is read twice, once by the employee in the meeting and once by a lawyer or a tribunal months later, and both need the same facts. This one states the reason and the process in dates, shows the final pay as a table with each component, and says what happens next, so there is nothing to ask afterwards.Employment contractA full time ongoing contract for an operations coordinator on $86,000 plus $10,320 of superannuation. Eleven numbered clauses, a leave table drawn from the National Employment Standards, and a notice table that scales with service.Shareholders agreement templateA veterinary diagnostics company has just taken $1.5 million from one seed fund. The founders keep 80 percent between them, so the whole agreement turns on a single number: the 75 percent consent threshold that puts the investor on one side of every decision that matters.Referral agreement template with a fee table by productA referral agreement works when it is clear where the referral stops and the advice starts. This one has a real estate agency passing buyers to a mortgage broker for a fee that ranges from $250 to $1,100 by product, attributed for 90 days, paid monthly, and clawed back if the lender claws back first.

Questions people ask