Does Your Business Use Non-Disparagement Clauses?

If you do not know the answer to this question, or if you do, the next question is whether your company should be using them. That question may get more difficult in the coming months due to proposed legislation from both sides of the aisle on the use of disparagement clauses and the freedom to leave reviews on internet review sites.

Currently there is a combined effort in Congress to end the popular practice of limiting what a person can and cannot say after using a business’s services. If passed, the legislation would open up a person’s ability to post negative reviews and comments about a business on a website. The bill has big backers behind it through the efforts of the most popular review websites.

Non-Disparagement Clauses

At this point you may be asking what a non-disparagement clause is, anyway. In recent years, companies have begun to include these clauses in their contracts, and the aim of the clause is to limit what a person can say online over services used. In most cases such a clause would be part of the bargained for exchange of goods or services. Courts across the country have upheld the clauses as a valid contracting power.

The opponents of these clauses have several arguments as to why they should be eliminated in today’s economy. One of the strong arguments on the opposing side is that these clauses limit a person’s free speech and are therefore contrary to the First Amendment of the U.S. Constitution. Another criticism is that limiting what patrons say about a business they used goes against the new economic way of doing business.

While there are good arguments on both sides of this issue, some of the core issues surrounding what someone says will remain. In our tradition of the common law, we have developed rules over the years that allows a person to speak her mind, but does not give license to say anything false or otherwise defamatory about another. Those actions will remain.

The issue of whether a statement made about a business or person is defamatory comes down to whether the statement is true or not. If a person goes to a business, then makes a false report about their experience, then it is most likely defamatory and therefore actionable under the common law in a civil action. And as was stated earlier, today’s economy in many ways revolves around what is printed, posted, and updated in the world wide web.

So what is the answer, if there is one, for how a business can protect its online reputation? The question of whether a disparagement clause should be used by your business is a good one, and it should be discussed with a legal professional who can help you understand the repercussions of your decision. For example, you can modify a non-disparagement clause to reflect your business’s desire to prevent defamatory and untruthful comments about it.

Your Company’s Legal Partner

As you face important business and legal decisions for your company, look to a law firm with a wide range of business and legal experience to guide you. At The Royse Law Firm, our team of dedicated professionals will work with you proactively to ensure the best result possible not matter what situation you may face. Contact us today.

Disclaimer: This blog and website are public sources of general information concerning our firm and its lawyers, as well as the information presented. They are intended, but not promised or guaranteed, to be correct, complete, and up-to-date as of the date posted. This blog and website are not intended to be, and are not, sources of legal opinion or advice. The materials, information, and communications on this blog and website do not apply to any particular person, entity, or situation, and do not apply to you or to your specific situation. You will need to consult with an attorney and/or other appropriate professional about your specific situation. Thank you.
Roger Royse

Roger Royse, the founder of the Royse Law Firm, works with companies ranging from newly formed tech startups to publicly traded multinationals in a variety of industries. Roger regularly advises on complex tax structuring, high stakes business negotiations and large international financial transactions. Practicing business and tax law since 1984, Roger’s background includes work with prominent San Francisco Bay area law firms, as well as Milbank, Tweed, Hadley and McCloy in New York City.
Read My Full Bio | Contact Me