Confidentiality and non-disparagement clauses are customary in settlement agreements and severance contracts in the employment law context. These days, however, the temptation can be irresistible for disgruntled former employees to trash their former employer on social media sites like Facebook, Twitter, or LinkedIn, on blogs, by text or e-mail or other electronic means.

In the 1800s, Londoners stood on soapboxes at Speaker’s Corner in Hyde Park to air their grievances to small groups of passers-by. But in 2010, with greater permanency and reach, disgruntled employees are more likely to turn to the Internet to share their thoughts to the entire planet. A former software company employee once sent 200,000 e-mails to 35,000 employees complaining of his treatment by a former employer.

For this reason, standard confidentiality and non-disparagement clauses should include a specific prohibition regarding communications on social media and e-mail, along with a liquidated damages provision. This puts the former employee on notice and will make him or her think twice before “tweeting” about the employer. In addition, a court will be more likely to enforce the agreement and award the company damages for a breach if there is specific language addressing this behavior.

In one recent case, a federal court ruled that an employer was relieved from payment obligations under a confidential settlement agreement after the plaintiff texted her friends about the amount of the settlement. In another case, a former CEO and CFO anonymously posted negative comments about a publicly traded company on Yahoo. The company determined their identity by subpoena and sued under a non-disparagement clause, recovering six-figure severance payments. These cases fly under the radar because they are often filed under seal, but they are increasing. 

A claim for breach of a non-disparagement clause is different from a defamation claim in important ways. Most importantly, truth is not necessarily a defense. Damages are generally limited to liquidated damages or compensation damages. Disgorgement of any severance pay is a proper form of contractual damages for a breach.

In City Group, Inc. v. Ehlers, 402 S.E.2d 787 (Ga. Ct. App. 1991), a company’s former president was quoted as saying that he left because of “philosophical differences” and that “[i]t was hard to define the direction of the Company.” The company sued him under a non-disparagement clause. The court held that the comments did not constitute disparagement, noting:   The term, "disparagement," is defined in Webster’s Third New Intl. Dictionary (1961) as "diminution of esteem or standing and dignity; disgrace . . ., the expression of a low opinion of something; detraction. . . ."  A “disparaging” term, according to the court, can therefore be broadly viewed as a negative statement, even if true. The Webster’s New Riverside University Dictionary defines “derogatory” as “disparaging.” So the terms seem synonymous.

As employers strive to protect their reputation, good will, and employee morale in the age of social media, non-disparagement clauses are worth a look.