Derogatory Comments and Settlement Agreements.

Q:  “I am leaving my employment under a settlement agreement and it contains a clause which states that I will not say anything bad about my employer after the termination of my employment. Can they stop me doing this and what would happen if I spoke about them after I’ve signed the agreement? They can’t stop me telling the truth about them, can they?”

Employment Solicitor Ian Carey answers…..

General background

It is very common for employers to include such clauses in settlement agreements. For many employers, limiting the reputational damage to the organisation from an employment dispute is an important reason for entering into a settlement agreement with an employee. 

A non-derogatory statement clause (more colloquially known as a non-slagging off clause) will be drafted in a variety of ways each with varying levels of obligation. It is important for you to understand the effect of the clause and to make sure you fully understand the legal obligations arising from it. If you are unclear on any aspect, then you should seek further advice from your independent legal adviser prior to signing the settlement agreement.

 Seek a reciprocal clause

If your settlement agreement contains such a clause then the settlement agreement should be checked by your independent legal adviser to see whether your employer is subject to a similar clause and if not, then a reciprocal clause should be inserted into the agreement for your benefit i.e. a clause that states that your employer agrees not to make any bad comments about you.

Please note, it is likely that any reciprocal clause on an employer will be drafted using such words as “best endeavours” or “reasonable endeavours”. This is arguably a less onerous obligation but is usually considered necessary unless your employer is a sole trader. Where your employer is an organisation comprising of a number of persons, then “best endeavours” or the lesser “reasonable endeavours” is commonly used because whilst you as an individual can control your own actions, it is more difficult for the employer consisting of a group of persons to do so. 

Can an employer stop me making bad comments?

The short answer is yes – although they can’t “gag” you in a physical sense, it is legitimate (and common) to include legal obligations on an employee in a settlement agreement regarding confidentiality which will include a non-derogatory statement clause. 

As mentioned above, an employer is unlikely to pay settlement sums to an employee without having some ability to limit the reputational damage arising from the employment dispute.  

What would happen if I spoke about them after I’ve signed the agreement?

This will depend on how the non-derogatory statement clause is drafted and the extent to which you have breached it.

In theory, any breach of the clause is actionable by an employer on the basis of being a breach of contract although in order for a court to award damages i.e. compensation to be paid by you, the employer would have to show that some loss flowed from the breach.

 In addition, if the employer was concerned about the breach and could show that damages were an inadequate remedy, then it may seek an injunction to prevent you from making further damaging comments in breach of the clause although the circumstances would have to be such to justify such injunctive relief.

In any event, much will depend on the severity of the breach.

One end of the spectrum may be a former junior employee being overheard in a restaurant telling a close friend about “their former employer” and painting them in an unsavoury light. Although this would be a breach, it is hardly likely to lead to any serious loss unless the friend happens to be a major customer of the employer and decides to cease business relations as a consequence or is a journalist who decides to publish “an exclusive story”.

At the other end of the spectrum, a former aggrieved board director with considerable influence in a business sector starts a sustained social media campaign against his former PLC employer giving a “warts and all” insight into why the business is failing which leads to a dramatic fall in the PLC’s share price and the cancellation of several lucrative contracts.

In the latter case, the losses suffered may be very significant and the former board director is likely to be on the receiving end of prolonged and costly litigation.

Settlement sums may be conditional upon compliance

Regardless of these factors, employees should be aware that many employers will make the payment of the settlement sums conditional upon the employee complying with their obligations under the settlement agreement. Therefore, it could be a very costly mistake to make a bad comment about your former employer in breach of your obligations under the agreement because your employer may then refuse to pay to you the settlement sums due to you under the agreement or if they have already been paid to you, seek to recover those sums from you together with interest.

They can’t stop me telling the truth about them, can they?

For the reasons set out above, in practical terms that is the effect of a non-derogatory statement clause which you would be best advised to observe unless you wanted to run the risk of litigation and/or the loss or recovery of the settlement sums paid by the employer.

The only exceptional circumstances where a former employee would be relieved from complying with their legal obligations regarding non-derogatory statements are usually specified as being in order to make protected disclosures e.g. whistleblowing or by court order e.g. giving evidence under oath in legal proceedings.

By Ian Carey – Employment Solicitor

Answer given February 2016

IMPORTANT: The contents of this article are for guidance only and do not amount to legal advice.

helping employees with settlement agreements since 2013