Non-disparagement in California

Question

Two somewhat unrelated questions on disparagement, specifically in the context of California:

1. What is the current standing law with regard to non-disparagement clauses in contracts? I recall a recent law prohibiting them in terms of service agreements, but what about employment an other (e.g. severance) contracts? Are they legally enforceable? Does California have an anti-SLAPP law?

2. What is the legal definition of disparagement in the context of a non-disparagement agreement? Is it like libel in that it is limited to untrue claims, or are any negative and business-impacting claims subject to it even if demonstrably true?

Answer 1

California has a law prohibiting non-disparagement clauses in consumer transactions.¹ The rule tells us that any waivers of the rule are void. We also learn that the penalty is $2500 for the first violation and $5000 for each subsequent. The consumer can bring the lawsuit.

Non-disparagement agreements are valid in employment and severance agreements. So, yes, they are enforceable as a matter of law. (But note that the NLRB and the EEOC have recently come out against certain broadly worded non-disparagement language.)

CA has an anti-SLAPP statute.²

There is no "legal definition of disparagement in the context of a non-disparagement agreement." If the term is not defined in the contract the court will likely apply the plain meaning rule. Generally speaking, the plain meaning of disparagement is speaking or writing about the subject in a negative light. As such the term "disparagement" will apply to negative speech, regardless of truth. In fact, most non-disparagement clauses will include a word like "criticize." The thing is, false negative comments are already a tort which means that you can get sued for those even without the non-severance agreement. However, a non-disparagement agreement makes it easier for the plaintiff because they do not need to prove damages and they can include liquidated damages in the contract.

This might be confusing because disparagement is a tort recognized in CA.³

A claim of disparagement requires a plaintiff to show a false or misleading statement that (1) specifically refers to the plaintiff's product or business and (2) clearly derogates that product or business.

The point is that the disparagement prohibited in employment contracts is not the recently-defined tort of disparagement but rather the plain definition of disparagement. The disparagement prohibited in employment contracts applies to true statements. (The caveat being that the definition is subject to a definition included in the contract.)

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¹Cal. Civ. Code 1670.8. (a) (1) A contract or proposed contract for the sale or lease of consumer goods or services may not include a provision waiving the consumer's right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.

²CODE OF CIVIL PROCEDURE 425.16. (a) The Legislature finds and declares that there has been a disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances.

³ Hartford Casualty Ins. Co. v. Swift Distribution, Inc., 326 P. 3d 253 - Cal: Supreme Court 2014