If You Can’t Say Anything Good about Someone, Well, Keep Talking – The EEOC Challenges the Legality of Non-Disparage Agreements

4 minute read | June.25.2013

As the saying goes, if it didn’t end badly, it never would have ended. That is often the case for former employees who no longer simply gripe to spouses or close friends about their former employers. Disgruntled former employees and disengaged current employees often take to social media in railing on the Company for everything from a toxic work environment to lousy product to scaling back employee perks.

For departing employees that sign separation agreements, employers often require the employee to keep quiet about the company. These “Non-Disparage” agreements are generally broad in scope and prohibit the employee from making comments, either as fact or opinion, to any person or entity, including the press or on any social media site, that would negatively impact the Employer or its employees.

Recently, the EEOC has challenged the legality of Non-Disparage agreements as a violation of public policy. With that in mind, when drafting a separation agreement for a departing employee, take the following into consideration related to whether to insert a Non-Disparage provision within the agreement.

EEOC Enforcement Guidance on Non-Waivable Employee Rights under EEOC Enforced Statutes, No. 915.002 (April 10, 1997)

In 1997, the EEOC made it clear that employers were not to interfere with an employee’s right to file an EEOC charge or participate in an EEOC proceeding. See EEOC Enforcement Guidance on Non-Waivable Employee Rights Under EEOC Enforced Statutes, No. 915.002 (April 10, 1997). The EEOC stated that separation agreements “that attempt to bar individuals from filing a charge or assisting in a Commission investigation run afoul of the anti-retaliation provisions because they impose a penalty upon those who are entitled to engage in protected activity under one or more of the statutes enforced by the Commission.”

In order to avoid running afoul of the law but, at the same time, assuring that it has a valid and enforceable release, employers often insert language in separation agreements that state unequivocally that nothing within the separation agreement should be construed to interfere with an employee’s right to file a charge with, cooperate, or participate in an investigation or proceeding conducted by the Equal Employment Opportunity Commission, or other federal or state regulatory or law enforcement agency.

Waiver of Right to Recovery

Although employers may not restrict an employee’s right to file or participate in an EEOC proceeding, employers certainly have the right to restrict an employee’s right to recovery. EEOC v. Waffle House, Inc., 534 U.S. 279, 304 (2002) (“If an employee signs an agreement to waive or settle discrimination claims against an employer, for example, the EEOC may not recover victim-specific relief on that employee’s behalf”) (dissenting on other grounds).

Without restricting an employee’s right to file or participate in an EEOC proceedings, employers often state in separation agreements that consideration provided to the Employee in the separation agreement shall be the sole relief provided to the Employee for all claims released by the Employee and that Employee shall not be entitled to recover, and agrees to waive any monetary benefits or recovery against the Employer related to any released claim.

Non-Disparage Agreements

Although the law is well settled that a former employee can waive a right to recover for a Title VII claim, any language within the separation agreement that appears to discourage a former employee from cooperating would likely be subject to attack by the EEOC or state agencies. That is certainly the case in the matter pending in the Northern District of Illinois. In a recent court filing, the EEOC took the position that a non-disparaging provision within a separation agreement was unlawful as against public policy.  See EEOC v. Baker & Taylor, Inc., Case No. 13-cv-03729, Northern District of Illinois, Eastern Division, 2013.  The non-disparagement provision at issue stated the following:

I agree that I will not make any disparaging remarks or take any other action that could reasonably be anticipated to damage the reputation and goodwill of Company or negatively reflect on Company.  I will not discuss or comment upon the termination of my employment in any way that would reflect negatively on the Company.  However, nothing in this Release will prevent me from truthfully responding to a subpoena or otherwise complying with a government investigation.

The EEOC views this provision as reflecting “resistance” to the rights secured by Title VII and a barrier for individuals to participate and cooperate with the EEOC or state agencies. The Court has yet to rule on the EEOC’s attempt to enjoin the employer from inserting the referenced non-disparagement provision in the employer’s separation agreement.

Would the EEOC have been more tolerant if the separation agreement stated that “Nothing in this non-disparagement provision shall interfere with the Employee’s right to cooperate and participate in an investigation or proceeding conducted by the EEOC or other federal or state regulatory or law enforcement agency?” One would hope so. Non-disparage provisions are often an integral part of a separation agreement and are not intended to silence an employee from participating in government investigations. Rather, non-disparage provisions provide value to an employer to assure that a former, disgruntled employee does not unfairly attack a Company’s reputation and products and thereby negatively impacting sales and employee morale. Employers should continue to monitor this area of the law to assure that non-disparage provisions within separation agreements are lawful and enforceable.