Jobless and fearful, a former marketing director at a Denver dot-com was facing an increasingly common decision last month: whether to sign away some of her rights in exchange for severance pay.
The woman had decided to leave the startup at the end of March because of disagreements with the way executives there were managing the struggling company. Thats when she was asked to sign a nondisparagement clause in order to receive two additional weeks of pay. The clause concerned her, not because she planned to bad-mouth the company but because of its breadth. It would restrict her from saying anything negative about the company to others.
She was torn, attempting to make a decision by an April 10 deadline. Her final decision? Well, lets just say she requested anonymity to tell this tale.
“I have to put bread on the table and may have no choice but to sign this,” she said. “You feel like youre at risk because if you slip and say something about the company you worked for and someone decides to define it as disparaging, then where does that leave you?”
Questions like hers are increasingly on the minds of employees of dot-coms and tech companies in the midst of massive layoffs and a sour business climate. Employees are trying to make sense of the pros and cons of nondisparagement clauses commonly tacked onto severance packages. Theyre also coming head-to-head with the question of whether to restrict what they say in public and to friends and relatives or to try to fight a contract that some say violates commonly held beliefs in free speech.
Nondisparagement clauses, though, are more common than most people think, said Laura Brown, an attorney at Brown & Wood LLP, in New York. They are used in everything from individual resignations to wide-scale layoffs to protect companies, especially public ones, from damaging comments that could scare off potential customers or hurt stock prices.
The clauses are legally binding as long as they involve a contractual agreement between an employer and an employee, where each is exchanging something such as additional compensation in exchange for a restriction on disparaging comments.
While not yet a top target for the clauses, IT employees are likely to be prime candidates eventually because they change jobs so often and because they have access to critical information such as a companys overall IT infrastructure and details of projects that may be failing, said Brent Longnecker, an executive vice president at Resources Connection Inc., a human resources professional service company based in Costa Mesa, Calif.
Laid-off employees dont always view the clauses as fair, though. When Amazon.com Inc. laid off 1,300 employees in January, it also put together a separation agreement that included a nondisparagement clause.
Instead of signing, some of the employees fought back. A group of customer service employees had already been working with the Washington Alliance of Technology Workers, in Seattle, to organize a union.
Together, they publicized the clause in the media and urged employees to fire off e-mail messages to executives arguing that the clause was unfair and violated their free speech, said Jeremy Puma, a laid-off customer service employee, in Seattle.
A lot of money was at stake: If they didnt sign the agreement, affected employees left with only two weeks of severance pay as opposed to 12 weeks if they did, Puma said.
Within days, however, Amazon relented to public pressure and informed employees that they could cross out the nondisparagement clause. The company didnt return phone calls requesting comment about the episode.
Lawyers who represent employers, though, said that while employees might not like the clauses, they do not violate constitutional rights to free speech. The constitution protects citizens from government-imposed restrictions on speech, not contracts agreed to with employers, said Linn Hynds, chairman of the labor and employment law department at Honigman, Miller, Schwartz and Cohn LLP, in Detroit.
To enforce a nondisparagement clause, employers can sue former employees for breach of contract, seeking a return of any severance pay and any damages, such as the loss of a customer from negative comments. But the clauses can be hard to enforce in court because, for example, many former employees are unable to pay large damages, Hynds said.
As with any contract, employees need to remember that theyre signing a binding legal agreement and that, if theyre not comfortable with the terms, they should try to negotiate a change in them or not agree to them.
“You need to determine whether its worth it to you,” Hynds said. “If you feel so strongly that you want to say something bad about them, to the extent its worth more than the $20,000 youd be paid in the agreement, then by all means dont sign the contract.”