The non-disparagement clause – (sometimes) worth the paper it’s written on
Non-disparagement clauses are common features of settlement agreements and deeds of release in employment disputes or separations. On paper, the clauses operate to prevent the parties from disparaging or denigrating each other. Employment disputes and separations are often acrimonious, so non-disparagement clauses can be very important to both parties in resolving the dispute. After all, nobody wants to settle a dispute and then have the other party bad-mouth them afterwards. But our clients often ask us, do such clauses work in practice? Are they enforceable?
In Network Ten Pty Limited v van Onselen  NSWSC 829, the Supreme Court of New South Wales answered this question in the affirmative when it decided a dispute between Network Ten and the journalist Dr Peter van Onselen. The Court also provided some useful guidance for drafting of effective non-disparagement clauses.
Network Ten employed Dr van Onselen as a Network Political Editor on 10 December 2018.
In or around early 2023 Network Ten directed Dr van Onselen to relocate to Canberra. He refused, so Network Ten made his role redundant.
Network Ten and Dr van Onselen then entered into a deed of release.
The deed contained a non-disparagement clause which stated:
7.1. Subject to clause 7.3, the Employee agrees not to disparage the Company or any of the Releasees or make any statement or publication, or authorize any other person to disparage or make any statement or publication, whether oral or in writing, which may or which does in fact bring the Company or any Releasees into disrepute or ridicule or which may otherwise adversely affect their respective reputations.
7.3. For the avoidance of doubt, clauses 7.1 and 7.2 do not limit or restrict the truthful statements made by each party respectively in relation to the Proceedings.
On 29 May 2023, Dr van Onselen wrote an article published in The Australian Business Review section of The Australian newspaper. It included the following extracts:
Even though Channel 10 has long been the minnow of Australian commercial television – out gunned and out rated by 7 and 9 now more than ever – when CBS (now Paramount) took the little Aussie battler over a few years back I assumed its future was bright.’
So what does all of this mean for Network 10? It could be fine, limping along with little attention paid to it by its big overseas owner (or its domestic competitors to be frank).
‘Since that time the network’s ratings have slowly ebbed lower and lower, elongating the divide between it and its more successful commercial rivals in Australia.’
Network Ten sought a permanent injunction against Dr van Onselen restraining further breaches of the deed and a declaration that he breached the deed by writing the article.
Network Ten argued that the article was in breach of the non-disparagement of the Deed because the article, and the above extracts. was disparaging towards Network Ten.
Dr van Onselen argued the non-disparagement clause wasn’t intended to capture statements he made in good faith that ‘generally discredited or lower[ed] the estimation of Network Ten (or its holding company)’. He said it was only intended to capture statements made in ‘bad faith that go beyond fair comment.’ He also argued:
- The article commented on information that was publicly available.
- Network Ten and Paramount’s standing and reputation was already damaged, so it could not be further damaged by the article.
- The non-disparagement clause is a ‘restraint of trade’ which is invalid because it impinged on Dr van Onselen’s right to free speech which is required for him to work as a journalist.
The Court held Dr van Onselen was in breach of the non-disparagement clause in the Deed.
The Court found the article as a whole was pejorative. Certain paragraphs were clearly drafted to be disparaging – not neutral or analytical. The Court held this was clearly the intention behind the language chosen to describe Paramount’s share price “plummeting” and Network Ten “limping along…”
Key takeaways for employers
The Court’s decision has the following lessons for parties agreeing terms of settlement which include non-disparagement clauses:
- Non-disparagement clauses are worth it but they won’t “muzzle [a party] entirely”. This means factual statements made in a neutral way (without any criticism or negative implications) made by ex-employees may not be enough to show a breach of a non-disparagement clause.
- Whether a negative comment is ‘disparaging’ depends on both the context of the statement and the specific language the statement uses – statements that are not neutral, analytical, or merely informative may be enough to breach a non-disparagement clause.
- Non-disparagement clauses (such as this one) generally will not operate as a restraint of trade. But it’s best practice to avoid drafting these clauses to broadly to give them a flavour of operating to as a ‘restraint of trade’. A non-disparagement clause should go no further than to protect your legitimate business interests.
Contact the Workplace Law team at Gilchrist Connell for assistance with non-disparagement clauses or any other workplace relations or safety law matter.