Tuesday, July 23, 2019

Drafting that Nondisparagement Clause



New ImageAlthough employers are more resistant to agreeing to mutual nondisparagement obligations after employment than they used to be, such agreements remain important in one situation: where ending the relationship is conditioned on a good reference and no bad mouthing of the soon-to-be-ex-employee.

But there are complications when it is the corporate employer who is being gagged as compared to the more common situation where an individual employee agrees not to disparage her former employer. The problem arose in Bissette v. University of Mississippi Medical Center, where Garth Bissette, a professor at the Medical Center, ran into difficulties leading to possible detenuring. Before UMMC’s review process was completed, Bissette entered into a settlement agreement providing for his departure but containing a clause requiring UMMC to give Bissette a favorable recommendation and also requiring mutual non-disparagement and confidentiality.

As you might guess, Bissette was later bad mouthed by one Woolverton, a UMMC employee (who hadn’t been told about the agreement). There wasn’t much doubt that Woolverton’s comments were disparaging: he allegedly attended a NIH conference at which he told participants from other universities that, among other things, Bissette had no professional accomplishments during his tenure, did nothing with his scholarship or professional service, and was often intoxicated after returning from lunch.

Although Bissette brought several claims, the most interesting was the breach of contract cause of action. The Mississippi Court of Appeals first found that the individual defendants were not bound because of the wording of the clause in question, which  provided that “This agreement is being entered into …. between [....UMMC] for the benefit of itself, all related corporate entities, its and their officers, directors, employees, agents, successors, and assigns . . . . and Dr. Garth Bissette.” According to the court, “employees” such as Woolverton were not individually bound by the agreement since they were merely its third-party beneficiaries. Under this construction, UMCC had not made any promises as to them not disparaging Bissette. Had the University agreed “on behalf of” such persons, the result might have been different. But the court also indicated that reading the commitment so broadly would lead to odd results, such as embracing “even a receptionist” at a UMMC clinic.

This is all pretty odd.  How could an agreement between A and B bind C contractually? There’s no indication that UMCC was acting as its employees’ agent.  Plus, of course, Woolverton didn’t even know about the settlement! The more sensible reading of the clause is that UMCC is promising that none of its employees, etc. will bad mouth Bissette. And the confidentiality clause seemed to confirm this: it permitted UMMC to disclose to those “necessary to carry out the terms and conditions of this Agreement.”

No matter: the court also rejected the argument that UMCC was vicariously liable by virtue of Woolverton’s acting as its agent (even if he were not personally liable). “Employee” is not synonymous with “agent,” and there was no evidence that Woolverton was furthering UMMC goals at the conference, so the university wasn’t responsible for what he said. That may be true (although the court’s stress on the fact that NIH (not UMMC) paid for the conference seems dubious given how often university work is grant -funded), but if UMCC had committed that none of the named persons would disparage Bissette, it’s not clear that such a promise should be read to be limited to actions taken on the employer’s dime and time.  

The net effect was that Bissette walked away with considerably less than he had thought he’d gotten for not continuing to fight his detenuring. Even the “good recommendation” Bissette bargained for seems of doubtful value in light of this story. The lesson for plaintiffs’ attorneys looking for this kind of protection is to work through more carefully exactly what it means for an organization not to disparage or at least the steps the organization will take to inform its employees about what is expected of them.

And there are broader issues this scenario raises. Practically speaking, anyone familiar with academia might doubt both the efficacy of a promise that no one will tell tales out of school at scholarly conferences and the ability of a plaintiff to prove damages should such a breach occur. More theoretically, there’s the question of whether gag clauses really are a societally good idea: what if Bissette really was frequently intoxicated after lunch?  Finally, there’s a not insignificant policy question of whether employers, especially public ones., should be free to constrain their employees’ speech, especially when not acting within the scope of their employment.

CAS

Thanks to Kamille Perry, Seton Hall class of 2021.

https://lawprofessors.typepad.com/laborprof_blog/2019/07/drafting-that-nondisparagement-clause.html

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