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Non-disparagement provisions are commonplace in today's settlement and separation agreements, with employers often seeking the broadest protection against disparagement. A recent decision from a New York federal court, however, suggests that such provisions may have their limits in connection with wage and hour settlement agreements. Even a non-disparagement provision that is mutual and agreed upon by all the parties may be struck down if it is so overbroad as to violate the FLSA's compliance objectives according to the court in Santos v. El Tepeyac Butcher Shop Inc.
In Santos, the plaintiffs alleged unpaid overtime wages in violation of the FLSA. The parties thereafter reached an agreement on settlement terms that included a mutual non-disparagement provision. The court rejected its inclusion, however, finding it overbroad because it barred "any negative statement" and made no carve out for truthful statements about the plaintiffs' experiences litigating the case. The court concluded that such a provision would violate the FLSA's compliance objectives by denying the plaintiffs the ability to inform their co-workers about the settlement and their rights under the statute.
While the court struck the parties' non-disparagement provision, it did not go so far as to hold all non-disparagement provisions as per se invalid. Employers, at least those operating in the Southern District of New York, should continue therefore to include non-disparagement provisions in their FLSA settlement agreements, but they should also consider drafting them carefully to avoid the problem the employer in Santos faced. At a minimum, employers should consider including a carve out permitting plaintiffs to make statements about their experiences litigating the case.
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