Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
Contents
- Why Is Non Disparagement Important for Australian Businesses?
- Is a Non Disparagement Clause Enforceable in Australia?
- What Should a Non Disparagement Clause or Agreement Include?
- When Should You Use a Non Disparagement Agreement?
- Non Disparagement vs. Non-Disclosure (Confidentiality) Agreements
- What Legal Documents Might You Need?
- Are Non Disparagement Clauses Suitable for Startups and Small Businesses?
- Key Takeaways
Considering including a non disparagement agreement in your business contracts, or wondering if you need a non disparagement clause to protect your company’s reputation? In today’s highly connected business environment, what people say about your business - online and offline - can have a major impact on your brand, client relationships, and overall success. While you may trust your business partners, employees, or departing clients, disputes or misunderstandings can sometimes lead to damaging public comments. That’s where a non-disparagement agreement comes in.
If you want to safeguard your business from negative publicity or reputational risks, it’s important to understand how non disparagement clauses work in Australia, when they’re appropriate, and how to ensure they’re both effective and enforceable. In this guide, we’ll walk you through the basics of non disparagement agreements, how they fit into the broader landscape of contracts and reputation management, and what legal considerations you’ll need to account for when using them in your business.
Let’s break down the essentials so you can protect your hard-earned reputation and operate with confidence.
What Is a Non Disparagement Agreement?
A non disparagement agreement is a contract provision (or sometimes, a standalone contract) where one or both parties promise not to make negative or harmful statements about the other. In plain English: you agree not to “badmouth” each other, whether publicly or privately, during and often after your business relationship ends. These agreements are commonly included in employment contracts, settlement deeds, partnership agreements, and even supplier or client contracts, especially when the reputation of one or both parties is a key asset. A non disparagement clause can be mutual (both sides agree not to disparage each other) or one-sided (only one side is restricted).How Does a Non Disparagement Clause Work?
A non disparagement clause typically spells out what is considered “disparagement.” This usually includes statements - verbal, written, online, or even gestures - that could damage the other party’s reputation, business, or goodwill. These are broader than defamation (which is covered under Australian law), so sometimes even true statements, if negative, might breach a non disparagement agreement. For example, you might include a clause in an employment separation agreement that states: “The employee agrees not to make any negative or disparaging comments about the employer, its directors, staff or products, in any medium, including social media, emails, or discussions with third parties.”Why Is Non Disparagement Important for Australian Businesses?
Maintaining a positive reputation is vital - whether you’re dealing with employees, contractors, clients or partners. Negative comments, particularly in the age of social media and online reviews, can spread rapidly. Even if a complaint is resolved, the effects of a single bad post or negative review can have lasting consequences for your company’s image and future business prospects. Non disparagement agreements are relevant in a variety of scenarios, including:- Employee exits or redundancies, especially at a senior level
- Resolving disputes with customers or business partners
- Settlement agreements, where confidentiality and reputation are critical
- Founders or shareholders leaving a startup
- Franchisees leaving the franchise network
Is a Non Disparagement Clause Enforceable in Australia?
This is a key question for Australian business owners - and the answer is: Yes, a non disparagement clause can be legally binding in Australia, so long as it is clearly worded and operates within the law. However, there are important limitations to keep in mind.- No Gagging of Whistleblowers or Illegal Activity: A non disparagement agreement cannot stop someone from making legitimate complaints (for example, to a regulator, the Fair Work Ombudsman, or reporting criminal conduct). Australian laws around whistleblowing and public interest disclosures take precedence.
- Clarity Is Key: The clause should be drafted precisely - vague or overbroad language may not be enforceable. For example, it should define what types of communication, media, or subject matter are included, and whether the agreement is mutual.
- Defamation Law Still Applies: A non disparagement clause doesn’t override your rights (or obligations) under Australian defamation law. If someone publishes false and damaging information, legal remedies may still be available under defamation statutes, whether or not a contract exists.
- Consideration Must Exist: Just like any contract, there must be consideration (something of value exchanged) for a non disparagement clause to be enforceable. In many cases, this is the final pay-out or other settlement terms.
What Should a Non Disparagement Clause or Agreement Include?
A robust non disparagement clause should cover:- Clear Definition: Explain what “disparagement” means - e.g., negative or adverse statements, regardless of whether they’re factually true or false.
- Scope: Who and what does it cover? (Company, directors, products, staff, clients, services, etc.)
- Medium: Specify if it applies to spoken, written, online, or social media comments.
- Exceptions: Allow for statements required by law, whistleblower protections, or truthful statements to government authorities.
- Duration: How long does the restriction last? During employment/engagement and for how long after?
- Remedies: What happens if the clause is breached? You may specify damages, injunctive relief (court order to stop the statements), or termination of remaining benefits.
When Should You Use a Non Disparagement Agreement?
Not every business relationship requires a non disparagement clause, but there are clear circumstances when it’s a smart risk-management step.- Employee Terminations: You want to protect your brand, client relationships, and internal morale when an employee leaves (especially if things ended badly). See our guide to ending an employment relationship.
- Settlement of Disputes: When you’re settling a complaint or potential claim (with a staff member, customer, or business partner), a non disparagement clause can form part of your waiver, release, or settlement deed.
- Commercial Partnerships: Agencies, suppliers, or independent contractors who have access to your clients, business operations, or sensitive information may be required to sign a non disparagement agreement when the arrangement ends.
- Franchise Brands and Franchisees: When a franchisee is leaving a system, both sides have a strong interest in maintaining a positive reputation. Read more on Franchise Code requirements and considerations.
Non Disparagement vs. Non-Disclosure (Confidentiality) Agreements
While they seem similar, non disparagement agreements and non disclosure agreements (NDAs) serve different purposes:- Non Disparagement: Focused on preventing damaging statements about a person or business.
- Non-Disclosure: Aims to stop the sharing of confidential or sensitive information (trade secrets, client lists, financials, etc.).
Legal Requirements and Compliance in Australia
Are There Any Legal Risks With Using a Non Disparagement Clause?
Yes - if not drafted carefully, a non disparagement clause can be unenforceable or, worse, expose your business to scrutiny under Australian Consumer Law (ACL), unfair contract terms, or employment laws. Here’s what to watch out for:- Fair Work & Public Policy: Clauses that unfairly restrict employees or independent contractors can fall foul of workplace laws. Don’t try to silence legitimate complaints to workplace regulators or health and safety authorities.
- Australian Consumer Law: If the clause attempts to restrict genuine product reviews, you could breach the ACL. Businesses cannot use contracts to gag consumers from posting honest reviews about products or services (read more on ACL rules).
- Unfair Contract Terms: For small business and consumer contracts, harsh or one-sided clauses could be struck down if they’re considered unfair under the ACL. If in doubt, have a legal review of your contracts before use.
Are There Alternatives?
Instead of, or in addition to, a non disparagement clause, you may consider:- Mutual Release and Confidentiality Agreements: These are broader settlement tools covering various aspects of the departure or dispute.
- Code of Conduct or Social Media Policies: For current employees, it is wise to have staff policies in place around public comments and social media activity.
- Dispute Resolution Clauses: Including a process for dealing with disputes before they escalate to public complaints.
What Legal Documents Might You Need?
Depending on your business circumstances, you might need one or more of the following legal documents in addition to your non disparagement agreement:- Employment Agreement: Outlines the rights and obligations of your staff (can include non disparagement and confidentiality provisions).
- Deed of Release or Settlement Deed: Used at the end of an employment or commercial relationship, settling claims and containing key clauses like non disparagement.
- Non Disclosure Agreement (NDA): Protects trade secrets and sensitive information shared with staff, contractors, or partners.
- Service Agreement or Contractor Agreement: For independent contractors, setting expectations - including post-engagement behaviour.
- Social Media or Communications Policy: Internal rules for staff or representatives about what can be said publicly about the business.
- Shareholders Agreement: In startups or joint ventures, clearly spells out what founders and shareholders can (and cannot) say about the company after their exit.
Are Non Disparagement Clauses Suitable for Startups and Small Businesses?
Absolutely! While non disparagement agreements are common in larger businesses, they are also valuable for small businesses and startups - especially where the personal reputation of the founder or key staff is the heart of the business. Early-stage businesses may be exposed if a founding team member, early customer, or dismissed employee takes to social media with negative comments. A well-drafted clause (ideally as part of your exit, partnership, or contractor agreements) can help prevent disputes from spilling into the public sphere.Key Takeaways
- A non disparagement agreement prevents parties from making negative statements that could damage your business reputation.
- Non disparagement clauses can be included in employment, settlement, partnership, or commercial agreements, and should be carefully tailored for clarity and fairness.
- These clauses are enforceable in Australia - within limits. They cannot override public interest, whistleblower, or consumer rights laws.
- Poorly drafted or overreaching clauses can be struck down or even breach Australian Consumer Law, so professional legal advice is critical.
- Non disparagement agreements are often used alongside non disclosure (confidentiality) agreements for comprehensive protection.
- Having the right legal documents - including policies, NDAs, and employment agreements - will help you manage exit risks and protect your business from reputational harm.
- Legal experts can help you create effective, compliant, and industry-appropriate non disparagement clauses as part of your business contracts or settlement agreements.
