On February 1, 2016, the U.S. District Court for the Eastern District of Pennsylvania issued an opinion in Garcia v. Scientifix, LLC, which allowed an employee to proceed with claims of breach of contract and defamation against her former employer.
In Garcia v. Scientifix, the employee’s claim for breach of contract arose out of an existing settlement agreement between the parties. The settlement agreement was the result of the employee’s previous claims that Scientifix and several of its corporate officers had violated the Pennsylvania Wage Payment and Collection Law (“WPCL”). The settlement agreement contained a non-disparagement clause under which each party agreed that it would not “communicate, publish or release, indirectly or directly, in any medium or format, negative or disparaging comments” about the other.
In connection with a Request for Proposal the employee issued on behalf of her new employer, one of Scientifix’s corporate officers, who was a party to the settlement agreement, sent an email to the employee’s new employer stating that Scientifix would not provide it with pricing information if the employee was involved in the project as he did not “trust her ethics.” The officer further alleged that the employee had shared Scientifix’s pricing information with competitors in the past.
The defendants argued that the non-disparagement clause was limited to negative and disparaging comments arising out of the prior WPCL action or made during the employee’s employment with Scientifix. The Court examined the language of the clause and rejected this argument, stating it found “that both plaintiff and defendants intended that neither will communicate or publish any negative or disparaging information about the other. Period.” The Court also found that the contents of the email were capable of defamatory meaning. Accordingly, the employer’s motion to dismiss was denied as to both the breach of contract and defamation claims.
Lesson for Employers
Non-disparagement clauses are often included in settlement and release agreements. It is important that employers review any non-disparagement language carefully to understand the obligations such language may create. While an employer may believe that the scope of a non-disparagement clause is limited to certain situations or periods of time, the language of the clause may belie this assumption and subject the employer to liability.
Leech Tishman’s Employment Practice Group has extensive experience in drafting and reviewing settlement and release agreements and is available to assist your organization to ensure its representatives understand the obligations that may be created under these agreements.
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