Legislators Introduce Bill Calling For Nationwide Ban On Non-Disparagement Clauses

from the the-'KlearGear-Law' dept

Non-disparagement clauses are one of the stupidest things any company can enact. In most cases, it's almost impossible to enforce them, no matter how artfully crafted. Most aren't. Most non-disparagement clauses found lying around the internet have been lazily copied and pasted from pre-existing bad ideas instituted by other companies.

On top of the legally-dubious aspects, there's the potential for severe backlash -- something that completely underscores the futility of these half-assed gag orders. Instead of heading off criticism, these clauses tend to invite negative reviews, often from internet denizens who've never patronized the company they're bashing at multiple review sites.

But still, these clauses persist. Up until recently, the court of public opinion has had to do most of the heavy lifting when it came to the enforcement of these clauses. Last September, California became the first state in the nation to ban non-disparagement clauses, threatening violators with fines up to $10,000 (for repeated violations).

Now, the federal government is taking another swing at bad companies hiding behind worse legal language.

Today, Representatives Darrell Issa, Eric Swalwell, Blake Farenthold, and Brad Sherman (two Democrats and two Republicans) jointly proposed in Congress the Consumer Review Freedom Act of 2015, which would ban non-disparagement clauses nationally. We at Public Citizen have litigated cases against the use of such clauses (for instance in the KlearGear case, as well as the Cox case). The proposed bill, which is similar to one introduced last session (by Democrats only), also prohibits a business from imposing a clause requiring consumers to sign away their intellectual property rights in communications about the business. We've challenged that type of clause, too. Today's bill authorizes enforcement by the Justice Department and by state attorneys general.
The proposed law includes fines that could add up to real money fairly quickly.
The Attorney General shall bring an action against any business who violates subsection (d) for a civil penalty of not more than $16,000 for each day that the business so requires the use of such a contract by a distinct person.
No company will be penalized for existing clauses but will be expected to remove them as soon as possible. One year after the bill's enactment, any clauses still in existence (or new clauses enacted past this point) will subject companies to daily fines.

As noted above, the bill would also prevent IP landgrabs by companies that allow them to issue DMCA takedown notices targeting critical review they now "own" thanks to the fine print on Terms and Conditions pages.

How effective a law like this will be in keeping the KlearGears of the nation in line is open to debate. Some shady companies may maintain their US "presence" for only as long as it remains beneficial to them. In the wake of the default judgment against KlearGear for its bogus non-disparagement clause, the company -- which had claimed to be located at multiple locations throughout the US over the past several years -- suddenly revealed itself to be a very French corporation and thus out of reach of the $350,000 fee.

Hopefully, the law -- if implemented -- will deter future companies from ambushing unhappy customers with egregious fees and damaged credit records. The fines mooted here should act as a deterrent, especially when pursuing these fines doesn't appear to hinge on the enforcement of these questionable clauses, but rather their mere existence.


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  • icon
    That One Guy (profile), 8 May 2015 @ 6:14pm

    A good start

    And one I hope makes it through intact enough to have some real teeth too it.

    Now, if we can only get the second half of protecting consumers from angry businesses, and get a strong federal anti-SLAPP law on the books...

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 8 May 2015 @ 9:00pm

    There are so many terrible things that get slipped into these non-negotiable contracts, this restriction on non-disparagement clauses can only be considered a good start. Non-negotiable contracts between unequal partners, such as between a corporation and a consumer or employee, are almost always an exploitation of the weaker (and less legalistically-savvy) "partner" in the deal.

    While consumers can typically walk away and go elsewhere, employment-related contracts are a different matter entirely, and often presented long after a person has been hired. Although many of the clauses in employment contracts are legally unenforceable, that doesn't prevent companies from forcing employees to sign away their rights if they don't want to be rapidly unemployed.

    But while 'unequal partner' contracts with draconian stipulations have been common for decades, enforcement has been rare. At least until KlearGear made it into a business model -- and for that, we can all be thankful.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 8 May 2015 @ 9:40pm

      Re:

      I agree. And what makes many of these "contracts" worse is that the consumer isn't given a physical copy of the contract for reference (wasn't there an issue in one of the KlearGear cases where the company used a clause that wasn't in there when the consumer actually bought the product?), does not actually sign anything and therefore may not be aware of the terms, and/or is not made aware of the "contract" until after the sale (many software agreements, fine print on the back of a ticket, etc.)

      While consumers can typically walk away and go elsewhere, employment-related contracts are a different matter entirely, and often presented long after a person has been hired.


      A company should be able to fire an employee who writes negative things about them, and assigning the rights of an employee's review to the employer is appropriate in *some* cases, so a blanket ban on that isn't appropriate. But it seems like there's a loophole where the employer can demand the employee sign something that says the employee can *never* say anything bad about them.

      Another thing I'd like to see, but has a much lower chance of passing than this, is the abolishment of mandatory arbitration clauses. If there's an actual dispute and both sides at that time want to use arbitration, great. But requiring someone to give up their right to a fair trial just to buy a product or get employment is not appropriate.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 8 May 2015 @ 11:49pm

        Re: Re:

        So basically you're okay with stomping all over freedom of speech and denying people work if they refuse to sign a contract stripping them of their basic human rights....

        You didn't really think this through did you...

        reply to this | link to this | view in chronology ]

      • icon
        Coyne Tibbets (profile), 9 May 2015 @ 1:03am

        Re: Re:

        Arbitration is fine, if it is fair arbitration. What that does is remove the random element of the jury, which is often problematic for both sides.

        What I would like to see changed with arbitration is that, instead of having to use the company's captive arbitrator/partner, such clauses require that the arbitrator must be acceptable to both sides; or, alternatively, that the arbitrator is responsible for losses due to unconscionable decisions.

        As it stands, arbitrators tend to be in a partnership with the company and are prone to decide in the company's favor even when the company is wrong.

        reply to this | link to this | view in chronology ]

        • icon
          art guerrilla (profile), 9 May 2015 @ 4:35am

          Re: Re: Re:

          well, that's the nub, isn't it ? there *is* (essentially) no 'fair arbitration'; it is a process for the benefit of korporate people, not real (you know, useless) people...

          given it is a system TOTALLY dominated by the korporations, 'arbitrators' are self-selected to be korporate suckups, otherwise they don't get called to 'arbitrate' next time...

          again, a theoretical 'fair' arbitration system may be possible, but not under the current regime dominated and controlled by korporations...

          reply to this | link to this | view in chronology ]

  • icon
    eaving (profile), 9 May 2015 @ 12:19am

    Freedom of speech doesn't mean what you seem to think it means. Your are entitled to not have the government in any way limit you speech. You are not entitled to there being no repercussion for what you say. Go around being openly racist and expect to be shunned. Go around saying your boss is a asshat and the product of generations of inbreeding and expect there will be a response. Your right to say these things, however, is still there.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 9 May 2015 @ 4:34am

      Re:

      Uhm, yeah it actually does give you the right to a bigot or an asshole. If your boss wants to fire you for talking shit then so be it. But signing a contract that says you won't say anything 'bad' (whatever that means) is a violation of basic human rights.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 9 May 2015 @ 7:25am

      Re:

      "Freedom of speech doesn't mean what you seem to think it means. Your are entitled to not have the government in any way limit you speech."

      You do realize that what these companies were doing was using government power via the courts to limit peoples' speech, don't you?

      reply to this | link to this | view in chronology ]

  • identicon
    Skeptacular, 9 May 2015 @ 5:25am

    Kleargear, in its slimy shyster strategies, has marginalized itself and destroyed its own reputation with its insouciant, heedless acts. Long after they had been left in shreds, their sporadic responses remained all bravado and no substance.

    The result of this new law will be a wholesale diminishing of the sorts of misdeeds Kleargear has become infamous for, and even should they themselves skirt the issue, their terms will be invalid in the States and the credit reporting agencies they used to give their intimidation clout, will no longer accept their directives at face value. At that point, they'll be literal legal deportees. When other countries begin to follow suit, they'll be no more.

    reply to this | link to this | view in chronology ]

  • icon
    Monday (profile), 9 May 2015 @ 6:46am

    What exactly is it?

    I had to look these things up, and they kinda read like a non-disclosure agreement... are these almost the same thing, 'cuz Imma going into a studio and the work that'll be done won't be out for a while (~ten months) and I don't want anyone talking about it, in any way.
    Will / is an NDA about to become a useless piece of paper? AND, forgive me if this comes off a little stupid... I've been up for two days writing. I'm slowly acquiring diminished capacities :D

    Cheers...

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 9 May 2015 @ 10:22am

      Re: What exactly is it?

      There's a huge difference between signing an agreement that you won't go opening your big fat mouth about the project you're working on and revealing the terrible work conditions or legally questionable things the company you're working for may be doing...

      reply to this | link to this | view in chronology ]

    • icon
      John Fenderson (profile), 9 May 2015 @ 10:43am

      Re: What exactly is it?

      An NDA is very limited in scope (by necessity, as broad ones tend to get ruled as invalid by courts). Typically, you are agreeing not reveal specific information that was generated by company actions for a limited period of time unless that information is publicly available elsewhere.

      That's a world apart from a clause that says that you cannot express your own opinion or publish your own writings that don't contain privileged company information.

      reply to this | link to this | view in chronology ]

  • identicon
    Mr. Oizo, 9 May 2015 @ 8:02am

    I don't know what a Non-disparagement clause is so I clicked on the first link, which brought me back to this story. Not very helpful.

    reply to this | link to this | view in chronology ]

  • icon
    OldMugwump (profile), 9 May 2015 @ 12:49pm

    Yet another invitation to sue

    Just what we don't need - yet another law that gets lawyers going suing people and imposing fines.

    What's wrong with just saying that such non-disparagement clauses aren't enforceable? Do we really need to threaten every business in the country with a fine of "up to" $16,000/day per customer?

    And, personally, I don't see anything wrong with an employer asking employees not to badmouth them publicly - at least as long as they're employed there.

    reply to this | link to this | view in chronology ]

    • identicon
      Isma'il, 9 May 2015 @ 1:37pm

      Re: Yet another invitation to sue

      "What's wrong with just saying that such non-disparagement clauses aren't enforceable? Do we really need to threaten every business in the country with a fine of "up to" $16,000/day per customer?"

      Yes, we NEED to threaten businesses who have the resources (money) to intimidate customers or members of the public into remaining silent about their dubious and/or illegal practices. History has shown that companies/corporations can and WILL abuse their power whenever they feel the need. Comcast is a great example of this. Corporations exist for one purpose only: To increase profit regardless of the social or environmental cost.

      If corporations and businesses exercise fair and just practices, like the kind private citizens are expected to adhere to, these laws and regulations wouldn't be necessary. The "Citizens United" decision by SCOTUS also exacerbates the problem.

      Bottom line: Corporations are NOT people and should not have the same rights as people do, or special rights, for that matter.

      reply to this | link to this | view in chronology ]

    • icon
      That One Guy (profile), 9 May 2015 @ 4:30pm

      Re: Yet another invitation to sue

      How many people do you think would know, or even think, that such clauses aren't enforceable, after reading a scary sounding TOS telling them that they are? After all, it says it on a site, they wouldn't put something like that in if they didn't have legal backing, would they?

      No, better to hit companies who try and slip such things in where it hurts, their wallets. That they'll pay attention to, a 'non-disparagement clauses aren't enforceable' law they'd just ignore, banking on people not knowing any better.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 9 May 2015 @ 6:34pm

      Re: Yet another invitation to sue

      "What's wrong with just saying that such non-disparagement clauses aren't enforceable?"

      People would still have to hire lawyers and bear considerable legal expenses just to have courts say the clauses aren't enforceable. The mere threat of legal expenses would be enough to chill speech.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 10 May 2015 @ 2:51am

    Yes, we NEED to threaten businesses who have the resources (money) to intimidate customers or members of the public into remaining silent about their dubious and/or illegal practices.

    Bullshit.

    That last thing that is "needed" is to put enforcement into the hands of the otherwise useless DAs.

    Because the DA is gonna pass on enforcement 'because there are murders/rapists/child molsters' who instead need the DA's attention.

    People would still have to hire lawyers

    Bullshit again. You can always represent yourself.

    and bear considerable legal expenses

    Alas, self representation needs a person who'll spend the time on the self representation....and that time does have a cost.

    reply to this | link to this | view in chronology ]

    • icon
      That One Guy (profile), 10 May 2015 @ 4:42am

      Re:

      Because the DA is gonna pass on enforcement 'because there are murders/rapists/child molsters' who instead need the DA's attention.

      Please, like they'd pass up an easy win against any company stupid enough to still have a non-disparagement clause once the year 'grace period' was over.

      It's not like it would take any time at all to do, simply show up at court, present evidence that the company has the clause and how long they've had it, and the fine gets handed out. In and out in less than an hour, and the DA gets to rack up a win for their record.

      Bullshit again. You can always represent yourself.

      Of course, because your average citizen can easily drop everything to file legal challenges against a company trying to silence them with significant monetary and/or legal threats for daring to say something bad about the company, and given law is just such a simple field to grasp and understand, I'm sure they'd have no trouble managing such an uncomplicated process, and would have no trouble at all going toe-to-toe against lawyers who go to court for a living. /s

      Alas, self representation needs a person who'll spend the time on the self representation....and that time does have a cost.

      Self-representation which takes time, money, and knowledge that most people don't have, or can't spare. Easier by far to let the AG of a given state score an easy win against sleazy companies, rather than force individual people into a 'fight' they would be woefully unprepared for, and that's going to cost them significantly even if they win.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 11 May 2015 @ 2:26am

        Re: Re:

        Funny how copyright fanboys will readily defend prosecuting grandmothers whose IP addresses were found downloading pornography, insisting that these things take precedence over murder, child rape and molestation.

        But when it comes to large companies suing, charging and otherwise ruining people who disagree with them, it's all "Nope, nothing wrong here, courts will never deal with this, you consumers are crazy".

        reply to this | link to this | view in chronology ]


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