Amazon backpedals on trash-talking clause

The e-tailer backs down from requiring laid-off workers to sign "non-disparagement" agreements, which is unusual since the clauses are increasingly common.

3 min read
Amazon.com backed down Thursday from requiring laid-off workers to sign "non-disparagement" agreements, which is unusual since such agreements are increasingly common.

"We'd have been very unlikely to enforce this provision anyway, so it doesn't make sense to ask you to sign it," Vice President Bill Price wrote in an e-mail to the employees laid off Tuesday. Price noted that the paragraph barring employees from saying anything negative about the company is a standard provision in Amazon's separation agreements.

Local union organizers had urged the employees to refuse to sign the agreements, saying the agreements limit workers' rights long after they have left a company.

"The fact that these agreements are becoming more common among rank-and-file employees is an indication of the erosion of workplace rights," said Marcus Courtney, co-founder of the Washington Alliance of Technology Workers, which has been leading an organizing drive among Amazon's customer service workers.

"They may be increasingly common, but that doesn't mean they are increasingly right," Courtney said.

Experts say many New Economy and Old Economy companies use the non-disparagement agreements to head off bad publicity that can cause a stock to drop, or in the case of a high-tech start-up, spook investors.

"Everybody does that," said John Challenger, chief executive of Challenger, Gray & Christmas, a Chicago-based outplacement firm.

The more traditional and familiar nondisclosure agreements restrict employees from divulging company secrets, while non-compete agreements generally forbid employees from working for rival companies for a specified amount of time.

Most non-disparagement agreements are tied to financial incentives. Usually, neither party has to prove it has been damaged by a disparaging remark; instead, the agreement awards automatic cash damages for each proven derogatory remark. Such provisions help to limit breaches of the agreement, experts say.

"In most cases, people live up to these agreements," said Victor Schachter, an employment law attorney with Palo Alto, Calif.-based Fenwick & West. With the automatic or "liquidated" damages, non-disparagement agreements "become very easy to enforce," he said.

Amazon said workers who signed the agreements would get additional weeks' worth of severance pay and a cash bonus. All laid-off workers were automatically given a stake in a $2.5 million, stock-based trust fund that the company will distribute in 2003.

Price said Thursday that workers just needed to cross out the paragraph containing the non-disparagement material in the separation papers. They will still get the additional benefits.

Securing non-disparagement agreements is also more popular during a booming economy because workers change jobs more and companies can ill afford to have reputations as bad employers, said Gary Friedman, an employment attorney with Mayer, Brown & Platt in New York.

But Internet and e-commerce companies are more sensitive to bad publicity, and for good reason, Friedman said. Unlike their traditional counterparts that have established brand identities and reputations, e-commerce companies are much more malleable and vulnerable to negative reports.

"You don't need to be convinced to buy from Ford or GM like you would be from Amazon.com," Friedman said.

But Schachter said non-disparagement agreements may be unenforceable when they collide with workers' rights or public policy. The National Labor Relations Act, for instance, protects the rights of employees who are attempting to organize unions. Such employees may not be bound by non-disparagement agreements even if they sign them, Schachter said.

Likewise, employees may not be held liable for derogatory remarks if they involve something in the public interest, such as allegations of discrimination or public endangerment, Schachter said.