Non-Disparagement Clause Enforced against Former Employee

Winnie Ng and Benjamin Harris, Linklaters

The Court of First Instance in Hong Kong has recently held, in City University of Hong Kong v Hans Richard Mahncke [2015] HKEC 1557, that a clause preventing an employee from making disparaging remarks about his former employer and its employees is valid and binding on the employee. This is the first time such a clause has been the subject of a Hong Kong court judgment in an employment context, and is a significant step forward in protecting employers’ interests.

The Decision

The defendant, Dr. Mahncke, was a legal academic, employed by the plaintiff, City University Hong Kong (the “University”). Under the terms of a separation agreement (the “Agreement”) signed between Dr. Mahncke and the University, Dr. Mahncke agreed (in addition to a release in favour of the University and its council members, staff and students) not to make any disparaging statement about the University, or about any officer, employee, agent or council member of the University.

The University claimed that Dr. Mahncke breached the Agreement after signing it and accepting the settlement payment made by the University thereunder.

In the absence of Dr. Mahncke at the hearing, the Court held that the University was entitled to a range of relief, including a declaration that the Agreement (and a deed poll attached to it) were valid and binding on Dr. Mahncke. The Court also ordered a number of injunctions restraining Dr. Mahncke from making or pursuing claims against the University and three of its employees, and ordered Dr. Mahncke to pay the University’s costs.

Most significantly however, the Court ordered an injunction restraining Dr.Mahncke from making, procuring or arranging to make any statement that was or would be disparaging of the University or its past or present officers, employees, agents or council members by any means whatsoever.

Positive Outcome for Employers

This decision gives employers the assurance that a well-drafted non-disparagement clause can be an effective tool in managing the consequences of the departure of an employee, particularly where acrimony is involved. Non-disparagement clauses are not covered by the Employment Ordinance (Cap. 57), so decisions such as this are useful in providing guidance on their enforceability.

When drafting a non-disparagement provision in a separation agreement, employers can specify either the names of the persons/entities or a class of persons (such as directors) whom the employee must not disparage. Carefully drafting these types of clauses will be particularly important for separation agreements signed on or after 1 January 2016, as third parties may have a right to enforce a non-disparagement clause under the Contracts (Rights of Third Parties) Ordinance (Cap. 623) after it has come into force. It should, however, be noted that this Ordinance does not generally confer a right on a third party to enforce a term of an employment contract against an employee.

Employers who seek to enforce a non-disparagement clause should also be aware of the key difficulties in doing so (eg, proving that a breach has occurred and that the breach caused the employer to suffer loss or damage (if damages are being sought)).