Settlements often come with strings attached — especially confidentiality and non-disparagement agreements.
Lately, I have been seeing more defense lawyers requesting a confidentiality and non-disparagement clause inside the settlement agreement. This is standard for most ride-share companies, if they are settling a case; however, I am seeing them being requested more often, especially on high-value cases.
Confidentiality and non-disparagement provisions basically prohibit the injured person from discussing their settlement with anyone (except maybe a court or other limited circumstance). Some bad actor corporations will request confidentiality as they do not want their bad behavior to be public knowledge or used against them in future cases. I am not discussing that form of confidentiality (a more detailed topic). Just imagine a basic car crash but with serious injuries, and the defense is asking you to sign a confidentiality and non-disparagement clause — these clauses can carry significant legal and financial consequences.
Advantages: These clauses can enhance settlement value by providing the paying party with finality, reputational protection, and closure. They also protect the claimant’s privacy by keeping the facts, amount, and terms of the resolution out of the public domain and allows the injured person to truthfully tell snooping friends and relatives that they cannot discuss how much money they received or the details of the settlement.
While the discussed clause technically prohibits discussing with anyone, the main thing the paying party wants is to preclude somebody from posting on social media or some other public forum the details of their settlement.
Risks and Considerations: Signing these agreements places enforceable restrictions on what you can say — publicly or privately — about the incident, the parties, and the outcome. Breach can trigger liquidated damages, repayment obligations, and additional litigation.
There may also be tax implications. In certain circumstances, portions of a settlement allocated to confidentiality or non-disparagement consideration have been treated as taxable income, even where the underlying injury damages are not. The IRS scrutiny highlighted in the Dennis Rodman matter is a well-known example of how allocation and characterization of settlement funds can materially affect tax exposure. (But there is a way around that).
Bottom line: these provisions are not boilerplate. They are negotiated terms with long-term legal and financial impact. Always have settlement language carefully reviewed before signing.