Welcome to today’s episode of the Business Bites podcast. I am Rachel Brenke, of course, and I want to talk to you guys a little bit about something that recently happened within the last year here in the United States. It is a law that’s been enacted to kind of help protect consumers a little bit. You know, the government and the laws want to keep the business owners on the up and up and make sure that we are held to a higher standard, as I believe that we should be. But I am starting to see in a lot of Facebook groups and talk on the interwebs that people don’t really, and when I say “people” I mean entrepreneurs, don’t really understand how non-disparagement clauses or trying to restrict your clients from leaving a review for you that may be negative, they don’t really understand why this law is enacted and don’t really understand how it impacts you.
So essentially the little legal citation crash course for you guys. Last December it was signed into law, The Consumer Review Fairness Act of 2016. This is legislation which passed both the House and Senate at the start of December, and it makes certain clauses of a formed contract void if it prohibits or restricts an individual from engaging in a review of the sellers goods, services, or conduct. I’m gonna stop right here to say, non-disparagement clauses are allowed in situations such as settlement-type agreements. What we’re talking about here is an initial services agreement such as a photographer would have with a client, a logo designer would have with a client. Whatever your business is and you’re an initial services contract that you are executing this agreement to create a relationship with you guys, between the two of you, you cannot have what is called a non-disparagement clause or a gag clause.
These are the types of clauses that have been designed to discourage customers form posting reviews on the internet. The goal with this legislation was a desire to protect the rights of the consumer. Essentially it’s because they found that these clauses, these gag clauses, are non-disparagement, were discouraging customers from actually posting honest reviews that criticized the company. And oftentimes it was imposing a financial penalty if they did that. Something to keep in mind is that the Consumer Review Fairness Act doesn’t just cover reviews published in online media, rather is actually referring to a review in general and also empowers the Federal Trade Commission and the FTC in the states to be able to take legal action in addition to individual customers.
So it really remains to be seen how involved the FTC or the states will be [inaudible 00:02:58] businesses that are unfairly seeking to limit negative reviews of their products or services by using these non-disparagement or gag clauses in initial services contracts, but something that will remain to be seen. But what is really most important is what does this mean for your business? I need all of you guys to go back and, or just pick up a phone and call your attorney to make sure that this has been fixed for you. But you may need to revise your initial services contracts. If they were drafted with a non-disparagement or gag clause, it may be tipped off with things like a no review policy, non-disparagement, or agree to not disparage heading, basically anything that implies communicating something negative about your companies comes with a punishment.
And, again, if you’re unsure, have your attorney review it. In fact, I actually quite enjoy that they have enacted this legislation for the reasons that they did. It was to allow for people to give honest feedback about companies. But I also feel like it’s putting the ball in you guys’ court. It’s requiring you guys to think in advance your policy for handling negative reviews online. Because think about it. You want to think to yourself, “Can you turn a negative into a positive through great customer service?” Or can you use the opportunity to demonstrate a positive attitude to your clients? Because defensiveness and legal action is not always the best policy for responding to negative feedback and also by restricting or attempting to restrict people ahead of time, to me and my opinion, is more of a red flag about you as a business owner, than it really says …
And it makes me question whether or not I want to go into business with you at all. So not only do you guys need to review your contracts, make sure there’s no non-disparagement clauses in there ahead of time, keeping in mind that settlement agreements do allow for these. They do allow for confidentiality and some limitations on the non-disparagement. But overall we’re talking about the initial services contracts. So make sure that those are revised. Make sure that you do not have those in there. They are no longer valid to be used, and also consider what is your policy gonna be for handling negative reviews that do occur.
You want to come up with a consistent way, especially if you’re not the person that’s providing the customer service in your business. A consistent way that your business is going to respond, because remember every response and communication that goes out is a voice, and it speaks to the brand of your company, and that’s especially true when it comes to matters such negative reviews or potential litigation or legal issues. But sometimes negative reviews just aren’t true. I mean, so consider, what if you have a client or a competitor who is seeking to disseminate a negative review that contains lies or that is designed to damage your business? I mean, really, maybe it’s not a consumer who’s just trying to let off some steam and tell what happened.
Well, the first amendment, I mean, you know the one about free speech, protects your rights to free expression. However, however, I say this multiple times, however, it does not shield the speaker from repercussions should that speech constitute slander, defamation, or libel. This legislation does not do anything to prevent you, the business owner, from pursuing a legal remedy against someone if that speech should constitute the slander, defamation, or libel. If the bad review is not factual, then the business entity can still sue. However, if it’s a bad review because you provided a faulty good or service that was not as you promised, then you cannot contractually require, as we’ve established, that the customer refrained from offering a negative review or at least you cannot claim damages or some form of penalty applies if they do.
So make sure you guys go back, check your contracts, spread the word and let people know that this is no longer the case. You cannot do this. You shouldn’t even want to do this. You should want to allow for the free flow of communication from consumers. It’s how we’re gonna be better as business owners. We want to protect our consumers and ourselves. Give the best service possible. Make sure that you are the straight and narrow, and since you’re gonna be having your contracts reviewed for this situation anyways, go ahead and do your yearly review with your attorney. Let them know any policies or procedures that may have changed in your business as well as pricing. And they can also do any updates on changes that may have happened within your state as well.
Rachel Brenke is a lawyer, author and business consultant. She is currently helping professionals all over the world initiate, strategize and implement strategic business and marketing plans through various mediums of consulting resources and legal direction.
Hi, I’m Rachel Brenke
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