Positive business reviews on search engines such as google and yelp are something that every business strives to receive. Too many negative reviews, on the other hand, may cause business to suffer and adversely impact profits. How does a business control the negative reviews? Some businesses have tried to safeguard the flow of negative reviews by providing non-disparagement clauses within either their form contracts or their online terms and conditions.
In January of 2023, California passed legislation codified at California Civil Code section 1670.8, known as the Yelp law, prohibiting businesses from using non-disparagement clauses in contracts for the sale or lease of consumer goods or services.
Section 1670.8(a) provides:
- A contract or proposed contract for the sale or lease of consumer goods or services may not include a provision waiving the consumer’s right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.
- It shall be unlawful to threaten or to seek to enforce a provision made unlawful under this section, or to otherwise penalize a consumer for making any statement protected under this section.
- Any waiver of the provisions of this section is contrary to public policy, and is void and unenforceable.
Any person who violates the Yelp law faces a civil penalty of up to $2,500 for the first violation and $5,000 for each subsequent violation. In addition, a consumer or public prosecutor can recover a penalty of up to $10,000 for any willful, intentional, or reckless violation.
California’s law is based on the Federal Consumer Review Fairness Act, or CRFA, which makes it illegal to include language in form contracts that restrict an individual’s right to publish a review or make statements about good, services, or the conduct of a seller.
The Yelp law aims to protect customers from restrictions to their freedom of speech that are typically hidden in form contracts by invalidating any non-disparagement clauses. Despite these limitations, companies are not without protection. Businesses can still take legal action against online reviewers that are fake and/or customers who post content that is considered defamatory (either libel or slander), false and misleading content, content that is unrelated to the goods and services rendered, or any other content that is illegal and warrants removal.
It is important to note Section 1670.8 applies to any company or persons conducting business in the State of California. Therefore, companies should review form contracts, online terms and conditions pertaining to non-disparagement and consider either removing it in its entirety or consider language excluding the State of California.
Consider consulting with legal counsel to ensure that your company practices and policies are in compliance with your state laws related to online reviews.