California wants to stop companies from retaliating against customers who leave bad reviews. Last Tuesday, Governor Jerry Brown signed a law that bans them from adding “non-disparagement” clauses to their terms of service. Such clauses could let caterers, hotels, or other businesses fine customers who write negative reviews on places like Yelp and TripAdvisor. While it’s not unusual for employees to sign a non-disparagement clause, it’s not clear how common this practice is for customers. MarketWatch cited several examples in a piece last month, reporting that a number of online retailers, dentists, and others had attempted to fine or silence critics by pointing to sections buried in their contracts and terms of service. A hotel in Hudson, NY recently made the news for threatening to fine guests $500 for every negative review.
A new California law will outlaw “non-disparagement” clauses that prevent customers from posting negative reviews online. Writing a Yelp review just got a whole lot safer thanks to a new law, signed by California governor Jerry Brown, which prohibits companies from going after customers who write negative reviews of their services. The law, which appears to be the first of its kind in the United States, prevents companies from including “non-disparagement” clauses in their contracts with customers. The L.A. Times explains these clauses are often hidden in long user agreements that many consumers unwittingly agree to when using a service. From now on, California businesses that try to enforce such a provision will face a civil penalty of $2,500 for their first offense, $5,000 for each repeated infraction, and an additional $10,000 fine for “a willful, intentional, or reckless violation” of the statute. This type of legislation might seem unnecessary since forcefully silencing one’s customers seems to be a clear violation of the First Amendment. However, that hasn’t stopped a number of American companies from trying to mute criticism using just the type of contracts this bill seeks to outlaw. MONEY’s Brad Tuttle previously reported on a series of businesses that shake down their dissatisfied clients. One upstate New York inn threatened to bill customers $500 per negative review if they hosted an event at the location and any guests took their grievances online. Another couple was pursued by a collection agency after violating an (arguably non-existent) non-disparagement clause by slamming the online retailer KlearGear on RipoffReport.com. Thankfully, a federal judge ruled in the customers’ favor.