The Gag Clause Sitting in a Lot of Fee Agreements Just Became an Ethics Problem
If your firm's retainer agreement, or the letter you send when a client disputes a bill, includes language asking the client not to say bad things about the firm, the North Carolina State Bar has a proposed opinion worth reading before you send another one.
Proposed 2026 Formal Ethics Opinion 2, returned to committee in April 2026, walks through five scenarios that turn up constantly in small-firm billing practice: refunding a disputed fee, settling a fee complaint, and writing retainer agreements. The short version is that a lawyer can't use a non-disparagement or release clause the way a lot of form documents already do.
What the proposed opinion actually says
Broken down, the reasoning goes like this:
- If the fee was unearned, refund it, no strings attached. A lawyer can't condition an unearned-fee refund on the client signing a release of claims.
- If the fee is genuinely disputed, a release can be part of a settlement, but only with safeguards. Rule 1.8(h) requires telling the client in writing to consider independent counsel and giving them time to do it before they sign anything.
- A non-disparagement clause in a fee dispute settlement has to be narrow. It can't stop the client from filing a State Bar grievance or participating in a disciplinary proceeding, and it can't be presented as a take-it-or-leave-it condition of getting their money back.
- A non-disparagement clause has no place in the retainer agreement itself. The opinion points to the federal Consumer Review Fairness Act, which already bars businesses from putting non-negotiable gag clauses in standard form contracts, and applies that same logic through Rule 8.4(d) (conduct prejudicial to the administration of justice).
- A lawyer can't condition representation on one, or try to enforce one that's already out there. Same reasoning applies both ways.
None of this is exotic. The Consumer Review Fairness Act has been federal law since 2016, and the FTC has brought enforcement actions against an HVAC company, a flooring company, and a horseback riding outfit for the exact same clause type. What's new is a state bar spelling out, in writing, that fee agreements aren't exempt just because a lawyer wrote them.
Why this shows up more than people expect
Non-disparagement language rarely gets added on purpose. It usually rides in on a template: a retainer agreement copied from a prior firm, a fee dispute settlement letter drafted years ago and reused every time, or boilerplate a practice management vendor shipped by default. Nobody sits down and decides to add a gag clause. It's already there, and it gets sent again every time someone reuses the document.
That's the part worth paying attention to operationally. The risk isn't one bad decision, it's a document that gets sent on autopilot. A fee dispute comes in, someone pulls up last year's settlement template, fills in the numbers, and sends it, without anyone re-reading the boilerplate against a rule that changed since the template was written.
What to actually check
Two documents are worth a five-minute read this month:
- Your standard retainer or engagement letter. Search it for the words disparage, negative review, or any clause about public comments. If it's there, it needs to come out, not get narrowed.
- Whatever letter or agreement your firm sends when a client disputes an invoice. If it includes a release, confirm it also includes the Rule 1.8(h) language advising the client to consider independent counsel, and that any non-disparagement language (if there is any at all) doesn't touch the client's right to file a grievance.
This is also a decent example of where a firm benefits from having something read outgoing documents against a known rule set before they go out, without that something being allowed to send anything itself. A settlement letter is exactly the kind of document where a second, careful read catches a stale clause a busy staff member would otherwise miss, and where the actual sending still has to stay a decision a person makes.
The opinion is still proposed, not final, so watch for the adopted version. But the underlying federal law it leans on isn't proposed. It's been enforceable since 2016.
Sources: North Carolina State Bar, Proposed 2026 Formal Ethics Opinion 2; Federal Trade Commission, enforcement actions under the Consumer Review Fairness Act.