Employment / 2 min read
The National Labor Relations Board (“NLRB”) recently ruled that confidentiality and non-disparagement clauses in severance agreements violate the National Labor Relations Act (“NLRA”). As a result of this violation, the NLRB declared the entire severance agreement null and void.
The effect of this decision could be enormous as the decision applies to all employers whether their employees are union members. The ruling, however, will not affect severance agreements involving managers or supervisors, whose labor rights are not protected under the NLRA. In light of this ruling, employers should approach rank-and-file employee severance agreements with care.
The NLRB explained that offering a severance agreement to a rank-and-file employee which contains a confidentiality or non-disparagement clause would interfere with an employee’s right to discuss workplace issues. The NLRB emphasized that whether an employee accepts a severance agreement is immaterial to the analysis. The NLRB held that severance agreements are unlawful if they “may chill” former employees from cooperating with NLRB investigations or discussing the terms of their former employment with current employees.
The NLRB found that the confidentiality language prohibited former employees from disclosing the terms of their severance agreements with third parties, restricting their rights to engage in concerted activities under the NLRA. The agreement, therefore, would dissuade the employee from filing an unfair labor practice charge or assisting in an investigation into the employer’s use of the severance agreement. A non-disparagement clause in a severance agreement also interfered with former employees’ NLRA rights to make “statements to [the] Employer’s employees or to the general public [including to the NLRB] which could disparage or harm the image of [the] Employer.”
Employers should consider the following items when drafting separation agreements under this ruling:
- Whether a saving clause carving out NLRA issues, and charges before the NLRB will be sufficient to allow including broad confidentiality and non-disparagement provisions.
- The way the NLRB applies this standard to confidentiality clauses and non-disparagement provisions that are narrower in scope compared to the broad provisions at issue.
- Whether an employee who seeks the advice and counsel of a lawyer—which is often a requirement of severance agreements—can effectively waive NLRA rights.
The NLRB’s decision may be challenged in court, and it remains to be seen whether a court would find that the mere offer of a severance agreement can be unlawfully “coercive” or conclude that an agreement that only restricts post-employment activities violates the NLRA.