Last month, the National Labor Relations Board (NLRB) made a decision that changed the game regarding severance agreements. The ruling confirmed that overly broad confidentiality and non-disparagement clauses have a “clear chilling tendency” and that offering agreements with such provisions violates the law. However, the NLRB did not ban severance agreements outright, as long as they are narrowly tailored.
Severance agreements are still allowed, but with certain limitations as confirmed by the NLRB decision. Employers must take care to draft severance agreements that do not include overly broad confidentiality and non-disparagement provisions. These types of clauses create an environment in which employees may feel that they cannot speak out against their employer, even if they have legitimate concerns about the conditions of their employment or the workplace culture.
Overly broad confidentiality and non-disparagement provisions have a “clear chilling tendency.” The NLRB has found that confidentiality and non-disparagement provisions in severance agreements are unlawful when they prevent employees from exercising their rights under the National Labor Relations Act (NLRA). These provisions are overly restrictive and prevent employees from speaking out about legitimate concerns, which can be protected under the NLRA.
Employers should take caution when drafting severance agreements. According to the NLRB decision, offering agreements with overly broad confidentiality and non-disparagement provisions violates the law. This is because such provisions create a legally binding agreement that reinforces the employer’s efforts to restrict an employee’s protected rights.
The good news is that confidentiality and non-disparagement provisions in severance agreements are still permitted – as long as they are narrowly tailored. The NLRB decision reiterated the importance of narrowly tailoring such provisions, which should include a temporal limitation and should be conveyed as clearly as possible to avoid confusion.
According to the NLRB’s latest memo, employers should avoid using language that may interfere with their employees’ exercise of NLRA rights in any form of communication. This includes handbooks, policies, forms, and other less formal agreements such as severance agreements. It is suggested that supervisors should not discourage employees from discussing the terms of their severance agreements, nor should they retaliate against those who attempt to do so.
Employers need to be aware that the NLRB’s decision has a retroactive effect, i.e., it applies to both existing and new severance agreements. If they are found to have violated these provisions, employers may be subject to legal penalties or may be required to rewrite the provisions in question. Therefore, it is advisable for companies to review their existing severance agreements to ensure compliance with the new guidelines.
The importance of tailoring agreement language cannot be overstated. It is crucial for employers to carefully draft and tailor the language used in severance agreements. The NLRB decision serves as a reminder that boilerplate savings clauses or disclaimers will not necessarily cure overly broad provisions. Employers must reassure employees that they still have the ability to exercise their NLRA rights without fear of retaliation, censorship, or any other undue limitation.
The recent decision of the NLRB on severance agreements has established clear limits on confidentiality and non-disparagement provisions that are too broad. To avoid legal repercussions and difficulties, employers should meticulously draft the language used in severance agreements to restrict their employees’ NLRA rights as narrowly as possible. Employers should also avoid using language that could interfere with the exercise of NLRA rights in any other communications with their employees.