National Labor Relations Board Changes Rules For Severance Agreements

On February 21, the National Relations Board (NLRB) ruled that employers may not offer employees severance agreements that contain confidentiality or non-disparagement provisions or that require employees to broadly waive their rights under the National Labor Relations Act (NLRA).

Specifically, the NLRB said a severance agreement will violate the NLRA if its terms have a “reasonable tendency” to interfere with, restrain, or coerce employees in exercising their Section 7 rights.

This action overturns rules that were issued during the Trump administration that had generally allowed employers to include confidentiality and non-disparagement clauses in severance agreements. (Confidentiality and non-disparagement clauses provisions are often used to protect an employer’s reputation from disgruntled former staff while safeguarding the more sensitive details of the agreement, including compensation, from public view.)

As lawyers at Kelley Drye have advised, employers must proceed with caution since:

• The decision reinforces the NLRB’s view that an employee’s right to speak about their employment covers a “wide range” of third parties, including judicial, legislative, and political forums as well as news and social media platforms. The boundary of that right is when the communication is “not so disloyal, reckless, or maliciously untrue as to lose” protection.
• The NLRB took a decidedly pro-employee stance, describing its “duty to protect” the NLRA’s “broad grant of rights” and reasoning that any such severance agreement has inherent coercive potential. To that end, the NLRB reasoned that even offering such an agreement may constitute an unfair labor practice, regardless of whether the employer seeks to enforce it.

Kelley Drye lawyers did note, however, that the NLRB ruling did not suggest that all confidentiality or non-disparagement clauses are per se unlawful.

Still, they advised employers to review their agreements, consult counsel, and narrowly tailor any confidentiality and non-disparagement clauses in their existing agreements and ensure the employees’ Section 7 rights are protected. This step may include affirmative exemptions for participation in protected activities and for assisting others in doing so, including cooperating with any NLRB investigative process.

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