NLRB Rulings Brings Changes to Severance Agreements

Some employers offer severance agreements to employees upon termination, waiving employees’ rights to potential employment claims in exchange for a few weeks or months’ salary. Many of those agreements also include broad non-disparagement and confidentiality provisions. In light of the National Labor Relations Board’s (“Board”) recent decision, those agreements will likely need to be revised going forward.

Last month, the Board ruled that offering a severance agreement that required employees to give up their rights under the National Labor Relations Act (“NLRA”) was an unfair labor practice. This decision reverses prior precedent which had previously approved of such language in severance agreements.

As a reminder, decisions from the Board apply to most employers, even if they do not have a unionized workforce. The rights under the NLRA exist independent of whether an employer’s workforce is represented by a union or whether a particular employee is in a union. That being said, the NLRA does include a carve-out for “supervisors” if they meet the NLRA’s definition.

New Decision

This case involved an employer that provided furloughed employees with a Severance Agreement, Wavier and Release (the “Agreement”) that contained broad non-disclosure and confidentiality provisions commonly found in severance agreements. The non-disclosure provision stated, “the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer.” The confidentiality provision stated, “[t]he Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person” except to certain people and for certain reasons.

The employees and their union claimed the non-disparagement and confidentiality provisions unlawfully restrained and coerced the employees in the exercise of their rights under Section 7 of the NLRA, which gives employees the right to engage in “concerted activities” for their mutual aid or protection.

The Board ruled that merely offering an agreement that conditions the receipt of severance benefits on the forfeiture of protected rights violates Section 7, regardless of whether the employee signs the Agreement. The Board reasoned that public statements by employees about the workplace are “central to the exercise of employee rights,” and non-disparagement provisions would prohibit those communications. The non-disparagement provision could also stifle protected activity by discouraging an employee’s cooperation with a Board investigation or litigation into unfair labor practices. The Board did acknowledge that the statements cannot be “so disloyal, reckless, or maliciously untrue, as to lose” protection under the NLRA.

In conclusion, the Board held, that a “severance agreement is unlawful if it precludes an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about his employment.”

Suggested Severance Agreement Revisions

To comply with this Board ruling, employers should consider the following limits on the scope of released claims, non-disparagement, and confidentiality provisions in severance agreements:

1. State that the agreement and/or list of released claims does not apply to claims arising under the NLRA.
2. Under the non-disclosure restriction, include a carveout that states the provision is not intended to limit the exercise of rights protected by the NLRA.
3. In the confidentiality provision, remove co-workers from the list of individuals not to disclose the Agreement to, and include a carveout for disclosure in the course of exercising rights protected under the NLRA.

It is possible the Board may extend this logic to non-disparagement and confidentiality provisions in employment agreements, employee handbooks, and settlement agreements.

All of that being said, it is important to keep in mind that this is simply the current Board’s position. As a government agency, its position on various issues commonly fluctuates with each change in presidential administration. And, of course, courts have the ultimate say in determining whether a severance agreement violates the NLRA.