NLRB Challenges Overly Broad Confidentiality and Non-Disparagement Provisions in Severance Agreements

Severance agreements can be crucial to managing employee lay-offs and terminations at your business. However, for these agreements to be legally valid, business owners must clearly understand the continually changing nature of federal and state employment laws. As such, they must periodically review their severance agreements and ensure they follow current law. Taking a proactive approach to employment law matters can help you avoid employment law-related problems before they arise. A Florida business  law attorney at Kramer Green can help prevent employment-related legal disputes.

NLRB Issues Important Ruling on Validity of Severance Agreements

The National Labor Relations Board (NLRB) has issued an important decision in the case of McLaren Macomb, 372 NLRB 58 (2023), concerning confidentiality and non-disparagement provisions in employee severance agreements. The NLRB found that a unionized hospital violated Section 7 of the National Labor Relations Act (NLRA) by offering severance agreements to 11 employees it permanently furloughed during the COVID-19 pandemic.

Section 7 of the NLRA prohibits employers from interfering with, restraining, or coercing employees who exercise their Section 7 rights, including the right to organize. The hospital’s standard severance agreements contained broad confidentiality and non-disparagement provisions, which prohibited the employees from disclosing the terms of their severance agreements or speaking poorly about the hospital and required them to waive all claims against the hospital concerning their severance or employment. As with all severance agreements, the employees were not required to sign them, but all 11 employees, in this instance, signed them.

The NLRB found that the confidentiality and non-disparagement provisions operated as an unlawfully broad waiver of Section 7 rights. For example, the non-disparagement clause prohibited the employees from making any statements that the hospital violated the NLRA at any time, whether currently or in the future. Likewise, the provision was likely to have a chilling effect on fellow employees should the NLRB attempt to investigate NLRA violations in the future.

In its decision, the NLRB overruled two Trump administration-era NLRB decisions that benefited employers by upholding broad confidentiality and non-disparagement provisions in severance agreements. The NLRB found in those decisions that the broad provisions were permissible so long as the circumstances surrounding the severance agreement did not involve the firing of an employee in violation of the NLRA or another unfair labor practice involving animus toward Section 7 activity. Instead, the NLRB returned to a former standard, in which severance agreement provisions violate the NLRA if they interfere with the employees’ right to organize.

The McLaren Macomb decision applies to unionized and non-unionized workplaces but only to employees, not managers and supervisors. Notably, the NLRB did not completely ban all confidentiality and non-disparagement clauses in severance agreements but only requires that such clauses be “narrowly tailored.” However, the NLRB did not explicitly explain how employers should “narrowly tailor” such provisions to ensure legal validity.

Let Us Help You Protect Your Business

A business law attorney at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. is ready to help you protect your business by ensuring that your employee severance agreements and other critical business documents comply with all relevant laws. We understand how diligently you have worked to build your business, and our goal is to assist you in preserving what you have built. Contact our office today at (954) 966-2112 or reach out to us online to schedule a time to discuss your legal issues with our attorneys.

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