The National Labor Relations Board (NLRB) recently ruled that language commonly used in severance agreements is unlawful. The Board stated these provisions conflict with ex-employees’ rights to discuss the terms and conditions of their employment with others. Their February decision hasn’t been appealed as of this writing, but it probably will be.

You may be offered a severance agreement if you’re leaving your job. Part of it may include confidentiality and non-disparagement clauses. In exchange for agreeing to its terms, you may receive some benefit (usually money and or an extension of payments for your health insurance).

The difficult part of the agreement may be a clause stating that if you violate these provisions, your ex-employer can sue you to make you stop, and if they’re successful, you must pay their attorney’s fees and costs of enforcement.

What is the National Labor Relations Board?

The NLRB, according to its website, is an independent federal agency. Its purpose is to protect employees from unfair labor practices by employers. It protects private sector workers’ rights to join together, with or without a union, to engage in collective action to improve their wages, benefits, and working conditions.

Employees can file complaints with the NLRB if they feel their employer or union violated the federal National Labor Relations Act (which the agency enforces). There are layers of investigations and adjudications within the agency. Their final decisions can be appealed in the federal court system.

What Led to This Decision?

The employer at issue is McLaren Macomb Hospital in Michigan. Some of its registered nurses belong to a union, according to the NLRB decision. Eleven members were laid off in 2020 and signed a severance agreement offered by management. The hospital didn’t tell the union about its plans for layoffs, that it was offering a severance agreement, nor did it disclose its contents.

An NLRB judge ruled the hospital violated the NLRA by laying off these union members without first notifying the union and allowing it to bargain about that decision and its impact. The decision was appealed through the Agency, and a majority of the Agency’s Commissioners (those in charge of the NLRB) approved the ruling but reversed the finding that certain of the agreement’s clauses were legally correct.

The problematic language is:

6. Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.
7. Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, 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, its parent and affiliated entities and their officers, directors, employees, agents and representatives.

This case is an example of the power of government and our legal system. A case involving eleven laid-off employees and a hospital in Mount Clemens, Michigan, may impact tens of millions of workers nationwide.

What Did the NLRB Decide?

Two of the three Commissioners found it’s illegal for an employer to offer a severance agreement that includes broad non-disparagement and confidentiality provisions to a worker facing separation. The clauses were deemed illegal because they infringed on employees’ NLRA rights. They:

• Limit employees’ ability to discuss their wages, hours, and working conditions (which may include disparaging remarks) with other employees
• Prevent employees from helping other employees seek assistance
• Hinder employees from seeking aid from the NLRB, unions, and other outside organizations

The Board decided these clauses were illegal because they broadly prohibited employees from discussing wages, working conditions, and labor disputes. They could also prevent employees from:

• Criticizing their employer
• Complaining about their current or former workplace
• Cooperating with a government investigation
• Participating in NLRB proceedings
• Supporting other employees in these activities

The provisions also have no time or subject limits on what former employees  can’t discuss. The Board claimed that without limitations, the agreement clauses could apply to any term and condition of employment, labor dispute, or disagreement with the employer.

Does This Apply to Me?

The NLRA generally doesn’t cover those in management positions, so neither does this decision. But non-management employees, whether or not they’re in unions, would be covered (assuming it stands up to a future legal appeal).

What Can Employers Legally Do With Severance Agreements?

A month after the decision, NLRB General Counsel Jennifer Abruzzo published a memo laying out the Agency’s position on its impact on employers and employees. She stated:

• Narrow language that restricts the discussion of proprietary or trade secrets for a limited period based on legitimate business reasons may be legal
• Narrowly worded, justified, non-disparagement provisions that ban defamation may be lawful. Abruzzo defines defamation as maliciously untrue statements made with knowledge that they’re false or with reckless disregard for their truth
• Non-disparagement clauses protecting too many parties would not be considered legal, like covering “all disputes, terms and conditions, and issues, without a temporal limitation and with application to [corporate] parents and affiliates and their officers, representatives, employees, directors and agents”
• Abruzzo claims the holding applies to all employee-employer communications, not just severance agreements
• Management employees could be covered by this decision and protected by the NLRB if they’re retaliated against for their opposition to an employer violating, or attempting to violate, workers’ rights or participating in an investigation into such allegations

If the NLRB takes these positions in active cases and sides with employees, the employer may appeal the decision and federal judges will ultimately decide if Abruzzo’s positions are consistent with the NLRA.

Get Help from Attorneys You Can Trust

If you need legal representation in a separation agreement dispute or have questions about one you signed or that’s been offered to you, call Kingston Law Group’s employment law attorneys at 609-683-7400, or contact us online today. You should know your rights, how an agreement may affect you now and in the future, and whether the agreement’s enforceable.

We can schedule a near-term and reduced fee initial consultation with you at our Central Jersey law offices in Princeton. We are compassionate counsel and tough advocates. We will listen to your facts, explain the law, and help you find a pathway to economic and social justice. We will vindicate your rights if they have been violated. Call today. You will be glad you did.