On February 21, 2023, the National Labor Relations Board (NLRB) ruled that “employers may not offer employees severance agreements that require employees to broadly waive their rights.” The NLRB says that the decision upholds the principle that “employers cannot ask individual employees to choose between receiving benefits and exercising their rights.” (see key press release from the NLRB here: https://www.nlrb.gov/news-outreach/news-story/board-rules-that-employers-may-not-offer-severance-agreements-requiring)
WHAT THIS MEANS FOR SEVERANCE AGREEMENTS
Based on this ruling, severance agreements may not contain terms that could “interfere with, restrain, or coerce employees” in exercising their rights. It’s important note, however, that this restriction does NOT apply to supervisory level employees.
HOW THIS CAME ABOUT
In 2020, a hospital in Michigan let go 11 union employees and in exchange for a payout, they were asked to sign severance agreements prohibiting them from making public comments “which could disparage or harm” the company. The NLRB was operating with a Republican majority, who at the time, ruled that “such limits on speech were legal.” This year’s decision reverses that.
WHAT THIS MEANS FOR YOUR COMPANY
This decision applies retroactively. If any agreements that contained overly broad non-disparagement clauses were signed, those clauses are no longer considered valid by the NLRB. The presence of a non-disparagement clause in an already signed severance agreement doesn’t necessarily invalidate the entire agreement, but most certainly the unlawful portions. Also, confidentiality clauses that are narrowly focused (for example, that cover protection of proprietary information) will still be considered legal.
Employers should work with employment law experts to determine whether agreements need to be updated and make sure that going forward, agreements are not in violation. The law also states that “employers offering severance agreements must notify the employee that they have a right to consult with an attorney regarding the agreement” [Note: While this is a fairly typical part of most severance agreements, it’s notable that the NLRB found enough evidence to the contrary that they decided it needed to be codified].
Email me to learn more about how this and other recent key rulings affect your employment or post-employment agreements! firstname.lastname@example.org
Nathalia Colmenares - HR Administrator, PEAR Core Solutions, Inc. – www.pearcoesolutions.com