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NLRB Cracks Down on Non-Disparagement, Confidentiality Provisions in Severance Agreements

laid off

It’s long been common for employers, when laying off workers, to provide severance pay. In exchange, the company will demand that the worker release any claims they might have against the company. However, a recent ruling by the National Labor Relations Board has called into question certain common severance provisions, suggesting that it’s probably a good time to review your own severance agreements with an attorney.

In the case in question, a hospital operator offered severance agreements to 11 union workers at a Michigan hospital after they were permanently furloughed during the pandemic. The employer made a direct severance offer without going through the union. The agreements had a “confidentiality clause” that barred the workers from discussing the terms of the severance agreement with anyone else, and they had a “non-disparagement clause” that forbade them from saying anything that could hurt the employer’s reputation.

But the NLRB found that those provisions violated federal labor law. Specifically, the board found that they violate a worker’s right to engage in “concerted activities” — in other words, joint efforts by employees to improve their wages and working conditions.

Not only did the NLRB deem the provisions unlawful, it also found that merely offering a severance agreement with such terms was illegal, even though the departing employee had the right not to accept the offer.

Meanwhile, the board found that it was illegal for the company to offer the packages directly to the employees instead of going through their union.

While the decision only impacts line employees and not supervisory employees, it’s very important that you contact a labor employment attorney to examine your severance agreements to make sure you’re not setting yourself up for legal liability.