On February 21, 2023, the National Labor Relations Board (“Board” or “NLRB”) released a decision stating that an employer violates Section 8(a)(1) of the National Labor Relations Act (“Act” or “NLRA”) when it “proffers a severance agreement with provisions that would restrict employees’ exercise of their NLRA rights.” In particular, this opinion focused on the broad scope of the non-disparagement and confidentiality provisions in an employer’s severance agreement. This decision could have significant implications for employers when they offer severance agreements to employees.
Section 7 Rights
Section 7 of the NLRA guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Section 7 includes the right to not participate in these activities too.
When discussing these rights, the Board in its decision stated that an employee’s right to speak openly about labor disputes is subject only to refraining from language that is so “disloyal, reckless or maliciously untrue as to lose the Act’s protection.”
NLRB Decision
This decision overruled two recent Trump-era rulings by the NLRB (Baylor University Medical Center and IGT d/b/a International Game Technology) that required additional unlawful conduct of an employer, outside of the severance agreement itself, to make the language of an agreement unlawful on its face. For example, in Baylor, the Board held that a severance agreement only violated the NLRA if the employer offering the agreement “discharged its recipient in violation of the [NLRA], or committed another unfair labor practice discriminating against employees under the [NLRA].”
The Board clarified that it would be returning to the pre-Baylor and IGT analysis, which focused on the language of the severance agreement “to determine whether proffering the agreement had a reasonable tendency to interfere with, restrain, or coerce employees’ exercise of their Section 7 rights.”
The Board did not broadly rule that all non-disparagement and confidentiality clauses are unlawful. For instance, the Board pointed out that the non-disparagement clause at issue, in this case, was “not even limited to matters regarding past employment with the Respondent.” According to the Board, the non-disparagement clause of the severance agreement in question contained an unlimited timeframe applicable to the prohibition against disparaging statements and covered individuals and entities broader than the employer itself. Specifically, it prohibited disparaging statements about the particular employer but also about its “parents and affiliated entities and their officers, directors, employees, agents and representatives” and did so for “all times hereafter.” The Board opined that such conditions could lead to a “chilling effect” in which former employees would be less likely to express their complaints about a former employer with groups such as unions, former co-workers or NLRB members conducting investigations.
According to the decision, the confidentiality provision was overly broad in that its prohibition against disclosure to “any third person” would preclude the employee “from disclosing even the existence of an unlawful provision contained in the agreement” and “would reasonably tend to coerce the employee from filing an unfair labor practice charge or assisting a Board investigation into the Respondent’s use of the severance agreement, including the non-disparagement provision.”
The Board reasoned that “[b]ecause the agreement conditioned the receipt of severance benefits on the employees’ acceptance of those unlawful provisions,” the mere proffer of the agreement to the employees was unlawful.
Who Does This Decision Protect and What’s Next?
It is important to note that the Board’s decision only applies to covered employers and employees as defined by the NLRA. The Act applies to most private employers, including those without a unionized workforce, but it excludes public employers. And not all employees are protected by the NLRA. For instance, supervisors, independent contractors and some agricultural workers (all as defined by the NLRA and Board decisions) are generally not covered.
Employers should expect more to come on this decision. The NLRB Office of the General Counsel will likely issue a guidance memo and an appeal on the Board’s decision is expected. As always, we will be sure to update you with any new developments.
Practical Takeaways
- Employers should consider this decision when drafting severance and other employment‑related agreements.
- Before drafting a severance agreement, an employer should determine whether the decision applies to it and the particular employee(s) to whom it will offer the agreement.
- Employers should assess whether confidentiality and non-disparagement provisions are necessary and, if so, what specifically they are trying to achieve.
- If including confidentiality and/or non-disparagement provisions in a severance agreement, an employer should consider tailoring the clauses to the specific concerns and consider including a disclaimer regarding an employee’s Section 7 rights.
If you have questions about this decision or severance agreements generally, please contact:
- Brad Taormina at (248) 457-7895 or btaormina@hallrender.com;
- Claire Bailey at (317) 429-3608 or cbailey@hallrender.com; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot give legal advice outside of an attorney-client relationship.
