Is it Illegal to Use a Non-Disparagement Clause in Severance Agreements?

Recently, the Biden Administration’s National Labor Relations Board (NRLB) reversed well-established principles and ruled that confidentiality and non-disparagement clauses in severance agreements violate Section 7 of the National Labor Relations Act (the NLRA) if they restrict workers from engaging in protected activity. For instance, the agency concluded that protected activity includes: criticizing employer policies with coworkers and former coworkers; discussing severance, wages, and other terms and conditions of employment; and cooperating in NLRB investigations. This new position reverses the precedent under the previous administration and long-established historical principles. The McLaren-McComb decision immediately applies to employers.

The ruling involved a hospital employee that was laid off with 11 other employees. They were all given a severance agreement that contained standards release of claims, and also (1) a confidentiality clause prohibiting the sharing of the terms of the Severance Agreement with anyone other than a spouse or professional advisors, unless compelled to do so by a court; and (2) a non-disparagement clause that prohibited the employee from disparaging the hospital or affiliated persons. These are very common clauses in severance agreements and were written broadly without any limiting language.

According to the NLRB, the language was illegal because it violated the National Labor Relations Act (NLRA) because it forced the employee to agree to unlawful restrictions, in order to get the monetary benefits. Section 7 of the NLRA states that non-supervisory employees have the right to join together to advance their interests as employees and engage in “concerted activity,” which is not limited to unionizing activities and could include discussing wages or other workplace concerns or opposing unlawful conduct in the workplace.

Important takeaways:

  • The decision applies to union and non-union employers.
  • Severance agreement language should be adjusted to allow an employee to cooperate with the NLRB, discuss wages, and exercise any other rights protected by Section 7.
  • The decision (and Section 7 rights) do not apply to supervisors. Supervisors include individuals with the authority to hire, discharge, direct, or take certain other actions with respect to other employees, through the use of independent judgment.
  • The decision applies to all types of agreements, including those that were completed prior to the date of the McLaren Macomb decision.

Read more here.

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