When an employee is terminated, they are occasionally offered a severance agreement. There are multiple reasons for a severance offer. It could be to soften the blow of a lay-off after many years of service. Or it could be to avoid a future lawsuit by having an employee sign a release.

But this week the National Labor Relations Board (“NLRB”) put employers on notice that they can no longer silence workers on two specific severance terms: non-disparagement and confidentiality.

Whatever the reason for the severance package, employers frequently included a non-disparagement clause. This was a way to control the speech of former employees.

Employers nearly always include a confidentiality provision in a severance agreement as well. Employers may not offer severance to all employees or may not offer equal amounts to all employees. Having a confidentiality clause helps the employer keep that secret.

This new decision by the NLRB concerned a Michigan hospital, McLaren Macomb, that furloughed several employees during the pandemic. As part of their severance agreement, McLaren included these clauses:

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.

The NLRB stated: “The broad scope and the wide protection afforded employees by Section 7 of the Act bear repeating. It is axiomatic that discussing terms and conditions of employment with coworkers lies at the heart of protected Section 7 activity. Section 7 rights are not limited to discussions with coworkers, as they do not depend on the existence of an employment relationship between the employee and the employer, and the Board has repeatedly affirmed that such rights extend to former employees.”

The NLRB concluded: Examining the language of the severance agreement here, we conclude that the nondisparagement and confidentiality provisions interfere with, restrain, or coerce employees' exercise of Section 7 rights. Because the agreement conditioned the receipt of severance benefits on the employees' acceptance of those unlawful provisions, we find that the Respondent's proffer of the agreement to employees violated Section 8(a)(1) of the Act.

If you're offered a severance agreement from your employer, we always suggest that you have it reviewed by an attorney. There could be restrictions on your future employment, competition, or speech. The agreement could limit your rights to unemployment compensation or insurance. And it's important to know what could constitute a breach of the agreement and what remedies are available in the event of a breach. Please contact us for a review of your severance agreement.

The full opinion can be found here: https://www.nlrb.gov/case/07-CA-263041

See also https://www.nlrb.gov/news-outreach/news-story/board-rules-that-employers-may-not-offer-severance-agreements-requiring

 https://www.cnn.com/2023/02/22/success/severance-agreements-rule-change-from-nlrb/index.html

https://www.nytimes.com/2023/02/22/business/economy/nlrb-severance.html

https://www.reuters.com/legal/us-labor-board-limits-gag-clauses-severance-agreements-2023-02-22/

https://www.vice.com/en/article/dy7a7x/companies-cant-ask-you-to-shut-up-to-receive-severance-nlrb-rules