Board invalidates confidentiality and nondisparagement clauses

The National Labor Relations Board recently ruled that confidentiality and nondisparagement provisions in an employer’s severance agreements with 11 employees were unlawful under the National Labor Relations Act (NLRA). The decision overturned a Trump-era decision which we previously reported, involving Baylor University Medical Center. The current Board wrote that “a severance agreement is unlawful if its terms have a reasonable tendency to interfere with, restrain, or coerce employees” in their exercise of rights under the NLRA to band together on issues related to wages, hours, and working conditions. According to this Biden-era Board, offering an agreement containing such terms is a violation of the NLRA; it doesn’t matter whether the employer has a good relationship with a union or doesn’t intend to discriminate against employees.

In this case, the confidentiality provisions in the separation agreements limited employees to discussing the settlement offer only with their spouse, legal counsel, or tax adviser, or when compelled by a court or administrative agency. The Board objected to these limitations, stating that the terminated employees should have been able to share information about the settlement offer with their former coworkers, their union, and the Board, in order to fully exercise their rights under the NLRA.

The nondisparagement provisions in the separation agreements prohibited employees from making 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.” This provision was so broad that it would be nearly impossible to discuss or pursue NLRA rights without making a negative statement about the company. The Board also wasn’t happy with the broad scope of entities who were shielded from disparaging remarks, or the lack of an expiration date on these obligations (McLaren Macomb, NLRB, Feb. 2023).

Tips: Vigilant will be updating our model separation agreements to address the Board’s current position. If you offer a settlement agreement that includes confidentiality (nondisclosure) or nondisparagement clauses, talk with legal counsel to weigh what restrictions (if any) to include. Consider adding language to make it clear that any such provisions aren’t intended to restrict the employees’ exercise of their rights under the NLRA or other laws. Some state laws already limit employers’ ability to restrict employees’ communications about their employment. If you already have such provisions in existing agreements, there’s no need to panic. The statute of limitations under the NLRA is only six months. Also, even if the Board were to find your agreements unlawful, the Board’s ability to order financial remedies is limited to making employees financially whole—it can’t order penalties like the Occupational Safety and Health Administration (OSHA) and it can’t order damages for emotional distress like the Equal Employment Opportunity Commission (EEOC).