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Protecting Severance Agreements from Labor Board Attacks, Confidentiality and Management Positions

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Another area where employers need to review their policy terms relates to severance agreements.  Employers typically include in severance agreements broad confidentiality and non-disparagement provisions, and really don't want other employees or the public to know what they have paid to secure a severance agreement.  They also don't want former employees "bad-mouthing" the company.  Unfortunately, the Biden Labor Board has now ruled that such provisions are unfair labor practices as confidentiality and non-disparagement terms have a tendency in its view to discourage concerted activity rights.   McLaren Macomb, 372 NLRB No. 58 (2/21/23).

Fortunately, there are provisions in this ruling that will limit its application.  First, the ruling only applies to "employees" under the Act, which excludes supervisory and managerial personnel.  Second, although the inclusion of such language is an unfair labor practice, the effect will be only to exclude the enforceability of the confidentiality/disparagement provisions and will not bar the enforceability of the remainder of the settlement agreement.  Nevertheless, employers might want to follow the suggestions in the NLRB ruling to limit the protection of the clauses to the actual employer (not including affiliates), to not impose penalties for violating the clauses, to limit the period of time for which the clauses apply, and to restrain only communications that are “disloyal, reckless or maliciously untrue.”

At a minimum, employers should consider adding so-called "disclaimers" that suggest that the confidentiality and non-disparagement provisions are not intended to and will not be enforced in a manner to restrict the employee engaging in any rights guaranteed under the National Labor Relations Act. 

This article is part of our May 2023 Newsletter.

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