Silence For Severance No More

The National Labor Relations Board recently ruled that employers may not provide employees with severance agreements that would require them to broadly renounce their rights under labor laws.

What is the NLRB?

The National Labor Relations Board was founded via the National Labor Relations Act of 1935, which was created to encourage collective bargaining by protecting workers’ freedom to unionize and to prevent and correct unfair labor practices that are carried out by unions and employers within the private sector.

The independent federal agency’s main objective is enforcing the National Labor Relations Act which safeguards workplace democracy by giving most private sector employees the freedom to demand better working conditions and choice of representation without the worry of reprisal.

Previous Law

Until Tuesday, February 21st, 2023, most severance and employment settlement agreement proposals contained standard confidentiality and non-disparagement restrictions, which generally prohibited employees from both discussing what caused the separation and speaking negatively of their former employers. According to two previous NLRB decisions, offering severance agreements to employees with these terms was lawful in and of itself. 

New Law

That changed on Tuesday when the NLRB issued a decision in McLaren Macomb holding that employers may not offer employees severance agreements that require employees to broadly waive their rights under the NLRA. Specifically, the decision notes that simply offering severance agreements with broad confidentiality and non-disparagement terms to employees constitutes an attempt to deter employees from exercising their statutory rights under Section 7 of the NLRA. In the growing age of social media, it is important to note that Section 7 not only protects employees’ rights to communicate with coworkers but also outside communications to the media, social media, the legislature, etc. that are intended to improve working conditions.

In a statement on the NLRB’s website, the current chair of the NLRB Lauren McFerran said “It’s long been understood by the Board and the courts that employers cannot ask individual employees to choose between receiving benefits and exercising their rights under the National Labor Relations Act.” Due to this understanding, the Board reexamined these two Trump-era decisions and concluded that they unlawfully restricted and violated workers’ labor rights by giving employees the impression they had no other choice but to accept severance agreement offers that included confidentiality and non-disparagement restrictions. 

What’s Next?

This change in understanding of the NLRA’s worker protections will likely give workers grounds to push back on severance agreements that contain any non-disparagement provision and perhaps even some confidentiality provisions (except for the limited employers not covered by the NLRA such as government, agricultural, and airline employers).