February 21, 2023

If You Can’t Say Anything Nice…

On February 21st, the National Labor Relations Board (NLRB) ruled that an employer violated the National Labor Relations Act (NLRA) when it offered a severance agreement that broadly prohibited covered employees “from making statements that could disparage or harm the image of the [employer] and further prohibited them from disclosing the terms of the agreement.”

Commonly known as non-disparagement clauses, these practices are coming under fire, as are nearly all restrictive covenants like non-competes, no solicitation, and non-disclosure agreements.

Why? The NLRB acknowledged that it had ruled such provisions lawful in the past but was not returning to “the prior, well-established principle that a severance agreement is unlawful if its terms have a reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their Section 7 rights, and that employers’ proffer of such agreements to employees is unlawful.”

The NLRA gives all non-supervisory employees, including those not represented by a union, the right to act in concert with regard to wages, hours, or conditions of employment. How can employees exercise those rights if they are constrained by an agreement that prevents them from talking to one another about related concerns? The NLRA is not alone in having this concern.

The U.S. Equal Employment Opportunity Commission (EEOC) has expressed similar concerns. As far back as 1997, the EEOC issued related guidance writing, “such agreements have a chilling effect on the willingness and ability of individuals to come forward with information that may be of critical import to the Commission as it seeks to advance the public interest in the elimination of unlawful employment discrimination.”

That’s not all. For the same reasons described above, the NLRB also found the confidentiality provision of the agreement violated the NLRA. It prohibited the employee from disclosing the terms of the agreement “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.”

Lessons Learned? Review your separation and severance agreements in conjunction with your legal counsel. If you want to limit or restrict what an employee may say to whom, do so in accordance with these agencies’ guidance.