Silent No More: NLRB bars Confidentiality / Non-disparagement Clauses in Severance Agreements
The National Labor Relations Board (NLRB) is charged with safeguarding the rights of employees in the United States. In its recent opinion in McLaren Macomb, 372 NLRB No. 58 (2023), the NLRB took a firm stance against the inclusion of non-disparagement provisions in severance agreements. This decision has far-reaching implications for both employers and non-union member employees, highlighting the importance of free speech and promoting a healthy work environment.
Background on Severance Agreements
Severance agreements are contracts between employers and employees that outline the terms of separation when an individual leaves a company. These agreements often provide financial compensation and other benefits in exchange for the employee relinquishing their right to sue the employer. Non-disparagement provisions, commonly found in severance agreements, prohibit employees from making negative statements about their former employers.
The NLRB's Rationale
The NLRB's McLaren Macomb opinion stems from the principle that employees have a fundamental right to engage in protected concerted activity under the National Labor Relations Act (NLRA). Protected concerted activity includes employees discussing wages, working conditions, and other terms of employment with their colleagues, whether it occurs during or after their employment. The NLRB views non-disparagement provisions as an infringement on this right.
Preserving Employee Rights
By prohibiting non-disparagement provisions, the NLRB seeks to protect employees' ability to voice their opinions and concerns about their workplace, even after they have left. In McLaren Macomb, the NLRB held that non-disparagement clauses there are illegal because they would prevent an employee from speaking publicly about workplace conditions violating the NLRA. No showing of injury was found to be required; the Board deemed these clauses to be ipso facto unfair labor practices, violating Section 7 of the NLRA, as they inherently stifle employee dialogue and discourage open discussions about work-related issues. The NLRB sees the right of employees to freely express their views as fundamental to maintaining a fair balance of power between employers and employees and foster a more transparent and accountable work environment.
Promoting Workplace Culture
Non-disparagement provisions in severance agreements have often been seen as tools used by employers to protect their reputation. However, the NLRB's opinion recognizes that these provisions can inadvertently perpetuate a toxic work culture. By preventing employees from discussing their experiences openly, employers may go unchallenged in their practices, leading to a lack of accountability and potential harm to future employees. The NLRB's decision aims to break this cycle and encourage employers to address workplace issues proactively.
Implications for Employers
While the remedies available under the NLRA are relatively limited, the NLRB's holdings in McLaren Macomb still serve as a clear warning to employers regarding the inclusion of non-disparagement provisions in severance agreements - and perhaps a harbinger of state employment laws to come. Companies must closely reevaluate their approach to separation agreements to ensure compliance with the NLRA. While employers still have the right to protect legitimate business interests, such as trade secrets and confidential information, they must strike a balance that respects employees' rights to engage in protected concerted activity.
Seeking Legal Counsel
Given the complexity of labor laws and the potential legal ramifications, employers are advised to consult with legal professionals specializing in labor and employment law when drafting severance agreements. Legal counsel can help companies navigate the intricacies of the NLRB's recent opinion, ensuring that their agreements strike a fair balance between protecting their interests and preserving employees' rights.
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