Legal Alert: NLRB Limits Non-Disparagement Clauses in Severance Agreements

The National Labor Relations Board (NLRB) has recently issued a decision that restricts the use of non-disparagement and confidentiality clauses in severance agreements. According to the NLRB, employers may no longer require employees to waive their right to criticize their former employer in exchange for receiving severance benefits.

In its decision, the NLRB stated that “employees have a protected right to engage in concerted activity for their mutual aid or protection, which includes the right to criticize their employer’s labor policies and practices.” As such, any attempt by an employer to prohibit such criticism through a non-disparagement clause would be a violation of the National Labor Relations Act. These clauses are violative of the Act “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.” Confidentiality agreements may still be lawful if they are “narrowly tailored to restrict dissemination of proprietary or trade secrets information,” or with other “legitimate business justifications.” Non-disparagement clauses may still be lawful if they are “narrowly tailored” and “justified” to prohibit statements that rise to the level of defamation or maliciously untrue made with “knowledge of their falsity or with reckless disregard for their truth or falsity.”

Christopher Santomassimo, a partner at OGC Solutions®, commented on the NLRB’s decision, saying:  “This ruling is a significant development for employers, as it places limits on the use of confidentiality and non-disparagement clauses in severance agreements. Employers must now carefully review their severance agreements to ensure that any non-disparagement and confidentiality clauses do not infringe on employees’ protected rights under the National Labor Relations Act.”

Santomassimo recommends that employers take the following steps in light of the NLRB’s decision:

1. Review all current and future severance agreements to remove non-disparagement or confidentiality clauses unless they can be tailored enough to comply with NLRB’s directives.
2. Train human resources and legal personnel on the requirements of the National Labor Relations Act and the limitations on non-disparagement clauses in severance agreements.

Employers should be aware that failure to comply with the NLRB’s decision could result in charges of unfair labor practices and potential legal actions. As such, it is crucial for employers to carefully review and revise their severance agreements to comply with the NLRB’s new restrictions on non-disparagement or confidentiality clauses.