NLRB Decision Affecting Use of Confidentiality and Non-Disparagement Provisions in Severance Agreements

In late February, the National Labor Relations Board (“NLRB”) issued a decision in which it determined that common confidentiality and non-disparagement provisions in most severance agreements violate the National Labor Relations Act (“NLRA”) if the provisions have a tendency to interfere with workers’ organizing rights under Section 7 of the NLRA.  Section 7 rights include the right to discuss wages and terms and conditions of work with current and former employees.  In addition, the NLRB held that merely offering an employee a severance agreement that contains a confidentiality or non-disparagement provision that interferes with Section 7 rights is an unlawful labor practice (note that managers, supervisors and independent contractors do not have Section 7 rights, so a severance agreement for those employees/contractors would not be impacted). 

Although the decision addressed severance agreements specifically, it is likely that the ruling will apply to other types of employment agreements such as Non-Disclosure Agreements and Confidential Information and Inventions Agreements, if they contain broadly worded confidentiality and non-disparagement provisions.
 

Although the decision does not state whether it will apply retroactively, employers probably do not need to modify existing agreements because under the NLRA workers can only bring claims that relate back to a violation that occurred in the past 6 months.  That time has passed for many former employees.  However, employers should not attempt to enforce a non-disparagement or confidentiality clause that is problematic, if it finds out that a terminated employee is making disparaging remarks and discussing the amount of their severance, because that may be viewed as a separate violation which could start the clock ticking on a new 6-month statute of limitations.
 

Employers should not continue to use template severance agreements that contain the standard broad confidentiality and non-disparagement provisions.   For departing employees for whom you do not have significant confidentiality or disparagement concerns, we recommend deleting those provisions from the severance agreement.  If you do want to include those provisions, we recommend that you narrowly tailor your confidentiality and non-disparagement provisions and add a disclaimer stating that the employee is not prohibited from engaging in activities protected by Section 7 of the NLRA.  Narrowly tailored provisions may take away some of the protections that employers have enjoyed in the past, but if the provisions are too broadly worded, a court may find the entire agreement, including the release of claims provisions, unenforceable, even if you include a severability clause.