National Labor Relations Board Restricts Non-Disparagement and Confidentiality Provisions Contained in Severance Agreements

The National Labor Relations Board (“NLRB”) has returned to its pre-2020 standard restricting confidentiality and non-disparagement clauses in departing employees severance agreements.

Generally speaking, a severance agreement is a contract voluntarily entered into between the former employer and employee after the termination of the employment relationship. They can be beneficial to both the employer and employee because the employee receives additional compensation, often in exchange for a release (protecting the employer from future litigation) and other non-monetary benefits to the employer.

In a recent decision, the NLRB found that a former employer violated the National Labor Relations Act by including provisions in a severance agreement which prohibited the employees from disparaging their employer and disclosing the terms of the severance agreement.

This is a dramatic shift in the law. Employers will need to ensure that severance agreements are narrowly drafted, so as not to prohibit the former employees ability to participate in Board charges and investigations. Likewise, confidentiality provisions should be avoided.

Although this decision will limit employers ability to keep their agreements confidential and limit disparaging statements to other, there are still significant benefits to their use. Stark & Stark’s Employment Group may help employers protect themselves through the use of a well-written, severance agreement which complies with this important change in the law along with existing state and federal laws.