Nondisparagement and Confidentiality Clauses In Severance Agreements Violate NLRA

Just about every single severance agreement I've ever seen in 36 years of law practice have two standard clauses: the former employee cannot disparage the former employer, meaning they can't say anything negative about the company or its employees and frequently to a broader list of entities; and a confidentiality clause prohibiting the former employee from telling anyone about the agreement, frequently prohibiting them from even saying it exists.

Well, the National Labor Relations Board has just ruled that both provisions are illegal under the National Labor Relations Act.

Regarding nondisparagement: 

This far-reaching proscription—which is not even limited to matters regarding past employment with the Respondent— provides no definition of disparagement that cabins that term to its well-established NLRA definition under NLRB v. Electrical Workers Local 1229 (Jefferson Standard Broadcasting Co.), supra, 346 U.S. at 477. Instead, the comprehensive ban would encompass employee conduct regarding any labor issue, dispute, or term and condition of employment of the Respondent. As we explained above, however, employee critique of employer policy pursuant to the clear right under the Act to publicize labor disputes is subject only to the requirement that employees' communications not be so “disloyal, reckless or maliciously untrue as to lose the Act's protection.” Emarco, Inc., 284 NLRB 832, 833 (1987).  

Further, the ban expansively applies to statements not only toward the Respondent but also to “its parents and affiliated entities and their officers, directors, employees, agents and representatives.” The provision further has no temporal limitation but applies “[a]t all times hereafter.” The end result is a sweepingly broad bar that has a clear chilling tendency on the exercise of Section 7 rights by the subject employee. This chilling tendency extends to efforts to assist fellow employees, which would include future cooperation with the Board’s investigation and litigation of unfair labor practices with regard to any matter arising under the NLRA at any time in the future, for fear of violating the severance agreement’s general proscription against disparagement and incurring its very significant sanctions. The same chilling tendency would extend to efforts by furloughed employees to raise or assist complaints about the Respondent with their former coworkers, the Union, the Board, any other government agency, the media, or almost anyone else. In sum, it places a broad restriction on employee protected Section 7 conduct.  We accordingly find that the proffer of the nondisparagement provision violates Section 8(a)(1) of the Act.

Our scrutiny of the confidentiality provision of the severance agreement leads to the same conclusion. The provision broadly prohibits the subject employee from disclosing the terms of the agreement “to any third person.” The employee is thus precluded from disclosing even the existence of an unlawful provision contained in the agreement. This proscription would reasonably tend to coerce the employee from filing an unfair labor practice charge or assisting a Board investigation into the Respondent’s use of the severance agreement, including the nondisparagement provision. Such a broad surrender of Section 7 rights contravenes established public policy that all persons with knowledge of unfair labor practices should be free from coercion in cooperating with the Board. The confidentiality provision has an impermissible chilling tendency on the Section 7 rights of all employees because it bars the subject employee from providing information to the Board concerning the Respondent’s unlawful interference with other employees’ statutory rights. See Metro Networks, supra, 336 NLRB at 67.

Regarding confidentiality:

The provision broadly prohibits the subject employee from disclosing the terms of the agreement “to any third person.”  The employee is thus precluded from disclosing even the existence of an unlawful provision contained in the agreement. This proscription would reasonably tend to coerce the employee from filing an unfair labor practice charge or assisting a Board investigation into the Respondent’s use of the severance agreement, including the nondisparagement provision. Such a broad surrender of Section 7 rights contravenes established public policy that all persons with knowledge of unfair labor practices should be free from coercion in cooperating with the Board.  The confidentiality provision has an impermissible chilling tendency on the Section 7 rights of all employees because it bars the subject employee from providing information to the Board concerning the Respondent’s unlawful interference with other employees’ statutory rights. See Metro Networks, supra, 336 NLRB at 67.

The confidentiality provision would also prohibit the subject employee from discussing the terms of the severance agreement with his former coworkers who could find themselves in a similar predicament facing the decision whether to accept a severance agreement. In this manner, the confidentiality provision impairs the rights of the subject employee’s former coworkers to call upon him for support in comparable circumstances. Additionally encompassed by the confidentiality provision is discussion with the Union concerning the terms of the agreement, or such discussion with a union representing employees where the subject employee may gain subsequent employment, or alternatively seek to participate in organizing, or discussion with future co-workers.  A severance agreement is unlawful if it precludes an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about his employment. Id. Conditioning the benefits under a severance agreement on the forfeiture of statutory rights plainly has a reasonable tendency to interfere with, restrain, or coerce the exercise of those rights unless it is narrowly tailored to respect the range of those rights. Our review of the agreement here plainly shows that not to be the case. We accordingly find that the proffer of the confidentiality provision violates Section 8(a)(1) of the Act. 

So, is this a magic wand? Did such provisions suddenly go poof? No. Management side will fight this decision like cornered rats. Still, keep an eye out for further developments. In the meantime, you might want to file with NLRB if your employer presents you with any such provisions in a proposed severance agreement.