NLRB Decision Places Limits on Non Disparagement Provisions in Severance Agreements

A recent decision from the National Labor Relations Board (NLRB) now prohibits employers from using broad prohibitions in severance agreements to prohibit former employees from talking about or criticizing their former employers. In addition, overbroad non disparagement provisions that require employees to relinquish their rights under the National Labor Relations Act (NLRA) are unlawful. By using these provisions, employers attempt to deter employees from exercising their rights in exchange for getting their benefits under the agreement.

The NLRB’s decision reversed two prior decisions from 2020. In both those decisions, the NLRB found that broad non disparagement provisions in severance agreements were lawful. This new decision is likely to be significant, as severe limits on disparaging speech have become commonplace in employee severance agreements due backlash from mass layoffs during the COVID-19 pandemic.

The NLRB case involved a Michigan hospital that terminated eleven union employees during the COVID-19 pandemic. In exchange for a payout, the hospital asked them to sign severance agreements with broad non disparagement clauses preventing them from making comments that could “disparage or harm” the company. The NLRB ruled that the employees could not waive their rights under federal labor laws, and employers asking them to do so could affect the rights of current employees.

The NLRB’s decision does not leave employers with no means of protection. For example, the decision is inapplicable to employees excluded from NLRA coverage, such as supervisors. The decision also does not permit former employees to say whatever they wish about their former employers. Critique of their former employers’ policies by former employees that are “disloyal, reckless, or maliciously untrue” lose protection under the NLRA.

Employee severance agreements can include disclaimers that specifically safeguard the rights of former employees under the NLRA. Any non disparagement provisions within severance agreements also could contain restrictions that may make them legally valid, such as offering a specific definition of “disparagement” or imposing temporal limits. Finally, in addition to the new NLRB decision, HR professionals should ensure that their severance agreements meet all requirements of new state laws, many of which address similar issues.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

The following two tabs change content below.

Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

Latest posts by Hall Benefits Law, LLC (see all)