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NLRB Concludes Confidentiality and Nondisparagement Clauses Violate NLRA

Severance agreements often require employees to keep the terms confidential and preclude them from speaking negatively about the company or anyone affiliated with it. The National Labor Relations Board (NLRB) just concluded these requirements violate the National Labor Relations Act (“Act”). In 2020, the NLRB allowed employers to use confidentiality and nondisparagement clauses in severance agreements with a careful review of the specific circumstances surrounding it. This latest decision reflects a return to the NLRB's position prior to 2020.

In the cases before the NLRB, the employers offered permanently furloughed employees severance pay in exchange for the employees agreeing not to disparage the employer to anyone and not to disclose their severance terms. The NLRB evaluated Section 7 of the Act, which guarantees employees may engage in concerted activities for the purpose of advancing their interests. In its analysis, the NLRB reasoned restricting the employees' ability to discuss the terms of their severance and share their opinions of their former employers inhibited the employees' ability to work together, irrespective of the circumstances around it.

The NLRB said the nondisparagement provision before it violated the Act because "[p]ublic statements by employees about the workplace are central to the exercise of employee rights under the Act.” The confidentiality provision violated Section 7 because it prohibited employees from "disclosing even the existence of an unlawful provision contained in the agreement," which could stop employees from filing unfair labor practice charges or helping the NLRB in an investigation. The NLRB's decision applies only to nonmanagerial employees with Section 7 rights under the Act. These rights include an employee's ability to draw attention to unsafe working conditions and engage in other activities that protect employees as a group.