NLRB VOIDS COMMON SEVERANCE AGREEMENT PROVISIONS

The National Labor Relations Board (NLRB) has overruled its own precedent and has decided that certain common provisions in severance agreements violate the National Labor Relations Act (NLRA).  Employers generally have included confidentiality and nondisparagement provisions in severance agreements. The NLRB now says those provisions are unlawful because they attempt to deter employees from exercising their rights to “concerted activity” protected under the NLRA.  Nondisparagement provisions prohibit employees from making derogatory statements about the employer, while confidentiality provisions limit employees from disclosing the terms of the severance agreement.

          Although the NLRA applies to both union and nonunion employees, the Act’s definition of employees does not include supervisors and managers.  For that reason, the NLRB’s decision is not relevant to those supervisory, management or executive positions.  Employers, however, should keep in mind that the NLRB likely will continue to construe supervisory positions relatively narrowly, so employers must look at more than an employee's job title to determine if the case applies to a particular supervisor.

          It is likely that there will be a court challenge to this decision, but in the meantime, employers would be wise not to include the forbidden provisions in severance agreements.  It is not clear from the Board’s decision whether a “savings” clause such as “this section is not intended to prohibit an employee from engaging in any lawful or protected activity under federal or state law” would be sufficient to avoid the problem.