New Severance Rules
As you may have seen, the National Labor Relations Board (NLRB) recently passed new severance rules, including making it illegal for employers to include broad non-disparagement and confidentiality provisions in severance agreements.
The National Law Review provided an outline of the changes. Before the ruling, “employers could lawfully include broad confidentiality and non-disparagement clauses in severance agreements. The Board’s prior reasoning in support of these holdings was that, because the severance agreement exclusively pertained to post-employment activities and was not mandatory, severance agreements containing broad confidentiality and non-disparagement clauses did not necessarily infringe on the employees’ rights.”
According to the NLRB, severance agreements that contain generic and standard confidentiality and non-disparagement clauses prohibit employees from:
- Discussing any information or knowledge gained from their employment
- Making statements that could harm the image or reputation of the employer
- Disclosing the terms of the severance agreement to anyone
While this language was commonly used, in the case the NLRB ruled on, they ordered the employer to immediately cease and desist from using these provisions in severance agreements since “the scope of the provisions was so overbroad as to restrict an employee’s right to make public statements about the workplace; and prohibit them from disclosing terms of the severance agreement, even including to those who may have received similar agreements.”
The ruling applies to most private-sector employers in the United States, regardless of whether employees are unionized. Organizations not covered by the ruling include airlines, railways, and local, state, and federal government agencies.
According to a CNN article, “Some categories of workers are not likely covered by the ban, because they are excluded under the National Labor Relations Act, which the NLRB enforces. They include: Supervisors and managers with the authority to hire, fire, set pay and discipline workers, even if their company itself is subject to NLRB authority; independent contractors; agricultural and domestic workers; and anyone employed by a parent or spouse.”
Korn Ferry writes, “Supporters say the NDA ban will enable workers to call out bad behaviors—especially the mistreatment of marginalized groups. “For women and people of color, many times the non-disparagement clause is a tool to silence action on what really is egregious behavior,” says Andrés Tapia, Korn Ferry senior client partner and DE&I strategist.”
There are still some questions, such as the lack of clarity on whether the ruling is retroactive and how the ruling will affect the Federal Trade Commission’s proposal to scale back non-compete agreements. There is also a concern that the ruling will drive down the size of severance agreements and potentially even if severance agreements are offered.
This is yet another change in the workplace dynamic toward employee empowerment. And one question companies need to ask themselves is what they can do to reduce the desire for employees to vent their frustrations in the first place. Building a strong culture, listening to employees, and being transparent in communications can set the foundation for better employee relations. And if you have questions about building your culture, send us a note.