NLRB Wants to Rewrite Severance Language

In an opinion that is sure to generate significant concern and discussion amongst employers and their lawyers, the NLRB issued a Decision and Order on Feb. 21, 2023 that renders unlawful severance agreements that contain “typical” confidentiality and non-disparagement provisions. The 3-1 decision in Macomb — the lone dissenting Board member was the sole Trump appointee — held that the employer’s mere offer of a severance agreement that required the accepting employee to maintain the confidentiality of the terms of the severance agreement and the employer’s proprietary information and to not disparage the employer and affiliates violated Section 7 of the National Labor Relations Act. In doing so, the Board explicitly overruled two Trump-era opinions that effectively required indicia of employer intent to violate the Act through the severance agreement to support a violation. 

So, what does this mean for every employer everywhere that includes substantially similar confidentiality and non-disparagement provisions in severance agreements? First, take a deep breath! While the NLRB’s Decision is effective immediately, it is still subject to legal challenge. And, we can anticipate that the employer in Macomb or some other employer will surely challenge this decision in court. Second, because the Act does not apply to supervisors, employers may continue with Section 7 risk to include these types of provisions in severance agreements for individuals who are not covered by the NLRA (which, as you know, does not cover only unionized workers). Third, employers will have to make a conscious and thoughtful decision whether to modify or remove altogether the now offending provisions pending further review and challenge or run the business risk that an employee will challenge enforceability through the NLRB.

I anticipate that most employers will take a “wait and see” approach before making wholesale changes to their severance agreements. Doing otherwise seems, at least at this point, an unrealistic option because removing confidentiality and non-disparagement provisions limits significantly two key benefits to entering into a severance agreement in the first place.