On February 21, 2023, the National Labor Relations Board (NLRB) issued a decision regarding the usage of broad sweeping confidentiality clauses in severance agreements. This decision reverses two previous decisions made in 2020, and could force organizations to quickly take a hard look at the language used in such agreements.

The NLRB is an independent federal agency that protects the rights of private sector employees to join together, with or without a union, to improve their wages and working conditions. As part of the NLRB’s work, there have been long standing regulations that protect the ability of workers to use a certain degree of freedom of speech to organize unions and discuss working conditions. This is called “Concerted Activity”.

It is common practice for private employers to offer severance agreements that provide terminating employees benefits and compensation in exchange for giving up certain rights. Sometimes these rights are the ability to talk about aspects of the company, their wages or benefits. These are most commonly done through adding confidentiality or non-disparagement clauses to the severance agreements.

In past decisions, the NLRB has determined that giving up these rights, although protected under the National Labor Relations Act, was completely voluntary and that employees were choosing to give up these rights in exchange for compensation and benefits. The recent decision says that no matter the circumstance, an employee can never give up protected rights to engage in concerted activity, even if it is voluntarily agreed to.

Moving forward, organizations will need to review their severance agreement templates and remove any potentially large sweeping, broad statements, that refer to the requirement of complete confidentiality, non-disparagement language or provisions. It is likely that severance agreements moving forward will now be more itemized, and have exclusive lists of behavior or actions that are disallowed, as well as new (and likely more extensive) disclaimers.

Working with a professional payroll and HR partner helps minimizes risks like outdated or illegal employment documents. Contact us to learn how we can help you minimize employment risk while increasing your HR investment.