On February 21, 2023, the National Labor Relations Board (the “NLRB”) issued a broad sweeping decision that restricts the use of confidentiality and non-disparagement provisions in severance agreements.

Section 7 of the National Labor Relations Act (“Act”), affords non-supervisory employees with the right to talk to each other about the terms and conditions of their employment.  Employers may not interfere with, restrain, or coerce employees exercising Section 7 rights.  How this plays out in regards to separation agreements has fluctuated over time.

During the Trump era, the NLRB held that severance agreements with confidentiality and non-disparagement clauses were enforceable in certain instances.  Specifically, they only violated the Act if they were tainted by circumstances of coercion separate and apart from the agreement itself. The NLRB has since reversed course, recently holding that employers may not offer employees severance agreements with clauses that require them to waive their rights under the Act.

This decision has broad application.  The NLRB held that simply offering employees a severance agreement containing “quid pro quos” – clauses where employees forfeit Section 7 rights in exchange for severance – is inherently coercive and potentially unlawful under the Act.  Whether such clauses are enforceable now focuses on the language of the clauses.  It is immaterial whether an employee accepts the agreement or the context in which it is offered.  After reviewing the clauses at issue, the NLRB in this case found both unenforceable because they were overly broad.

Future decisions or guidance from the NLRB may help clarify what, if any, non-disparagement and confidentiality provisions will be enforceable.  The decision seemingly implies that narrowly tailored provisions may be enforceable.

Under this ruling, offering an agreement with unlawful terms is enough to result in an unfair labor practice.  The Act applies to all employees, union or non-union.  Moreover, while the case involves a severance agreement, this does not mean that the NLRB will not apply these principles in other agreements down the line, such as settlement agreements or separation agreements.  Accordingly, employers should review any agreement with a non-disparagement and/or confidentiality provision before proffering it to an employee or potential employee.