We are pleased to share a recent HRD America article, “Severance agreements can’t include non-disparagement, confidentiality clauses,” with quotes from Michael Brewer. This article discusses the recent NLRB ruling that companies can no longer offer severance agreements that include non-disparagement and confidentiality clauses. This ruling could potentially discourage some companies from offering severance packages altogether, while other
On February 21, the National Labor Relations Board (NLRB) issued a decision in McLaren Macomb holding that employers may not offer employees separation or severance agreements that require employees to broadly waive their rights under the National Labor Relations Act (NLRA). In McLaren, a hospital furloughed 11 employees, presenting each with a severance agreement and general release that contained confidentiality and non-disclosure provisions. (See the exact provisions copied below.) The Board majority held that merely “proffering” a severance agreement containing unlawful confidentiality and non-disparagement provisions violated the NLRA because conditioning the receipt of benefits on the “forfeiture of statutory rights plainly has a reasonable tendency to interfere with, restrain, or coerce the exercise of those rights.”
At first blush, this may feel like a sweeping change requiring immediate action. However, it is important to consider this decision with a grain (or two) of salt, breathe and thoughtfully plan your next steps. The key points identified below are designed to help you think through a tailored approach for your organization¾there is not a one-size-fits-all solution. Your approach will depend on the type of workforce you have, your risk tolerance and what you are trying to protect. We are standing by, ready to assist, should you need further guidance.
- For most private, nonunion employers, the risk of an unfair labor practice charge is relatively low. While it is absolutely true that the NLRA does indeed apply to most private sector employers, the NLRB and unions tend to focus more on unionized workplaces. (If you have a unionized or partially unionized workforce, the risk is higher but read on.)
A proposed bill in California seeks to protect workers against nondisclosure agreements and empower them to speak out about alleged acts of discrimination, including racism. Senate Bill 331, known as the Silenced No More Act, was introduced in February 2021 and seeks to expand protections against confidential settlements to cover all forms of harassment or discrimination under California law, including on the basis of race, ancestry, religion or gender identity. If passed, the law will impose greater restrictions on companies’ freedom to contract settlement and non-disparagement agreements.
New Obligations if SB 331 Passes
- SB 331 will expand the existing prohibition of provisions that prohibit discussing sexual harassment in the workplace to discussing any type of harassment (i.e., race, age, religious harassment). (See discussion of SB 820 below.)
- The law will prohibit non-disparagement agreements that prohibit the disclosure of information about unlawful acts in the workplace.
- The law also will create new obligations, such as the requirement to notify the employee that the employee has a right to consult an attorney regarding the agreement and giving the employee “a reasonable time period of not less than five business days” in which to do so.
Several Employer-Friendly Changes to Observe
- The law clarifies that including a general release or waiver of all claims in an agreement related to an employee’s separation from employment does not violate the statute.
- It verifies that the law does not prohibit a provision that precludes the disclosure of the amount paid in settlement of a claim.
- It confirms that employers may protect trade secrets, proprietary information, or confidential information that does not involve unlawful acts in the workplace.