The general counsel of the National Labor Relations Board issued a memo this week clarifying one of the biggest open questions after the NLRB rules broad non-disparagement clauses were illegal.
The general counsel of the National Labor Relations Board issued a clarifying memo on Wednesday regarding the “scope” of a February ruling by the federal agency’s board that said employers cannot include blanket non-disparagement clauses in their severance packages, nor demand laid-off employees keep secret the terms of their exit agreements.
Such provisions have become increasingly common in recent years, muzzling employees and otherwise stopping them from speaking up about working conditions by dangling a few weeks or months of pay in front of them at the exact moment they are losing their job.
In the memo sent to regional offices, General Counsel Jennifer Abruzzo addressed what had been one of the largest questions that resulted from the ruling: Does it retroactively void broad non-disparagement agreements that were signed prior to the February ruling? Abruzzo wrote that the decision does, in fact, have “retroactive application,” meaning that already-signed and “overly broad” non-disparagement clauses are no longer considered valid by the NLRB.
Abruzzo is charged with prosecuting cases against employers who break the rules. She said an unlawful clause would likely not invalidate an entire severance agreement, as the regional offices tend to “seek to have [the unlawful portions] voided out as opposed to the entire agreement.”
However, employers who attempt to continue to enforce illegal severance clauses could face trouble from the NLRB. While the NLRB typically has a six-month statute of limitations for labor violations, businesses who attempt to enforce illegal parts of an older severance agreement would be committing a contemporary “violation” and subject to enforcement, Abruzzo said.
Additionally, Abruzzo provided clarification around what non-disparagement and confidentiality clauses may still be considered legal. The provisions, she said, must be “narrowly-tailored.” In the case of confidentiality, the clause must serve to keep proprietary trade information secret “for a period of time based on legitimate business justifications may be considered lawful,” but must not have “a chilling effect that precludes employees from assisting others” or communicating with the media, a union, or other third parties.
With regards to non-disparagement, Abruzzo similarly said the provision must not only be both “narrowly-tailored” and “justified,” but limited to statements by an employee that fit the legal definition of defamation, meaning they are purposefully and maliciously untrue.
In February, the NLRB ruled that in a case regarding a Michigan hospital, laid-off workers had been asked to sign unnecessarily burdensome severance contracts that violated their labor rights. The decision overturned a pair of Trump-era decisions which had temporarily upended the previous “longstanding precedent” by saying that more broad non-disparagement and confidentiality clauses were lawful.
The NLRB this year said that the Trump era decisions were wrong and that the laid-off hospital employees had been asked to “overly broad non-disparagement and confidentiality clauses” that unnecessarily restrained their NLRB rights. The decisions led to questions about what the decision meant for people who signed similar non-disclosure agreements in the interim.
Read more from Maxwell Strachan.
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