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New Rule on Severance Agreements Puts Onus On HR, Employers  

The National Labor Relations Board has reversed a ruling under the Trump Administration that made it easier for employers to bound workers to confidentiality and non-disparagement requirements pertaining to severance agreements.

NLRBLast month, the NLRB notified employers that they are not permitted to offer severance agreements to their employees that would require those workers to broadly surrender their rights. The February 21 decision pertains to severance agreements for furloughed workers that banned them from communicating in ways that could disparage their bosses and from revealing the terms of these agreements. “A severance agreement is unlawful if it precludes an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about his employment,” the decision notes.

The NLRB notes in a release “that simply offering employees a severance agreement that requires them to broadly give up their rights under Section 7 of the Act violates Section 8(a)(1) of the Act.”

“The Board observed that the employer’s offer is itself an attempt to deter employees from exercising their statutory rights, at a time when employees may feel they must give up their rights in order to get the benefits provided in the agreement,” according to the release.

The NLRB decision applies to employers for union and non-union workers, Justin Peters, James Sconzo and Jonathan Sterling, attorneys at Carlton Fields, write for JD Supra. “The decision will require employers to reexamine use of severance agreements and any type of waiver or contract signed by an employee that waives the employee’s rights to discuss the agreement with coworkers or disparage their employer,” they write.

Employers and human resources departments need to be mindful that confidentiality and non-disparagement clauses they include in employment contracts “avoid taking actions that could reduce employees’ willingness to engage in protected concerted activity.”

“This includes avoiding the use of broadly worded severance agreements that require employees to refrain from discussing the terms of an agreement with coworkers,” the attorneys note.

Whether the NLRB decision applies to employees who have already signed a non-disparagement agreement, however, is not entirely clear, Vice reports. “It would not invalidate these prior agreements,” Alex Granovsky, a New York-based employment lawyer said, noting that the decision does not apply retroactively. And while Kate Bischoff, a Minneapolis-based employment law attorney and human resources consultant, notes that technically, “the legal principle is that it does not retroactively apply,” how it all plays out is still in question.

In theory, employers with such existing agreements prior to the NLRB decision could sue for breach of contract, but the employee would be able to make a “pretty good argument that the provision was unlawful.”

“If an employee goes out and says some bad things, whether or not an employer is going to be successful at enforcing the agreement is another thing entirely,” she said. Still, New York employment lawyer Glenn Grindlinger notes that NLRB decisions “almost always apply retroactively.”

“Typically, changes in the law do not apply retroactively,” he said. “But the National Labor Relations Board does not follow that. It is very rare for a National Labor Relations Board decision not to apply retroactively.”

While the NLRB decision could face a court challenge, the ruling became effective immediately, CNN Business reports. “This decision opens the door,” Granovsky tells CNN. “While on the one hand sunlight is the best medicine, and greater exposure should lead to better companies, this decision could also change the dynamics of a severance negotiation.”

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