E-Alert: NLRB Prohibits Disparagement Clauses in Settlement Agreements with Former Employees

The National Labor Relations Board (NLRB), issued a decision on February 21, 2023, reversing two Trump era decisions regarding non-disparagement and confidentiality language in former employee severance agreements. The underlying case, McLaren Macomb and Local 40 RN Staff Council, Office and Professional Employees, International Union (OPEIU), AFL-CIO, dealt with eleven hospital employees who were terminated during the COVID-19 pandemic. In exchange for signing severance agreements, the employees’ agreements included language prohibiting the employees from making public comments “which could disparage of harm the image of the Employer.”

Prior to this decision, in a string of cases decided under the Trump era Board, the Board analyzed employee severance agreements with similar non-disparagement and confidentiality provisions and concluded that, absent outside circumstances that could render the mere proffers coercive, the simple act of offering former employees similar severance agreements does not constitute a violation of the National Labor Relations Act.

Now, the Board has returned to its previous standard under which it will find that a “severance agreement is unlawful if its terms have a reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their Section 7 rights, and that employers' proffer of such agreements to employees is unlawful.” Thus, the majority reasoned that because the Act is designed to protect employees in the exercise of their Section 7 rights, the mere proffer of such agreements will be unlawful under the Act because they purport to create a legal obligation to require employees to forfeit their Section 7 rights.

This decision is troublesome for employers as the NLRB is now seemingly expanding rights under the Act to cover former employees. If you have questions concerning these recent decisions, please feel free to contact one of our labor and employment attorneys by calling (501) 371-9999.