Recently, the National Labor Relations Board (NLRB) has brought enforcement actions against employers who include confidentiality provisions in their severance agreements. For example, the NLRB recently settled a case against Lucid Group, Inc. (Lucid) where Lucid agreed to remove an overbroad confidentiality provision from its severance agreements, and to not enforce the provision in the severance agreement that was the subject of the complaint.
Most private sector employers are covered by the National Labor Relations Act (NLRA) even if they don’t have a unionized workforce. Under the NLRA, employees have “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Additionally, the NLRA makes it an unfair labor practice for employers “to interfere with, restrain, or coerce employees” in their exercise of such rights.
Per the NLRB, a non-disparagement clause is unlawful if it is too broad in scope, not limited to matters related to employment, contains no time limit, extends non-disparagement protection to entities related to the employer, and effectively prohibits the employee from organizing and discussing unfair labor practices with other employees. Additionally, according to the NLRB, confidentiality clauses are unlawful if they forbid the disclosure of agreement terms (including the existence of the non-disparagement clause) and any discussion of the agreement between employees.
The NLRB’s reasoning is that employers cannot ask employees to make a choice between receiving benefits and keeping the opportunity to exercise their rights under the NLRA. Going forward, employers subject to the NLRB’s jurisdiction should be aware that while severance agreements are still lawful, they must not include non-disparagement clauses, confidentiality clauses, or any other clauses that effectively bar NLRA protected activities. These limitations on confidentiality are in addition to state laws limiting nondisclosure and non-disparagement clauses, such as RCW 49.44.211.
As with other federal agency rules and decisions, it is possible that the NLRB’s rulemaking and decisions could be challenged based on a recent U.S. Supreme Court decision overruling the Chevron Doctrine, which gave deference to agency’s interpretations of the laws they administer.
This summary is a broad overview of a complex topic, and it does not constitute legal advice. If you have any questions, please contact ksutherland@omwlaw.com or any other member of the Ogden Murphy Wallace, P.L.L.C. Employment and Labor Law Group.
