Corporate Services, Inc.
208 Kishwaukee St. · Rockford, IL 61104
(p) (815) 962-8367 · (f) (815) 962-0940

Time Again to Review Your Severance Agreements


On June 26, 2024, the National Labor Relations Board (NLRB) issued a cease and desist order forcing an employer to rescind overly broad nondisparagement and confidentiality language from its severance agreement.

Logo for the National Labor Relations Board (NLRB)
Logo for the National Labor Relations Board (NLRB)

In addition, the administrative law judge (ALJ) instructed the employer in Prime Communications and Spencer Smith (pdf) to "notify in writing all former employees who signed the separation agreements that it has done so and that the unlawfully overbroad nondisparagement and confidentiality provisions will not be given effect."

In this case, the nondisparagement provision stated that it was "intended to be as broad as possible and to include the written publication of any information related to [the company], [its] business, [its] partners, owners, employees, agents, or services, whether true or untrue." Additionally, it expressly forbade former employees from "calling, making personal contact with or, emailing any employee of [the company] at any location [...]."

However, the ALJ was particularly interested in how this broad language would impede employees' rights under the National Labor Relations Act (NLRA). Section 8(a)(1) of the Act makes it unlawful to interfere with, restrain, or coerce employees to exercise their rights to engage in union and other protected concerted activities, like discussing working conditions.

Even without any attempt at enforcement, an employer violates Section 8(a)(1) of the Act by proffering a severance agreement with provisions that would restrict employees' exercise of their NLRA rights.

The ALJ reasoned that the no-contact rule would preclude a signatory "from assisting former coworkers who may be interested in challenging similar agreements or involved in any other employment dispute." According to the ALJ, the employer drafted the agreement to be "as broad as possible." Therefore, the provision "quite obviously" violated the Act. The agreement also included a $5,000 penalty for each such communication, which did not help its cause.

The ALJ also found the confidentiality provision, which reads: "Employee promises that he will maintain in confidence the terms and existence of this Agreement and will not disclose the existence of this Agreement or its terms to anyone else, except to his spouse, tax advisor and/or attorney," to be overly broad.

What was wrong with the relatively standard confidentiality provision? It prohibited disclosure of all terms, "as well as their mere existence," to "anyone else" or "any third party" except a tax advisor or attorney. So they "would reasonably tend to coerce the employee from filing an unfair labor practice charge or assisting an NLRB investigation into the Respondent's use of the severance agreement, including the nondisparagement provision." The $5,000 penalty for each violation also had a chilling effect on protected concerted activity.

Posted In: National Labor Relations Act (NLRA); National Labor Relations Board (NLRB)

Want to know more? Read the full article by at The Employer Handbook

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