NLRB Issues Ruling on Unlawful Severance Agreements

This week, the National Labor Relations Board issued a ruling stipulating that employers cannot make employee severance packages contingent on workers giving up NLRA-enacted rights. Specifically, that employers cannot prevent terminated employees from disparaging the employer or keeping the contents and existence of their severance agreement confidential.

In this most recent decision the board ruled that offering severance based on giving up labor rights was in and of itself an effort by employers to steer workers away from their statutory rights.  

According to board chairman Lauren McFerran, “It’s long been understood by the Board and the courts that employers cannot ask individual employees to choose between receiving benefits and exercising their rights under the National Labor Relations Act. Today’s decision upholds this important principle and restores longstanding precedent,”

The NLRB’s ruling is part of a larger strategy by the Biden administration to shore up workers’ rights. As of now, the common provisions of non-disparagement and confidentiality in severance agreements are not permissible under this ruling, however, it is expected to be appealed. The ruling also references potential carve-outs, which will be explored in the coming months. We will be monitoring this ruling closely as it has broad ramifications for our employer and employee clients signing or offering severance agreements.