NLRB Bars Employers from Including Non-Disparagement Clauses in Severance Agreements

Workers have the right to organize themselves in order to bargain collectively with their employers and advocate for better working conditions. Federal and New Jersey employment laws protect these rights and prohibit employers from interfering with or retaliating against employees who are engaged in lawful activities. The National Labor Relations Board (NLRB) adjudicates disputes over alleged violations of federal labor laws. In February 2023, it issued a ruling that invalidates a non-disparagement clause that an employer included in severance agreements for a group of employees it had just laid off. The NLRB found that the employer could not require workers to waive such a large number of legal rights. The following month, the NLRB’s General Counsel (GC) issued a memorandum providing guidance to NLRB directors and officers on how to implement this decision.

Section 7 of the National Labor Relations Act (NLRA) identifies a broad range of rights enjoyed by workers. This includes “the right to self-organization” and to join or form a labor union for the purpose of collective bargaining. The section also states that workers have the right to engage in “other concerted activities for the purpose of…mutual aid or protection.” The NLRB and the courts have interpreted this as providing rather broad protection of workers’ right to communicate among themselves and with others about various features of employment, such as working conditions and wages.

The case recently before the NLRB involved a hospital and a union representing various service employees. The hospital furloughed numerous employees at the beginning of the COVID-19 pandemic in 2020. It made the temporary furlough permanent for eleven union members later that year. Each of these employees received a “Severance Agreement, Waiver and Release” that offered a severance package in exchange for their signature. According to the NLRB’s ruling, the hospital did not inform the union of the furloughs or the severance agreements.

The agreement included a waiver of legal claims related to the employees’ employment and termination, a confidentiality agreement, and a clause entitled “Non-Disclosure.” That clause included an agreement not to “make statements…which could disparage or harm the image of” the hospital, any affiliated organizations, or its management.

An administrative law judge (ALJ) ruled that the non-disparagement clause violated § 8(a)(1) of the NLRA. Such a broad prohibition on “disparagement,” the ALJ found, was “unlawfully coercive.” This had been an NLRB precedent until 2020, when the Board issued two rulings that created a less stringent standard for non-disparagement clauses. With its February 2023 decision affirming the ALJ’s ruling, the NLRB overturned the two 2020 decisions and reinstated the earlier precedent.

On March 22, 2023, the GC issued Memorandum GC 23-05, which provides guidance on how the new ruling applies to new cases going forward. The memo notes that the decision could result in scrutiny of other provisions that seek to restrict workers’ activities after the end of an employment relationship, such as non-compete and non-solicitation clauses.

If you believe your employer has caused you harm by violating state or federal law, an experienced and skilled employment lawyer can help you assert your legal rights. The Resnick Law Group represents workers in New Jersey and New York in claims for damages. Please contact us online, at 973-781-1204, or at 646-867-7997 today to schedule a confidential consultation with a member of our team.

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