Employers Must Reconsider Confidentiality and Nondisparagement Agreements

Employers need to reconsider the confidentiality and nondisparagement clauses in severance agreements.  The National Labor Relations Board issued a decision on February 21, 2023 concluding that severance agreements may be deemed unlawful if they broadly restrict an employee’s ability to speak about the agreement or disparage their employer.  The reason is because these provisions, especially when drafted broadly, tend to chill the exercise of employee rights under Section 7 of the National Labor Relations Act.  Notably, an employee does not need to be unionized in order to be protected by these Section 7 rights.  

This is a significant and concerning change in the law for employers who seek to include confidentiality and nondisparagement provisions in severance and settlement agreements.  We may see some guidance or advisory memos that will help employers better understand the extent to which agreements can contain any such language in the future.  For now, though, it is fair to say that the current Board is very employee-friendly, and we will likely continue to see more scrutiny of other employer policies that can be interpreted to restrict Section 7 rights.

Employers should consult with experienced employment law counsel (ahem - not ChatGPT!) to best determine how, or if, the language in future severance agreements should be revised in light of this decision.


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