Labor Board Restricts Confidentiality Provisions in Severance Agreements

Published on: March 23, 2023

Authors: Gregory Hoff

Topics: Employee Relations, Employment Law

The Board recently issued a case that would make it unlawful for employers to attach overly restrictive confidentiality, non-disparagement, and non-disclosure provisions in employee severance agreements. The decision overturns a Trump-era Board decision that more freely permitted employers to include such provisions in severance agreements.

Background: In Baylor Univ. Med. Ctr., the Trump-era Board created new precedent under which employers were freely permitted to include confidentiality provisions, non-disparagement, non-disclosure agreements, and other contractual conditions in severance agreements. Under Baylor, such agreements would only be unlawful if the employer unlawfully terminated the employee in the first place or committed some other unfair labor practice in conjunction with the severance agreement containing such provisions.

The current Board’s decision in McLaren Macomb overturns Baylor and goes back to traditional Board precedent under which severance agreements violate federal labor law if their provisions – including NDAs, non-disparagements, and other confidentiality provisions – restrict or interfere with an employees’ rights to concerted activity under the NLRA. Employers are therefore prohibited from including, for example, non-disparagement clauses that ban any negative discussion of the employer by the employee – this exact type of clause was found unlawful by the Board in the present case.

More flip-flopping: The Board’s decision continues the labor policy whiplash from the Board that has become increasingly prevalent over the last two administrations. Additionally, the Baylor case was notably one specifically sought by General Counsel Jennifer Abruzzo for the Board to overturn, highlighting the influence her particular agenda has on the Board.