The National Labor Relations Board has ruled that it is generally illegal for companies to offer severance agreements that prohibit workers from making potentially disparaging statements about the employer or disclosing details of the agreement.
The ruling council, which has a Democratic majority, overturns a pair of 2020 decisions in which the Republican-controlled board found such severance deals not illegal on their face. It continues the trajectory of a pro-worker and pro-union labor council under President Biden.
Previous decisions have held that severance agreements are illegal only when they are accompanied by other suspicious circumstances, such as the possibility that they were used to cover up the illegal firing of employees who tried to unionize.
Still, Anne Lofaso, a professor of labor law at West Virginia University, said the latest decision was limited to rights under the National Labor Relations Actsuch as the rights of employees to raise awareness of unsafe working conditions or to engage in other activities that protect or benefit workers as a group.
She said an employer can still offer employees a severance agreement that requires them to waive their right to sue for, say, racial discrimination under Civil Rights Act of 1964.
In a decision issued Tuesday, the board said it was returning to long-standing precedent. The 2020 standard, she said, ignored the fact that a severance package with confidentiality or non-disparagement provisions could itself “unlawfully limit and enforce” workers’ employment rights.
“The board and the courts have long understood that employers cannot require individual employees to choose between receiving benefits and exercising their rights,” board chairwoman Lauren McFerran said in a statement.
Charlotte Garden, a professor of labor law at the University of Minnesota, said Approach 2020 effectively tried to “narrow the rule to situations where an employer sought to cover up its own prior illegal activity and prohibit employees from talking about it.” The current decision, she added, takes a broader view of when employees have the right to express themselves.
The case involved a Michigan hospital that permanently laid off 11 union members during the pandemic. In order to receive severance pay, they had to sign an agreement that prohibited them from making statements that might disparage the hospital and sharing the terms of the contract.
By furloughing employees and offering them a deal, the hospital bypassed the union, denying it the ability to negotiate terms, according to Tuesday’s ruling.
Marvin Kaplan, the board’s lone Republican, argued in his dissent that offering the severance deal was illegal because the hospital bypassed the union, but not specifically because of its nondisclosure and nondisparagement provisions.
Under Mr. Biden’s appointees, the labor board has moved relatively quickly to bring back workers it says were illegally fired. She also issued judgments expand effectively financial remedies available to such workers and make it easier for a subset of workplace employees to unionize.
