The NLRB ruled that employers can not require employees to sign non-disparagement clauses as part of a severance agreement.
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Companies can’t require employees to waive their rights as part of a severance agreement.
In a ruling on Tuesday, the National Labor Relations Board said such requirements are “unlawful.”
Workers can’t be forced to “choose between receiving benefits and exercising their rights,” NLRB’s Lauren McFerran said.
Companies that make former workers promise not to disparage their former employers in exchange for a severance payment are breaking the law, the National Labor Relations Board ruled Tuesday, restoring what it said was an “important principle and longstanding precedent” that employees cannot be coerced into waiving their rights.
The decision concerned a Michigan hospital that, in the midst of the COVID-19 pandemic, terminated 11 union employees and asked them — in exchange for a payout — to sign severance agreements barring them from making public comments “which could disparage or harm” the company.
In 2020, the NLRB, at the time operating with a Republican majority, twice ruled that such limits on speech were legal, arguing in one of its decisions that severance agreements with nondisparagement clauses are “entirely voluntary.”
But those earlier rulings were flawed, the NLRB’s new Democratic majority said Tuesday, asserting that employees cannot waive their rights under federal labor law — and that asking them to could affect the rights of those still on the job.
“We therefore overrule both decisions and return to the prior, well-established principle that a severance agreement is unlawful if its terms have a reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their Section 7 rights,” the board said, referring to the right under federal law to engage in collective action, such as union organizing, to improve workplace conditions.
Nondisparagement clauses, it reasoned, could prevent former workers from being able to assist investigations into ongoing labor law violations.
The NLRB is a five-person organization whose members are nominated by the president. It’s current chairperson, Lauren McFerran, is a Democrat who has served since January 2021. The lone dissenter on Thursday’s ruling, Marvin Kaplan, was appointed in 2017.
In a statement, McFerran said Thursday’s ruling reflected an understanding that “employers cannot ask individual employees to choose between receiving benefits and exercising their rights under the National Labor Relations Act.”
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