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Severance Agreements

Maya Lash • February 27, 2023 • 4 minute read

The National Labor Relations Board (NLRB) enforces labor laws in the United States, specifically those related to collective bargaining and unfair labor practices. On February 21, 2023, the NLRB issued a ruling in McLaren Macomb, 372 NLRB No. 58 (2023) about, among other things, a Severance Agreement that contained confidentiality and non-disparagement provisions. The provisions at issue prohibited employees from disclosing the terms of the Severance Agreement to most third parties, and broadly restricted employees from making statements about the employer. After examining the language of the agreement, the NLRB determined that these provisions interfered with the rights of employees and were in violation of the National Labor Relations Act.

Confidentiality clauses require a person to keep certain information confidential. These clauses are often found in Employment Agreements since, during the course of employment, an employee will likely learn and have access to sensitive information which, if disclosed, could harm their employer. Employers include confidentiality clauses in Severance Agreements in order to prevent the employee from disclosing its content and terms to others, including the amount of the severance pay. By including a confidentiality clause, the employer can require that the employee not disclose any of the specified confidential information, subject to certain exceptions.

The Confidentiality clause that was provided to employees in the NLRB ruling read as follows: “The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.

This was an issue in the NLRB ruling because it prevented employees from being able to discuss the severance terms with former coworkers and union representatives, among others.

Non-Disparagement clauses prevent whoever the clause runs against from saying bad things about the counterparty. Sometimes a non-disparagement clause is one-way (e.g., the severed employee can’t say anything negative about their former employer), and sometimes it’s mutual (neither party can say something bad about the other). They may also set penalties for breach. Non-disparagement clauses can be good and bad. From an employer’s perspective, they are paying severance, so wouldn’t like their ex-employees going around saying bad things about them, and ex-employees might like to prevent their ex-employer from badmouthing them (if the agreement is mutual). On the other hand, a non-disparagement clause can work to cover up legitimately bad behavior, which is why they have come in for increased criticism in recent years, and likely why the NLRB acted against them.

The non-disparagement clause at issue in the ruling read: “At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.”

If you have a Severance or Employment Agreement and you would like to see whether your agreement contains confidentiality and non-disparagement provisions, you can upload your document to our Contracts AI for free at the top of this page. Zuva’s AI will extract these provisions, as well as other termination-related provisions contained within your agreement, such as obligations related to notice and severance pay. It’ll also find non-competition and non-solicitation language, which are very important go-forward obligations to know about if you’re leaving your job. (Note that the US Federal Trade Commission has proposed banning non-competes from most employment contracts.) These AI models will automatically be applied to your agreement, allowing you to easily see whether your agreement contains these provisions and, if they are found, what those provisions say.

To use our free Contracts AI, simply upload your agreement by clicking the “Upload Your Document” button at the top of this page.