Companies can't shut you up using severance pay, at least in the US
Watchdog reverses Trump era decision upholding ability to stop ex-staffers talking smack about you
A US federal agency has made an employee-friendly ruling that affects laid-off staffers: if your company has given you severance pay, it can't insist you keep its skeletons in the closet in exchange.
The ruling affects all US business employers, which are subject to the National Labor Relations Board's (NLRB) authority, although public sector workers and independent contractors are not.
It means that tech companies Stateside will already be combing through the wording of their boilerplate severance agreements, which can't insist on silence and preventing leaks of critical details about their corp in exchange for severance pay. This might be quite timely for some in the midst of the industry's job-shedding bloodbath - 100,000 tech jobs were cut worldwide in January, according to layoffs.fyi.
The decision, which is effective immediately, was made earlier this week in the case McLaren Macomb (07–CA–263041), where a unionized teaching hospital laid off some of its employees, and put confidentiality and non-disparagement provisions in the severance agreements. The former workers then took the issue to the NLRB. The decision explained that tagging gag rules onto offers given to furloughed employees "prohibited them from making statements that could disparage the employer and from disclosing the terms of the agreement itself." This meant employees were then required to "broadly give up their rights under Section 7 of the Act violates Section 8(a)(1) of the [National Labor Relations] Act."
Section 8(a)(1) says it is unlawful for an employer to interfere with, restrain, or coerce employees in the exercising of their rights – including things like joining together to "advance their interests as employees."
The Board observed that the employer's offer is itself an attempt to deter employees from exercising their statutory rights, at a time when employees may feel they must give up their rights in order to get the benefits provided in the agreement.
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The ruling from the independent American federal agency reverses two previous Trump-era decisions (Baylor University Medical Center and IGT d/b/a International Game Technology, issued in 2020) which found that offering such severance agreements to employees was not unlawful by itself. Baylor, for example, said you could have a non disparagement provision in your severance agreement if the employee signed it "voluntarily" and wasn't fired illegally.
The NLRB called this week's move a return to "precedent" after the 2020 rulings.
"It's long been understood by the Board and the courts that employers cannot ask individual employees to choose between receiving benefits and exercising their rights under the National Labor Relations Act. Today's decision upholds this important principle and restores longstanding precedent," said NLRB chairman Lauren McFerran of the ruling [PDF], which she issued in conjunction with 2021 board appointees Gwynne Wilcox and David Prouty.
Republican NLRB member Marvin Kaplan dissented, arguing: "My colleagues' decision that Baylor and IGT must be overruled is based on a few fundamental misunderstandings of the Board's holdings in Baylor and IGT." ®