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New case just changed severance agreements

On Behalf of | Feb 23, 2023 | Contract Disputes

Layoffs have been in just about every news cycle for the last few months, and in each one of those articles is some mention of severance agreements. These are key ways to avoid business disputes and litigation, and included as part of these agreements are often broad confidentiality clauses. However, a recent decision has largely voided them here in San Francisco and across the country.

The National Labor Relations Board

In the last full week of February, the National Labor Relations Board changed its interpretation of Sections 7 and 8(a)(1) of the National Labor Relations Act. During the prior administration, it allowed broad confidentiality clauses in severance agreements that prevented former employees from disparaging their former employees and discussing the terms of their separation. However, now, the Board interprets Sections 7 and 8(a)(1) as baring blanket confidentiality clauses.

Immediately enforceable

Of course, this is an appealable order. However, until the order is appealed or stayed by a federal court, it is immediately enforceable. This means that currently, in place severance agreements may be litigated, if they have blanket confidentiality clauses, and if companies have these clauses in their severance agreements, they should likely narrowly tailor them to ensure that the severance agreements are enforceable later.

Who does it apply to?

The NLRB’s authority extends to just about all businesses and government (federal, state and local) employers within the United States. However, it does not extend to the railroad or airline industry. However, as this decision remains so new, it remains unclear about how it will impact specific cases, which is why you may need to consult a San Francisco, California, attorney.