NLRB Rules that Employers Cannot Impose Gag Orders in Severance Agreements

Yesterday, the National Labor Relations Board issued a landmark decision ruling that employers violate federal labor law if they condition severance payments on confidentiality and non-disparagement provisions and other provisions that restrict their exercise of NLRA rights.

The NLRB decision reverses two Trump-era decisions concluding that such provisions are only unlawful under certain circumstances. In reversing those decisions, the NLRB declared that the provisions interfere with workers’ rights “regardless of the surrounding circumstances.” The NLRB concluded that an employer now violates Section 8(a)(1) of the National Labor Relations Act if it conditions a severance agreement on any provision that would “restrict employees’ exercise of their NLRA rights.”

The NLRB remarked that its decision tracks with the historical understanding of the NLRA, which the Board previously understood to prohibit any agreement that “had a reasonable tendency to interfere with, restrain or coerce” an employee’s exercise of his or her NLRA rights. That understanding was upended by the Board’s decisions in Baylor University Medical Center and International Game Technology, which held that agreements are legal if they are voluntary, limited to post-employment activities, and the employee offered the agreement was not fired unlawfully.

The Board stated that the Baylor and IGT decisions were “flawed in multiple respects.” Now, “simply offering employees a severance agreement that requires them to broadly give up their rights” under the NLRA is unlawful.

NLRB Chairman McFerran noted that it has “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.” Yesterday’s decision “upholds this important principle and restores longstanding precedent.”

While the decision was made in the context of unionized employees, the Board’s ruling is equally applicable to non-unionized workers protected by the NLRA. The NLRA generally protects employees in the private sector, with the exception of agricultural laborers, independent contractors, and supervisors. As such, any severance agreement applicable to those employees – whether in a unionized or non-unionized workplace – may be deemed unlawful if it restricts a former employee’s right to discuss the agreement or disparage his or her former employer.