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NLRB Limits Severance Agreements


The National Labor Relations Board (“NLRB”) issued a major ruling this week on a case involving severance agreements. Until recently, employers had the right to include clauses within employees’ severance agreements and employment contracts that limited, or in some cases prohibited, their ability to disparage employers and reveal the specific terms of their agreement. However, the NRLD has ruled that could be a breach of Section 7 and 8(a)(1) of the National Labor Relations Act, which protects employees’ right to protected concerted activity.


Protected concerted activity is a legal concept under labor law rights, supported and enforced by the National Labor Relations Act (“NLRA”), that provides employees with the bargaining power, or leverage, to discuss work issues, unionize, petition for better work environment, etc. with no repercussions or risk of losing their jobs. Section 7 specifically gives employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” including the right “to refrain from any or all such activities”. Section 8, on the other hand,  ensures that “interfering with, restraining, or coercing employees in their exercise of the rights guaranteed in Section 7” violates the act and opens the employer to possible legal action.


This ruling is significant for businesses because many small business owners use employment or severance agreements that contain non-disparagement and confidentiality clauses that could, under this new ruling, be deemed to violate the NLRA. Also, although this ruling could be appealed, it is effective immediately – requiring immediate action to revise those agreement still being used.


If you use employment or severance agreements, and would like to obtain a review of those documents, revised agreements and a consultation on your practices and policies, please contact the Business Lawyers at The Jacobs Law at 1-800-652-4783 or office@thejacobslaw.com


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