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Businesses now need to check their severance agreements

On Behalf of | Mar 14, 2023 | Employment Law for Employers |

This is a trying time to be in business, and it has been for the last few years. It seems that the uncertainty that is always in the market has been turned up to 11 for far too long. And, to avoid post-lay-off litigation, many employers use severance agreements with healthy severance packages to make parting ways amicable. However, a recent decision by the National Labor Relations Board may throw those plans into turmoil.

The National Labor Relations Board

The NLRB has jurisdiction over just about every business, except airlines and trains. The Board’s responsibility as an independent federal agency is to protect employee rights to organize unions and protect against other unfair labor practices.

The National Labor Relations Act

Under the previous administration, Sections 7 and 8(a)(1) of the National Labor Relations Act was interpreted as allowing broadly written confidentiality clauses within severance agreements. These clauses prohibited former employees from disparaging their former employees or revealing information from the severance agreement or other company information.

Under the newly empaneled Board, however, the interpretation of Sections 7 and 8(a)(1) of the National Labor Relations Act changed. Now, broadly written confidentiality clauses within severance agreements are no longer legal, according to a recent NLRB decision.

The law, for now

For Tarrytown, New York, business owners who are familiar with the NLRB, they know that these decisions are appealable, and likely believe that this opinion will be appealed. You are likely correct. However, until the NLRB changes their mind or another federal judge finds differently, the recent decision is the law of the land. It takes effect immediately.

What does that mean?

It means that Tarrytown, New York, businesses now need to check their severance agreements to ensure that they comply with this new NLRB decision. Read broadly, this new prohibition could invalidate entire severance agreements.