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A court decision has raised important questions about the legality of non-disparagement and non-disclosure clauses in employee separation agreements. Are your agreements still compliant with the latest federal labor laws?
When entering into a separation agreement with an employee or employer, it’s common for the parties to want to include non-disparagement clauses. These clauses prevent either party — but usually the employee — from disparaging the employer. Along with non-disclosure agreements (NDAs), they’re a way for the employer to protect their reputation, and they are often signed in exchange for something else (such as severance pay). However, a ruling by the National Labor Relations Board (NLRB) raises questions about their legality. What does this mean for healthcare practice owners?
Understanding the Ruling
On February 21, 2023, the NLRB issued a decision in the McLaren Macomb case, finding that the employer violated labor law by offering furloughed employees severance packages with overly broad non-disparagement and non-disclosure clauses. Specifically, the clauses violated the parts of the NLRA that protect employees’ rights to organize and engage in collective bargaining.
The decision is significant because it applies to unionized workplaces as well as non-union employers. The NLRB explained that these broad clauses could discourage employees from exercising their rights under the NLRA, particularly the right to discuss the terms of their severance agreements. The provisions in question were so sweeping that they could have prevented employees from reporting unlawful terms to the NLRB itself. This goes against public policy that anyone “with knowledge of unfair labor practices should be free from coercion in cooperating with the Board.”
What Employers Should Do Next
Does the NLRB decision mean employers can’t include non-disparagement or non-disclosure agreements in their separation agreements? Not necessarily. It just means that employers will have to be more careful about how they include these provisions.
All employers should review the language in their separation agreements and carefully consider which employees receive these agreements. Questions employers should ask during this process include:
- What information needs to be kept confidential?
- How broad is the current language of the agreement?
- Can the language be narrowed to cover only the information that must be kept confidential?
- Are there any employees or positions that may not need a confidentiality agreement or non-disparagement agreement?
How This Ruling Affects Agreements in Healthcare
Given the prevalence of non-disclosure agreements (NDAs) in healthcare, the ruling may alarm practice and business owners. However, the NLRB is looking at a specific context — clauses within severance agreements — and prohibiting those clauses when they are overly broad or restrictive.
In contrast, the NDA you might ask your brand-new employee to sign — such as one that protects patient confidentiality, business transactions, or trade secrets — is different. Such agreements typically don’t threaten an employee’s rights under the NLRA. Moreover, those NDAs clearly define the specific information or classes of information they cover. For more information, see our blog post, Non-Disclosure Agreements (NDAs) for Healthcare Practices.
Get Legal Support
The attorneys at Jackson LLP are here to help you assess your current separation agreements and ensure they comply with the NLRA and other federal and state laws. Whether you need a thorough review or specific revisions to your agreements, our team can provide the guidance you need to protect your business and stay compliant. If you are in one of the states where we have licensed attorneys, schedule a complimentary phone consultation to learn more.
This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader. It should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.
