It is common for employers to enter into severance agreements with employees whose employment is being terminated and for such agreements to contain language that prohibits the now former employee from:

• disparaging the former employer or its products, services, officers, directors, etc.
• contacting former co-workers
• disclosing the fact or terms of the severance agreement except to a spouse, legal and financial advisors, and taxing authorities

In Prime Communications, LP and Spencer D. Smith, Case 16-CA-309916, (June 26, 2024), an NLRB Administrative Law Judge ruled that such clauses, if overly broad, violate Section 8(a)(1) of the National Labor Relations Act (“Act”). That provision makes it unlawful for employers to interfere with, restrain, or coerce employees in their exercise of rights under that Act, which includes communications that have to do with the terms or conditions of one’s employment.

The agreement in question contained a broad “non-disparagement” clause that expressly stated that it was to be interpreted “as broad[ly] as possible” and to “include… publication of any information related to the former employer’s business, owners, employees, agents, or services” even if the statement were true. A $5,000 penalty per breach was also included. The agreement further prohibited the former employee from “calling, making personal contact, or emailing any employee” of the employer. As written, that clause would have prohibited the former employee from contacting a former co-worker even if the sole purpose of the contact was unrelated to business. Finally, the agreement contained a confidentiality clause that prohibited the employee from disclosing the terms or existence of the severance agreement to anyone other than those typically excluded from such clauses as mentioned above.

The Judge ruled that these clauses were overly broad because they would interfere with the Section 8 rights of employees to discuss terms and conditions of employment. Specifically, as to the confidentiality clause, the Judge ruled that it would tend to coerce the former employee from filing an unfair labor practice charge or assisting the Labor Board in investigating the employer’s use of severance agreements to interfere with Section 8 rights. Importantly, the Judge ruled this to be the case even in the absence of any attempt or threat by the employer to enforce these provisions of the severance agreement. 

The employer here was required to rescind the non-disparagement and confidentiality provisions of the severance agreement and notify all former employees who had signed similar agreements that such clauses were not binding. 

Employers who use severance agreements should have such agreements reviewed by competent employment counsel to be sure that their form of severance agreements do not violate the Act.

For questions, comments or additional information, please contact Robert Small, Chair of our Employment Practice Group, at rsmall@regerlaw.com or via phone at 215.495.6541.