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First, They Came for Non-Competes — Now, the Focus is on Non-Disparagement Clauses

Feb 28, 2023Litigation & Dispute ResolutionEmployment Litigation

In an upcoming article in the Nassau Lawyer, I will examine the FTC’s proposed ruling as it pertains to essentially outlawing non-compete agreements nationwide. However, adding insult to injury, the NLRB issued a ruling on February 21, 2023 asserting that employees cannot waive their rights under Federal Labor Law to disparage former employers in exchange for severance payments, notwithstanding that the former employer paid the employee a severance payment and denied all liability associated with the allegations asserted by that employee.

The action by the NLRB, which affects all employers irrespective of whether they are unionized, is simply following a trend in various states that have established broad bans on the company’s use of non-disclosure and non-disparagement provisions. For example, effective June 9, 2022, Washington state enacted the “Silent No More Act,” banning NDAs related to all form of workplace discrimination as well as wage and hour violations and it prohibited agreements containing non-disclosure and non-disparagement provisions that restrict applicants, employees and independent contractors from openly discussing conduct or a legal settlement involving conduct of the applicant, employee or contractor who “reasonably believed” was subject to illegal discrimination, harassment, retaliation, wage and hour violations, sexual assault or conduct that is “against a clear mandate of public policy.”

While that state’s statute still would require employees to keep secret the amount paid in a settlement (assuming that was negotiated as part of the agreement), the employee can still speak to the facts of the settlement while not necessarily mentioning the amount. Maine and Oregon also enacted similar statutes.

The NLRB’s ruling in McLaren McComb, 372 NLRB No. 58, provided that such provisions may contain unlawful terms that have a reasonable tendency to “interfere with, restrain or coerce employees” in the exercise of their Section 7 rights. As a remedy for this violation, the NLRB ordered the employer to cease and desist from presenting employees with agreements containing the unlawfully overbroad confidentiality and non-disparagement provisions and to post in the workplace for sixty days and otherwise distribute to employees notices of its unfair labor practices.

As I have written in the past, employers should not assume that because their workers are not unionized that they need not be concerned with NLRB rulings as Section 7 of the National Labor Relations Act does not simply protect union workers. The phrase “to engage in protect concerted activity” has been read by this (and prior) NLRB Boards to be very broad and covers union and non-union shops alike.

The McLaren majority held out some hope for employers, permitting certain non-disparagement and non-disclosure provisions provided they are “narrowly tailored.” Yet, the meaning of “narrowly tailored” has yet to be defined. Thus, with guidance is unclear, employers are relegated to waiting with bated breath as to whether they can even undertake to draft non-disparagement and non-disclosure provisions within their severance agreements.

If an employer finds itself in a position whereby it truly believes it requires these provisions to be part of the severance agreement, it should seek out legal counsel who will do their level best to “narrowly tailor” those provisions to hopefully pass muster assuming they are challenged.