The National Labor Relations Board ruled Tuesday that employers can no longer demand laid-off employees avoid publicly disparaging the company as part of their severance agreements, nor can they stop affected employees from disclosing the terms of their exit packages. Doing so, the federal agency determined, would be a violation of the laid-off employees’ rights under the National Labor Relations Act.
The decision reverses two previous decisions, both in 2020, regarding the gambling company International Game Technology and Baylor University Medical Center, which held that such severance agreements were lawful. The board now says that determination was wrong and failed to recognize “that unlawful provisions in a severance agreement proffered to employees have a reasonable tendency to interfere with, restrain, or coerce the exercise of employee rights.”
Tuesday’s decision reinstated what had until 2020 been a “longstanding precedent” that companies cannot ask employees to waive their NLRB rights in order to receive severance, NLRB Chairman Lauren McFerran said in a statement.
The case concerned a hospital in Mt. Clemens, Michigan, which laid-off 11 employees in June 2020 at the height of the COVID-19 pandemic. As part of the severance agreement, the hospital demanded that the laid-off employees keep the terms “confidential” and agree not to say anything publicly that “could disparage or harm” the hospital’s image. If they did, they would face potentially “substantial” financial penalties.
Such demands “unlawfully restrain[ed] and coerce[d] the furloughed employees, the NLRB said Tuesday.
The decisions could prove significant. In recent years, limits on free speech have become an increasingly common aspect of many severance agreements, meant to limit damage and backlash stemming from mass layoffs.