The written agreement is the most common tool for employers to outline rights, responsibilities and protect their reputation from harm from disgruntled employees. In particular, severance agreements have been the cornerstone of protecting the employer’s rights and preventing the unnecessary cost of future lawsuits involving their staff.
However, recently, the National Labor Relations Board (“NLRB”) issued a decision that will have a dramatic impact on how employers prepare and enforce their severance agreements in McLaren v. McCombs. This decision, most importantly, limits an employer’s ability to draft enforceable confidential and non-disparagement clauses in their severance agreements without narrowing the language of those provisions beyond what was previously allowable, and attributing those provisions to a specified legitimate business interest.
A Memo was issued by the general counsel for the NLRB, Jennifer A. Abruzzo, in March, which clarifies that confidentiality clauses and non-disparagement restrictions may still be included in contracts. Yet, Ms. Abruzzo notes that any confidentiality clauses must be narrowly tailored to a duration justifiable by legitimate business justifications in order to be deemed valid. The memo was starkest in its restrictions of non-disparagement clauses, stating that only “statements about the employer that meet the definition of defamation as being maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity,” may be deemed lawful. For obvious reasons, this is a standard that will be difficult for employers to meet even in scenarios where former employees are spreading false information about the company.
This decision takes a hatchet to the breadth of protections that an employer may incorporate into its employment agreements. Under this new regime, employers will need to dramatically alter their current templates for offer letters, severance agreements and confidentiality addendums. It will be imperative that both HR departments and employers speak with their local counsel to discuss altering the current language of their existing agreements to comply with the recent decision’s mandates.
Failure to adjust could leave employers exposed as they will no longer have any recourse to restrict former employees’ conduct that could be determinental to their confidential business practices or their general reputation. If you have any questions about this decision, or its implications, do not hesitate to contact Senior Counsel, John Krawczyk at firstname.lastname@example.org.