M&A transactions often include special bonus, severance and/or release agreements for some or all employees. These agreements have generally included provisions requiring the employee (1) to keep confidential the amount of any bonus/separation payment and (2) to refrain from disparaging the employer. As recently as 2020, the National Labor Relations Board (“NLRB”) ruled that such compensation confidentiality and nondisparagement provisions are permitted under the National Labor Relations Act (the “Act”). However, with Biden Administration appointees now in control of the NLRB, this may no longer be the case.
On Aug. 12, 2021, the NLRB’s new General Counsel Jennifer Abruzzo issued a detailed memo outlining various areas where “numerous adjustments to the law” and “doctrinal shifts” made by the NLRB over the past several years would be reexamined, including cases “finding that separation agreements that contain confidentiality and non-disparagement clauses” are lawful. It appears that the NLRB has concluded that such provisions should not be lawful and, in fact, constitute unfair labor practices when applied to non-supervisory employees. The NLRB has already filed unfair labor practice charges in the context of special bonus agreements that included such provisions.
While employers have the right to challenge the NLRB’s rulings and may ultimately prevail, for now the most prudent strategy is to remove the following from employee severance, bonus and release agreements:
- Confidentiality covenants that prevent employees from disclosing the amount of their compensation, bonus or severance payments; and
- Nondisparagement covenants that require a departing employee not to make statements that are detrimental to the employer’s business or reputation.
