Employers often want to be sure that departing employees won’t disclose confidential business information or make disparaging remarks about the company, and therefore include such obligations in severance agreements. But there are risks, unless the provisions are carefully tailored to account for recent legal developments.
For example, in Baylor Univ. Med. Ctr., an Administrative Law Judge found that Baylor violated the National Labor Relations Act by offering an employee $10,000 severance in exchange for executing a severance agreement with problematic clauses. The Act protects employees who engage in protected concerted activity to address work-related issues. The National Labor Relations Board provides these examples of protected concerted activity: “talking with one or more co-workers about your wages and benefits or other working conditions, circulating a petition asking for better hours, participating in a concerted refusal to work in unsafe conditions, and joining with coworkers to talk directly to your employer, to a government agency, or to the media about problems in your workplace.”
The severance agreement at issue included a “no-participation” clause, which barred the employee from pursuing, assisting or participating in any claim brought by any third party against Baylor. The ALJ noted that the clause would encompass conduct protected under the NLRA, such as preventing individuals from volunteering information to Labor Board agents who are investigating or pursuing unfair labor practice charges filed against Baylor.
The confidentiality clause was equally offensive to the ALJ. That clause required the employee to keep secret information from her employment at Baylor, including “information concerning operations, finances, …, employees, … personnel lists; financial and other personal information regarding … employees.” The ALJ held that the confidentiality provision “would reasonably be construed by former employees” to prohibit protected activities by banning discussion of wages, hours, and working conditions with current employees, unions or others after their separation. The ALJ also found that the provision was not justified by Baylor’s concern that the ex-employee might divulge confidential healthcare-related information.
The ALJ found that, although both the confidentiality and no-participation clauses were neutral on their face, “the adverse impact on core NLRA-protected rights” were not outweighed by the justifications (or lack thereof) provided by Baylor.
The case now goes to the National Labor Relations Board for review. If upheld, it could be problematic for employers who use similar provisions in their standard severance agreements. However, there are relatively straightforward solutions to address the concerns expressed by the ALJ. For example, the “no participation” provision could have had a better chance of being enforced if it included a provision permitting the employee to participate in investigations by government agencies (including the National Labor Relations Board). Similarly, the confidentiality clause might have survived if it had simply carved out conduct protected by the National Labor Relations Act.
Experienced labor and employment counsel can guide employers on how to uphold important post-employment obligations in their standard severance agreements.
