New rules on non-disparagement agreements may not be as simple as some online pundits have suggested
(Bloomberg) — It isn’t often that musings from the National Labor Relations Board go viral, but that’s exactly what happened last week when its general counsel released guidance suggesting that people who signed “overly broad” non-disparagement agreements don’t actually need to abide by them.
The idea that former workers with a chip on their shoulder could let loose on their former boss or employer captured the imagination of Twitter users, some of whom publicly replied to articles about the memo with intimate details of how they were wronged by vindictive managers or taken advantage of by heartless companies.
Before you let your grievances rip, though, be aware that the situation may not be so straight forward. Employment lawyers say the rules surrounding the contracts, typically signed as part of severance agreements, are ambiguous enough to warrant a phone call to an attorney to check on the specifics.
“People believe, largely from Twitter, that this is an absolute sure thing,” said Vincent White, a partner at White & Hilferty in New York. “This has not faced scrutiny from the federal court system yet, and there are many questions about whether the NLRB actually has this power.”
Here’s what you need to know about the memo, and what to consider before speaking out.
What is a non-disparagement clause?
A non-disparagement clause, sometimes part of a broader non-disclosure agreement, bars the signees from saying anything negative about each other — sometimes even if it’s 100% true. They’re often included in severance agreements when employees leave a company. Sometimes they cover a specific duration of time, such as six months, while others may be indefinite. Either way, they can have a chilling effect on speech.
“Companies use non-disparagement clauses now to gag workers, and even more so, to scare them into thinking they will be gagged,” said Poppy Alexander, an attorney who represents corporate whistleblowers as part of her work with the law firm Constantine Cannon. “Helping remove some of that will help workers feel more comfortable bringing stories of fraud, abuse, and other bad behaviors to the fore.”
Some non-disparagement clauses focus specifically on defamation, while others bar employees from talking badly about their time at a company in general. Ariella Steinhorn, the founder of Lioness, an advocacy organization that helps amplify messages from whistleblowers, said non-disparagement clauses do a disservice to both former employees and the companies that use them.
“While companies may balk at the idea of their dirty laundry being aired publicly, it is ultimately in their interest to root out bad bosses and toxic dynamics at work,” she said.
What does the NLRB memo say?
The NLRB memo affirmed a February decision by the board that found overly broad severance agreements were a violation of workers’ rights, and clarified that the precedent it sets is retroactive. In other words, any overly broad clauses signed as part of a past severance agreement are also unenforceable.
“Lawful severance agreements may continue to be proffered, maintained, and enforced if they do not have overly broad provisions that affect the rights of employees to engage with one another to improve their lot as employees,” said the memo by NLRB General Counsel Jennifer Abruzzo.
The memo suggests that narrower non-disparagement clauses that are centered on defamation can be upheld.
Who does the NLRB severance ruling impact?
The original case centered on a dispute between McLaren Macomb General Hospital in Michigan and the local union representing nurses and other employees. When the hospital permanently furloughed 11 employees after the onset of the Covid-19 pandemic, it presented them with severance agreements the employees were required to sign if they wanted a higher payout. Language included non-disparagement, confidentiality and non-disclosure clauses, as well as a provision that if the agreement was violated and the company sought legal action, the former employee would be on the hook for the costs.
Per Abruzzo’s memo, the decision in McLaren Macomb is retroactive for any and all overly broad severance agreements. But what that refers to in practice is still up in the air, according to lawyers.
“It’s a little bit unclear,” White said. The memo doesn’t specify whether companies can still pursue legal action against a former employee for speaking out, for example.
Who is speaking out about severance agreements?
On Twitter, plenty of people rejoiced at the NLRB memo, particularly in response to a tweet by the media outlet Vice, which has been viewed more than 19.4 million times. Some users responded with their stories, either directly identifying past employers or alluding to past experiences.
Severance agreements are particularly common in the finance and tech industries, according to White. They’re also becoming broader, in part due to how quickly information can spread on reputation websites like Glassdoor and on social media. White sees it as companies believing it’s easier in the short run to silence employees than fix culture that caused the issue.
“Instead of doing the right thing, they try to figure out how to keep it quiet because it’s cheaper,” he said.
Should you talk to a lawyer before breaking a severance agreement?
Yes.
“The NLRB ruling definitely leaves room for interpretation with its focus on overly broad clauses, and you don’t want to put yourself in legal jeopardy unnecessarily,” Alexander said.
Even so, experts are hopeful that the memo will have a thawing effect for workers who want to speak out. White said a more concrete law at the federal level would also help protect workers. “There’s no question this is needed,” he said.
What happens if you break a non-disparagement clause?
That depends on the scope of your severance agreement, and how willing your former employer is to take action. Companies may try to seek an injunction and silence former workers through lawsuits and other litigation, whether or not they have standing. “What companies do, and what we’ve been fighting for years is, they don’t care if they win or lose,” said White. “They silence people not by winning, but just by litigating.”
Steinhorn, with the whistleblower group Lioness, said it’s incumbent on companies to remember that a former employee’s critique can still be a protected right.
“If the worker has told an egregious lie — for instance, alleging something completely fabricated versus a matter of opinion — then I can see a place for defamation action, especially if it ruins someone’s reputation,” she said. “But it’s important to note that disliking someone’s perspective because it doesn’t fit with the corporate party line is not the same as an egregious lie.”
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.