Confidentiality of Settlement Agreements Obliterated by the NLRB

For decades, employers have comfortably included confidentiality provisions in settlement and severance agreements. This allowed employers to keep the terms of the agreement and the sum paid to a former employee confidential. Employers were even allowed to require the employee to keep information regarding their employment with the Company confidential. Recently, however, this has begun to change. 

Effective January 1, 2022, Senate Bill 331 placed significant restrictions on confidentiality and non-disparagement provisions in settlement agreements related to sexual harassment and assault cases. More recently, the National Labor Relations Board (“NLRB”) imposed further restrictions on confidentiality provisions in severance and settlement agreements. In short, the NLRB opined in McLaren Macomb  (07-CA-263041; 372 NLRB No. 58) that if a confidentiality provision is too overboard, it restricts the employee from exercising their rights under Section 8(a)(1) of the National Labor Relations Act. Surprise: that’s most confidentiality provisions!

McLaren Macomb, a teaching hospital was forced to lay-off a portion of its staff during COVID-19. The staff were offered a severance agreement that included both a non-disparagement provision disallowing the staff to speak negatively about McLaren Macomb and a confidentiality provision that disallowed the staff from disclosing the terms of the severance agreement. 

The staff challenged the provisions (even though these are ordinarily included in severance agreements). McLaren Macomb contended that the provisions were lawful because McLaren Macomb did not separately violate any other portion of the NLRA and were unrelated to any union or protected activity. The NLRB disagreed. 

The NLRB decided that the non-disparagement and confidentiality provisions had a chilling effect on workers and interfered with their Section 7 rights under the NLRA to organize even though these workers were no longer going to be employed by McLaren Macomb. 

Though this case dealt with union employees, the implications of this opinion are far reaching as even non-union employees have rights to organize under Section 7. As a result of this opinion, Employers should carefully review and revise any severance or settlement agreement that they offer to employees. Otherwise, depending on the language of the severance agreement the entire agreement or the confidentiality and/or non-disparagement agreement could be deemed invalid. The attorneys at Bradley, Gmelich & Wellerstein LLP are here to help!

Gentle Reminders

  • Pursuant to Labor Code section 201.3, security companies must pay security officers weekly. Paying these employee bi-weekly or monthly will lead to individual and PAGA penalties.
  • Naranjo v. Spectrum Security Services, Inc. threw a curve ball at employers when the Court decided that premium pay for missed meal periods and rest breaks should be paid at an employee’s regular rate of pay rather than the employee’s regular rate of compensation which for decades was interpreted to be the employee’s hourly rate. If employers do not already, they should pay premium pay based on the employee’s regular rate of pay. 

Saba Zafar is Special Counsel in Bradley, Gmelich & Wellerstein LLP’s Employment Law Department. Ms. Zafar has over a decade of experience as an attorney, primarily in employment law. Ms. Zafar focuses her practice of providing strategic advice and counsel in all aspects of employment law and workplace matters, including drafting and implementation of HR policies and procedures, Employment Handbooks, providing advice to clients on personnel issues as well as general business matters.

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