The NLRB banned non-disparagement clauses in severance agreements. Will the change last?

Forcing workers to keep mum for cash is going out of style faster than the metaverse, as last month the National Labor Relations Board (NLRB) banned non-disparagement and non-disclosure clauses in severance agreements. This means companies can no longer effectively buy the silence of former employees who may feel it necessary to voice misgivings about their experiences on the job.

The new law could portend pretty vast changes, at least in the near term, for employers and workers alike, Kara Govro, senior legal analyst at the compliance consultancy Mineral, explained to HR Brew. If companies “have toxic environments…and then as people are leaving, they’re telling them, ‘You can never speak of this again,’ other people get suckered into working there, when otherwise there might be reviews on the internet, warning people.”

HR pros we spoke to are hopeful that the new rule may compel employers to more carefully consider employee experience, and incentivize them to improve a multitude of HR initiatives, particularly onboarding and offboarding. “Employers will see this and recognize the need to improve their workplace culture, and improve their onboarding processes [so] that people don’t want to go online and say negative things about the company,” said Sarah Morgan, director of equity and inclusion at the HR consultancy Humareso.

But the hope is tempered by political realities.

As Govro explained, the NLRB is governed by presidential appointees, which means it “has a habit of changing its mind every few years.” The rule change, for example, was a reversal of a previous ruling in 2020 that found non-disparagement and non-disclosure clauses in severance agreements were not unlawful.

The social situation. When employees leave a job with a sour taste, there is always the possibility they will divulge the worst of their experiences on social media, Morgan explained. The recent wave of layoffs in tech and finance has seen an outpouring of posts on LinkedIn—not necessarily detailing dirt, although some have—and many of them have gone viral. As the possibility of a former employee sounding off on social media has grown in the last ten years, so has the use of non-disparagement clauses, Morgan said. She recalls it became more common around “2010 to 2012, when we started to see instances of organizations going viral because of ways that they treated their employees…that’s when those clauses in severance and separation agreements started to become much more common.”

With the threat of being put on blast now a very real consideration, employers will “need to put more time and attention into not not just the exit experience, [but] the entire employee experience,” Amanda Halle, a former head of people and current HR consultant, said. “That means providing regular feedback and making sure employees are never shocked” by management decisions, she explained.

Halle said that “the times where [non-disparagement agreements come] up [are] pretty infrequent, at least in the cases where I’ve worked.” Moreover, severance agreements aren’t as common as some might think, Govro explained. “A lot of employees leave without a severance agreement. Those who get severance agreements [are] a fairly small portion of the population in most industries.”

However, a shifting strategy may involve a greater deal of awareness on behalf of employers, particularly in respect to employee experience. “A lot of it does have to do with offboarding, and how you treat employees in that process,” Govro said. “There are some ways to make employees leave with a really bad taste in their mouth. And there are things that you can do to make an employee feel better, even if they’re leaving under less-than-ideal circumstances.”

The best-case scenario, Halle said, is that the move signals a more permanent shift toward worker power that began during the pandemic. “It’s come at a time where the way companies treat people and the power dynamic is starting to shift or has been shifting. So, it seems like it makes sense that this is something that would be addressed.”

How big of a change, really? The decision to ban non-disparagement and non-disclosure clauses in severance agreements was a reversal of another recent decision. In 2020, the NLRB determined that such terms did not violate the National Labor Relations Act of 1935. Last month’s change “restores long-standing precedent,” NLRB Chair Lauren McFerran said in a statement.

Still, there remains optimism. “I think it’s good news,” Halle said. “It’s also in line with the way that we’re moving as a culture in terms of people shar[ing] everything out there.”