Make your home page

5 key points about US labor board’s severance agreement rule change

(Provided Photo/Adobe Stock via CNN)

(CNN) — There have been many questions raised about the implications and reach of a recent decision by the National Labor Relations Board to prohibit employers from requiring laid off workers to sign certain types of nondisparagement and confidentiality clauses if they want to receive severance.

Who’s covered by it? Is it retroactive? Can my employer no longer ever require that I stay quiet in exchange for severance?

CNN Business put these and other questions to some employment lawyers to get their take. Here are their answers.

1. Who does the new prohibition apply to? Most U.S. private sector employers are subject to National Labor Relations Board’s authority and must abide by its decisions.

Its recent decision will apply both to their union and nonunion workers.

“This board is signaling and reminding employers that the National Labor Relations Board applies to employers regardless of whether workers are unionized,” said Andrew Herman, an associate in the labor & employment practice at law firm Blank Rome LLP.

2. Who is not covered by the ban? Select groups are not subject to National Labor Relations Board’s authority.

Federal, state and local government agencies, including public schools, libraries and parks, are not under National Labor Relations Board’s jurisdiction. Neither are railways and airlines.

Some categories of workers are not likely covered by the ban, because they are excluded under the National Labor Relations Act, which the National Labor Relations Board enforces. They include: Supervisors and managers with the authority to hire, fire, set pay and discipline workers, even if their company itself is subject to National Labor Relations Board authority; independent contractors; agricultural and domestic workers; and anyone employed by a parent or spouse.

3. Is the ruling retroactive? That’s hard to say definitively. The decision the National Labor Relations Board published does not explicitly say it’s retroactive, Herman noted.

Generally speaking, National Labor Relations Board decisions may be presumed to be retroactive “unless it would be unfair to the employer or result in an injustice,” said employee-side attorney Michael Healey of Wagner, Falconer & Judd Ltd. In this latest case, Healey said, it’s fair to assume that it might not be because employers have been offering severance agreements in recent years based on a 2020 National Labor Relations Board decision that was effectively overturned by the board’s latest ruling.

That said, the lawyers CNN spoke to agreed that it’s possible the labor board might consider applying it retroactively if someone files a charge for an alleged labor violation pertaining to a severance agreement that was signed or enforced within the past six months. Normally there is a six-month window akin to a statute of limitations to bring an alleged violation to the board’s attention.

4. So can employers now never require me to stay mum about the company as a condition of receiving severance? No, they still can in some circumstances.

The National Labor Relations Board’s decision last week prohibits employers from requiring laid off workers to keep confidential both the terms of their severance agreement and the terms and conditions of their job (which includes wages, hours, health and safety issues, etc.).

But your employer may still require that you not reveal trade secrets or other confidential information that protects their business interests, Herman noted.

And employers may still ask you to waive your right to make any future claims or file a lawsuit against them.

5. How will this new ruling affect employers’ future severance decisions? It’s easy to forget, but there is no legal requirement for employers to offer laid off workers severance. But they do so for several reasons beyond just maintaining goodwill with employees and the surrounding community, which may rely economically on the business’ workforce.

They offer severance to buy protection from things like being sued or publicly disparaged, from having their trade secrets revealed or otherwise having claims brought against them.

“I’m doing it because I want to get something from the employee in return. I’m buying finality [in having to deal with that employee],” said Jon Hyman, a management-side attorney and chair of the employment and labor practice at Wickens Herzer Panza.

But by no longer being able to require that an employee stay quiet about the terms and conditions of their job or what’s in their severance agreement, the amount of protection an employer can buy is reduced. So employers may want to pay less for it, Hyman suggested.

“There’s a real risk to employees that the case will have a negative impact on the size of severance packages going forward,” he said.