Questions surrounding severance agreements

Questions surrounding severance agreements

On Behalf of | Apr 20, 2023 | Severance Agreements

Following a decision by the National Labor Relations Board, new rules about severance agreements have provided more questions than answers. The NLRB now prohibits employers from mandating that workers recently laid off being forced to sign non-disparaging and confidentiality clauses to receive severance packages.

Who is covered and not covered?

The ruling covers a majority of private-sector employers and applies to union and non-union workers. It does not cover federal, state, and local government agencies, including public schools, libraries, parks, railways, and airlines.

Not covered are supervisors and managers who can hire, fire, establish salaries, and discipline workers. Independent contractors, agricultural and domestic workers, and children/spouses of employers.

Employer requirements and protections

The decision also disallows employers to require confidentiality agreements regarding severance agreements and the terms/conditions of their employment, specifically wages, hours, and various issues with health and safety.

Employers can mandate confidentiality agreements that bar the sharing of trade secrets and other information that protects the company’s business interests. In addition, employers can request waiving rights to future claims or pursue any litigation.

Reasons for severance packages

Companies that lay off workers are not required to provide severance. However, it does help their image in their communities who benefit economically, not to mention goodwill with those still employed. Conversely, severance packages can also provide protection from lawsuits, boost their image, and limit the possibility of a disgruntled staff member revealing trade secrets.

Losing a long-held job can be devastating for employees and their loved ones. Severances can help ease the stress when a professional future is in question, providing economic stability until another job can be secured.