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Broad severance agreement confidentiality provisions may violate the NLRA
By Lauren Daming on February 27, 2018 at 1:54 PM

Word "confidential" written on shredded paperA National Labor Relations Board administrative law judge in February struck down two provisions in a severance agreement relating to confidentiality and participation in third-party claims. In Baylor University Medical Center, the administrative law judge (ALJ) concluded that these provisions violated the National Labor Relations Act (NLRA) because they had the effect of restricting protected conduct and were not justified by any countervailing concerns. The ALJ relied on the board’s recent Boeing Company decision that outlined a new framework for reviewing employer policies.

Under the board’s new standard announced in Boeing Company, when reviewing policies that appear neutral but could interfere with NLRA rights, the board will evaluate 1) the nature and extent of the potential impact on protected rights and 2) any legitimate justifications associated with the rule. The board explained that this new analysis was necessary because the previous framework had resulted in the invalidation of many “common-sense rules that most people would expect every employer to maintain.”

In the Baylor University case, one of the few ALJ decisions released since Boeing Company was decided, the ALJ invalidated a provision in the severance agreement requiring the employee to “keep secret and confidential and not … utilize in any manner all … confidential information of … [Baylor]” that was made available to her during her employment, including information about personnel lists and “financial and other personal information regarding … employees.” The ALJ found that this language would unlawfully prevent the employee from discussing wages, benefits and other conditions of employment and was not justified by Baylor’s rationale that the rule was necessary to prevent the disclosure of private health information. The ALJ also struck down a provision that would have prevented the employee from pursuing, assisting or participating in any claim brought by a third party against Baylor. Again, the provision was found to restrict protected activity by preventing the employee from providing information to board agents in support of unfair labor practice charges. Baylor offered no justification in defense of this provision. 

Although the Baylor University case is only an ALJ decision — not a decision of the board itself — it provides a warning to employers to review employee policies and standard separation or severance agreements for confidentiality provisions that may be broadly construed as restricting participation in protected activity. Employers that wish to incorporate confidentiality restrictions or provisions related to participation in third-party claims into standard agreements should carefully craft these sections to avoid curbing protected activity. Additionally, employers should be prepared to offer reasonable justifications for such provisions in the event that they do have an effect on protected activities.

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