U.S. employers should be careful in drafting severance pacts, labor board warns

The seal of the National Labor Relations Board (NLRB) is seen at their headquarters in Washington, D.C.
The seal of the National Labor Relations Board (NLRB) is seen at their headquarters in Washington, D.C., U.S., May 14, 2021. REUTERS/Andrew Kelly/File Photo

March 22 (Reuters) - A recent U.S. labor board ruling limiting what employers can include in severance agreements is a reminder that companies must be careful not to ask workers to sign away their rights, the agency's top prosecutor said on Wednesday.

National Labor Relations Board (NLRB) General Counsel Jennifer Abruzzo in a memo to agency staff said the February decision prohibits agreements that restrict workers' ability to file lawsuits or communicate with the board, unions and the media. The decision also applies retroactively, Abruzzo said, meaning agreements offered to workers before the NLRB decided last month's case could still be deemed illegal.

Wednesday's memo comes amid a wave of layoffs, particularly in the tech industry. U.S. companies, including Amazon.com Inc (AMZN.O), Microsoft Corp (MSFT.O) and Google parent Alphabet Inc (GOOGL.O), laid off more than 180,000 workers in January and February, the highest total since 2009.

The Democrat-led NLRB in a Feb. 21 decision overturned a pair of Trump-era rulings that had said severance agreements only violate federal labor law when employers engage in "animus and additional coercive or otherwise unlawful conduct" when asking workers to sign them.

In the new ruling, the board found a Michigan hospital operator broke the law by offering workers severance agreements that included confidentiality and non-disparagement provisions, because they could discourage workers from filing complaints with the NLRB or publicizing labor disputes.

Companies routinely ask laid-off workers to sign agreements in exchange for severance pay that limit their ability to file employment-related lawsuits and bar them from disparaging their former employers.

Abruzzo, an appointee of Democratic President Joe Biden, said in Wednesday's memo that despite the new ruling, employers can ask workers to sign non-disparagement agreements if they are written narrowly to apply only to statements that are "maliciously untrue" and meet the legal definition of defamation.

Reporting by Daniel Wiessner in Albany, New York, Editing by Alexia Garamfalvi and Aurora Ellis

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Dan Wiessner (@danwiessner) reports on labor and employment and immigration law, including litigation and policy making. He can be reached at daniel.wiessner@thomsonreuters.com.