Changes are being made to what can be included in severance agreements. If you are an employer, you need to be aware of recent decisions made by the National Labor Relations Board.
What’s the Purpose of a Severance Agreement?
A severance agreement is a contract between an employer and an employee that outlines the terms of the employee’s exit from the company. Typically, this agreement is offered to employees who are terminated, laid off, or whose employment is ending for other reasons. The purpose of a severance agreement is to provide the employee with some form of compensation or other benefits in exchange for giving up certain legal rights, such as the right to later pursue legal action against the company for wrongful termination. Depending on the terms of the agreement, the employee may receive a lump sum payment, continued salary or benefits, job placement services, or other forms of compensation. Severance agreements are designed to protect both the employer and the employee by establishing clear expectations about the finality of the employee’s employment and obligations for each party.
Changes to Severance Agreements You Should Know
A recent decision by the NLRB has put an end to companies being able to ask laid-off employees to keep certain information confidential. According to the NLRB, it is a violation of the employees’ rights, under the National Labor Relations Act, to ask laid-off employees to keep the terms of their severance agreements or the terms and conditions of their employment confidential.
So what does this mean? If you are an employer who is offering severance packages to laid-off employees, you need to review and revise your severance agreements and confidentiality clauses to ensure they don’t include any terms that restrict the employees’ power to discuss the terms of their severance or the conditions of their job. This means the employee can freely discuss their wages, hours, and any other conditions they faced during their employment along with what their severance package includes.
The ruling means this policy went into place immediately, so reviewing the documents you ask laid-off employees to sign and making the necessary changes will help to avoid any future conflict. Remember there is no legal requirement to offer severance, but it is a way to leverage confidentiality of your trade secrets and business interests, which are not covered in this ruling. Employers can also still ask laid-off employees to waive their rights to make any future claims against the company or file lawsuits.
Need help reviewing your severance agreements? Contact us and let us know how we can help.
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Disclaimer: This article is intended to serve as a general summary of the issues outlined therein. While this article may include general guidance, it is not intended as, nor is it a substitute for, a qualified legal advice. Your review or receipt of this article from Lexern Law Group, Ltd. (the “LLG”) or any of its attorneys does not create an attorney-client relationship between you and the LLG. The opinions expressed in this article are those of the authors of the article and does not reflect the opinion of the LLG.