Why the NLRB’s New Severance Agreement Ruling Will Force Employers to Think About the Employee Experience

If you’re a savvy HR leader who keeps up with the news, you’ve probably already heard all the buzz about severance agreements lately. In case you missed it, on February 21, 2023, the National Labor Relations Board (NLRB) ruled that employers may not offer severance agreements to non-supervisory employees that contain certain non-disparagement and non-disclosure clauses. In other words, companies can no longer require employees to sign certain confidentiality agreements as part of a severance package. 

More recently, on March 22, 2023, NLRB General Counsel Jennifer Abruzzo issued a memorandum clarifying that the decision applies retroactively to severance agreements already in effect. There’s still some speculation that these rulings could be challenged in the future, but for now, many companies are reviewing and adjusting their severance agreements, especially as more and more companies announce budget cuts and layoffs.

What Exactly Does the Ruling Prohibit? 

The new severance agreement rules come from the NLRB’s decision in McLaren Macomb. During the COVID-19 pandemic, a hospital in Michigan offered severance packages to 11 employees, contingent upon them signing a severance agreement. The agreement included terms that prohibited the employees from making statements that could harm the hospital’s image and disclosing the terms of the agreement, essentially waiving their rights under the National Labor Relations Act (NLRA). The NLRB ruled this severance agreement was a violation of the NLRA and reasoned that the employees may feel coerced to sign the agreement in exchange for the severance pay. 

If you’re an employer, it can get a little confusing, but don’t worry. Employers can still require some confidentiality terms in severance agreements. The NLRA only protects certain activity after an employee has been let go. For example, employees can still criticize policies and share information about job conditions such as wages, hours, health and safety issues, etc. Employers can still ask employees to waive their rights to make future legal claims against the company and to sign non-disclosure agreements asking them to keep quiet about company trade secrets.

There are also a boatload of exceptions. For example, the ruling doesn’t apply to federal, state and local government agencies. That’s right, public schools, libraries, and airlines are all excluded from the new rules. Some private sector employees also fall under the exclusion. Some supervisors and managers, independent contractors, agricultural workers, and anyone employed by a parent or a spouse are all excluded, too. If you’re an employer, make sure you research and understand all the nuances in your jurisdiction. 

Focusing on the Employee Experience

When you bring up severance agreements, you almost always bring them up in the context of layoffs. Layoffs are never fun for anyone involved. Employers who care deeply about their company culture often try to avoid them at all costs. And while there is actually no legal requirement for employers to offer severance pay to laid off workers, most companies do offer severance benefits as a sign of good faith and to protect their public company image. This act of good faith makes sense given the recent surge in layoff posts–-some highly detailed layoff posts often slamming their former employers–on social networks, particularly on LinkedIn. 

Now that employers can no longer effectively buy the silence of their former employees, it’s time for employers to focus on preventing employees from wanting to make those unflattering comments in the first place by focusing on improving the employee experience. 

We’re not talking about lavish company parties or catered lunches everyday. Sometimes, implementing simple opportunities to recognize an employee for their work is enough to make employees feel like their work matters. Employers can also improve the employee experience in other ways:

• Gather feedback from employee engagement surveys. There’s no better way for employers to understand what their employees want and need in the workplace than by asking them directly. Rather than waiting for negative feedback to publicly appear on social media after an employee leaves, send out an employee engagement survey and act on the feedback. 
• Promote a healthy workplace. According to our new State of Work-Life Wellness Report, our proprietary research found that 25% of US workers don’t feel their work allows them to take time for their wellbeing. Creating a healthy workplace helps employees be more productive and engaged in their work.
• Spend time on team-building activities. Team-building activities help your employees build connections and strengthen relationships. They also show your employees that you value them enough to spend work time getting to know each other and having fun. 

The new severance agreement rules may be forcing employers to audit their existing agreements, but HR leaders don’t have to wait until the relationship is “severed” to build a good experience for their employees. As you look for more ways you can engage your employees and improve the employee experience, you will probably need great benefits and ways to help take care of your employees—so they, in turn, help take care of you even after they leave. To get started with great benefits to boost employee engagement, talk to a Wellbeing Specialist today.