Time to Update Your Severance Agreements: New Washington State Law and National Labor Relations Board Decision Place Additional Requirements
Authored by: Joshua D. Brittingham
March 2023
Severance agreements have traditionally included confidentiality clauses that allow employers to keep the terms of the agreement, including the amount paid, confidential. This is particularly true when an employee has asserted claims that are waived as part of the severance agreement. However, recent legislation in Washington, known as the Silenced No More Act (RCW 49.44.211), and a National Labor Relations Board (NLRB) decision in McLaren Macomb, 372 NLRB No. 58 (2023), place new restrictions on such confidentiality clauses, requiring changes to many employers’ current severance practices.
Washington State Silenced No More Act
The Silenced No More Act, effective June 9, 2022, was passed in response to the #MeToo movement and seeks to prevent nondisclosure or non-disparagement clauses in any agreement between an employer and employee that would prevent an employee from disclosing conduct they reasonably believe to be illegal. This includes illegal discrimination, harassment, retaliation, wage and hour violations, sexual assault, and violating a clear public policy mandate. Under the new law, employers cannot prevent employees from disclosing the existence of a settlement agreement related to such conduct, but they can still prevent disclosure of the settlement amount.
National Labor Relations Board Decision
On February 21, 2023, the NLRB went further, holding that severance agreements containing broad confidentiality and non-disparagement clauses violate Section 7 of the National Labor Relations Act. The NLRB held that even offering an employee a severance agreement containing an overly broad non-disparagement and confidentiality clause could violate the NLRA. Section 7 of the NLRA allows employees to collectively work together to improve working conditions, freely discuss the terms of their employment with current and former employees, file NLRB claims, and assist and cooperate with NLRB investigations. Under the decision, a non-disparagement clause may still prohibit statements that are “disloyal, reckless, or maliciously untrue.”
Potential Penalties
Employers in violation may be subject to severe penalties. Employers that violate the Silenced No More nondisclosure rules may be liable for a minimum of $10,000 in statutory damages, plus the employee’s reasonable attorneys’ fees and costs. Employers who violate Section 7 of the NLRA may be liable for up to $50,000 in civil penalties.
Compliance
Employers can comply with both the Silenced No More Act and NLRB decision by including specific language that carves out any non-disclosure or non-disparagement obligations. We recommend that employers review their form severance agreements and any other employment-related agreements to ensure compliance with the new requirements and are happy to answer any questions.
