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Check your severance agreements because they may be invalid

As layoffs have been circulating in the news recently, severance agreements have been back in the news as well. And, of course, this has brought up a lot of legal questions too. However, Santa Monica, California, business owners may have missed the February news from the National Labor Relations Board. In that decision, the NLRB decided that laid off employees can now speak freely about their former employers, despite what may be in their signed and paid out severance agreements.

The National Labor Relations Act

At issue in the February decision was employee rights under Sections 7 and 8(a)(1) of the National Labor Relations Act. Specifically, the NLRB examined whether broadly written confidentiality clauses within severance agreements violated employee rights under those sections.

Under prior NLRB decisions with the prior administration, they found that these types of confidentiality clauses were legal. However, the newly empaneled NLRB reversed course, and they found that broadly written confidentiality clauses violated Santa Monica, California, employee rights under the sections.

What this may mean

While the meaning of this new decision has not yet been litigated, the immediate effect is likely that broadly written confidentiality clauses are now not enforceable. This extends to future Los Angeles area severance agreements, but it could also affect already entered ones. That means employees could be allowed to disparage their former employees, talk about their severance packages and give up other trade secrets, and employers may have little recourse to stop them.

What should employers do?

All Southern California employers, except train and airline companies, should take this decision seriously. Its effect is immediate, even if it is later overturned. For now, it is the law, and employers should change their severance agreements accordingly.