Severance agreements just got harder to enforce

Severance agreements just got harder to enforce

On Behalf of | Mar 20, 2023 | Severance Agreements

In today’s economic reality, many companies use periodic layoffs to stay competitive, keep their share price competitive and stay in business. However, if your company is forced to spend millions litigating post-layoffs, all of the financial benefits of the layoffs are eliminated. A recent decision by the National Labor Relations Board made enforcing Pittsburgh, Pennsylvania, severance agreements much harder.

The National Labor Relations Board decision

The NLRB decision relates to Sections 7 and 8(a)(1) of the National Labor Relations Act. The prior empaneled Board found that these sections allowed for broadly written confidentiality clauses in severance agreements, but the Board reversed that holding.

How does this affect me?

These Pittsburgh, Pennsylvania, confidentiality clauses are now not enforceable and depending on how future courts read this February NLRB decision, confidentiality clauses could invalidate entire severance agreements. This means that severance agreements could be broadly unenforceable, or just the confidentiality clauses themselves could be unenforceable. In either instance, an employee who was fully paid may not have to act in a way that they agreed to act, and the former employer may not have a recourse.

Update now

For Pittsburgh, Pennsylvania, business owners, do not wait for there to be an issue and hope that future litigation goes your way. The best cure is prevention. Update your severance agreements now to incorporate this new guidance to ensure that your severance agreements are enforceable in the future. For employees, consult an attorney before signing the severance agreement, and if you have already signed one, you may also wish to consult an attorney because it may no longer be enforceable.