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New NLRB decision may lead to business litigation

On Behalf of | Mar 3, 2023 | Business Litigation |

Business owners in this climate are no strangers to layoffs. And, if so, they are also likely no strangers to severance packages and agreements, which also likely include broad confidentiality provisions. However, a new National Labor Relations Board decision may lead some New York and Pennsylvania business owners into business litigation over these broad confidentiality provisions.

Sections 7 and 8(a)(1) of the National Labor Relations Act

At issue are the interpretations of Sections 7 and 8(a)(1) of the National Labor Relations Act. Under the prior administration, broad confidentiality provisions within severance agreements were deemed allowable. However, in a recent February NLRB decision, they overturned this prior guidance and have found that broad confidentiality provisions in severance agreements are against Sections 7 and 8(a)(1) of the Act.

Possible immediate impact

As our Albany, New York, readers have likely gathered, this NLRB decision is in no way definitive, and of course, the decision is appealable. Nonetheless, the decision has an immediate effect, which means business owners could see business litigation soon, if they have entered severance agreements with these broad confidentiality provisions. Indeed, some employees may seek to rescind them entirely to go to competitors, steal company secrets, spread lies or do other nefarious acts.

Check your severance agreements

Even if you have not done layoffs recently, you should check you prior severance agreements and ones that you may use in the future for these broad confidentiality provisions. If they contain them, consult with a New York or Pennsylvania attorney to tailor your agreement to fall in line with this new guidance. Otherwise, you may find your entire severance agreement unenforceable.