Creating Nondisclosure Agreements

Creating Nondisclosure Agreements

Small business owners face unique challenges in navigating labor law compliance. Recent rulings by the National Labor Relations Board (NLRB) on nondisparagement and nondisclosure agreements (NDAs) have added a new layer of complexity. Here’s what you need to know and practical steps you can take to protect your business while staying compliant.

Understanding the NLRB’s ruling

It applies to both unionized and non-unionized workplaces. In the past, many companies included broad nondisparagement and confidentiality clauses in severance agreements to protect their reputation, prevent negative publicity, and safeguard sensitive business information. These clauses typically prevented employees from making negative statements about the company or discussing the details of their severance terms.

However, the NLRB determined that such clauses, if too broad or vague, could interfere with employees’ rights under Section 7 of the National Labor Relations Act (NLRA). Section 7 guarantees employees the right to discuss their wages, working conditions, and other employment-related matters, with coworkers or the public. This ruling underscores the tension between protecting a company’s interests and respecting the fundamental rights of employees to speak freely about their workplace experiences.

The NLRB’s decision emphasizes that employers cannot use severance agreements to silence employees or limit their ability to engage in discussions about their work environment, wages, or legal claims. Overly broad nondisparagement and confidentiality clauses can potentially violate these rights by inhibiting open communication about matters like workplace conditions, labor practices, or even the possibility of future legal actions.

In response to this ruling, it is critical for business owners and employers to carefully draft severance agreements to make sure they do not infringe upon employees’ Section 7 rights. Employers must be mindful of balancing the need to protect proprietary information and the company’s public image with the rights of employees to engage in discussions or actions aimed at improving working conditions, addressing workplace concerns, or organizing with fellow workers. It is essential that employers review their agreements and make sure the language used is narrow, specific, and does not unnecessarily restrict employees’ freedom of expression.

Key impacts of the ruling

Traditionally used to safeguard a company’s reputation and sensitive information, these clauses now face stricter scrutiny, so they do not infringe on employees’ rights. Understanding the nuances of these changes is essential for employers to avoid legal challenges while maintaining reasonable protections for their business interests.

Nondisparagement clauses:

• These prevent employees from making negative statements about their former employer.
• The NLRB concluded that broad restrictions could violate employees’ rights to engage in concerted activities, such as discussing working conditions or wages.
• Employers must now narrow the scope of these clauses to avoid potential legal challenges.

Nondisclosure and confidentiality provisions

• Typically, these restricted employees from sharing information about their severance agreements.
• The NLRB clarified that while protecting trade secrets and proprietary information is acceptable, restricting discussions about workplace issues or legal claims is not.

Considering the NLRB’s guidance, employers must carefully balance their need for nondisparagement and confidentiality clauses with employees’ rights to discuss workplace issues. By narrowing the scope of these provisions and focusing on specific, lawful protections, businesses can better align their agreements with federal requirements.

Retroactive implications

The NLRB’s ruling applies retroactively, meaning that previously signed agreements containing nondisparagement or nondisclosure clauses may be challenged. This creates a potential risk for businesses, as former employees could revisit their severance terms and raise legal concerns.

Key considerations for small businesses:

• Review older agreements to identify problematic language.
• Consult legal counsel to assess exposure to retroactive claims.

It’s important to find out if your business is at risk, especially if you have parted ways with employees in the past. Don’t make the mistake of assuming they won’t take action if they believe an agreement was unlawful.

What small business owners should do now

To comply with the NLRB’s guidance and mitigate risks, small business owners should:

1. Review existing severance agreements

• Examine current agreements for nondisparagement or nondisclosure clauses that could be overly broad.
• Update language that may no longer align with federal labor laws.

2. Modify agreement templates

• Develop new templates for severance agreements with tailored language.
• Focus nondisparagement clauses on protecting against defamatory or harmful actions rather than broadly restricting speech.

3. Implement an internal review process

• Establish a regular audit schedule to review agreements and ensure ongoing compliance.
• Assign a dedicated team or personnel to oversee these reviews and address potential issues.

4. Educate managers and HR teams

• Conduct training sessions to ensure that key personnel understand the new requirements.
• Emphasize the importance of respecting employees’ Section 7 rights.

5. Seek legal counsel

• Regularly consult with labor law experts to stay updated on compliance requirements.
• Address state-specific nuances or jurisdictional differences that may affect agreement terms.

Small businesses should adopt a strategic approach to these employment rule changes. Putting in the effort now will make sure you can maintain compliance, protect employee rights, and encourage a thriving workplace culture.

Next steps

• Audit all severance agreements, past and present, for compliance.
• Draft agreements that are specific, legally sound, and aligned with employee rights.
• Follow developments in labor law and regularly update your practices accordingly.

The NLRB’s ruling underscores the importance of transparency and compliance in severance agreements. By addressing these changes, small business owners can avoid legal pitfalls and encourage trust within their organizations. Careful planning and expert guidance will help businesses protect their interests while respecting employees’ rights.