COUNSELOR’S CORNER Federal Agency Targets Severance Agreements Mark McQueen, Baird Holm, LLP Employees in 2023 have many statutory weapons to challenge employment separations. Civil rights claims are the most common, but employees may also assert disability discrimination, failure to accommodate, or denial of the right to take medical leave due to pregnancy, adoption or serious health conditions. Perhaps the broadest employee protection of all is in the National Labor Relations Act (NLRA), which protects the right to protest working conditions and to engage with coworkers in “mutual aid and protection” (including organizing a union). These new (and old) statutory rights have increased the frequency of employment challenges. At the same time, the cost of defending them has dramatically increased. Legal challenges that proceed to trial are painfully expensive, forcing many employers to purchase costly insurance to protect against that risk. So how do employers protect themselves? Other than sound policies and human resource practices, there’s only one preferred technique: severance agreements. In the simplest terms, severance agreements typically involve an employer paying extra money to departing employees in exchange for a promise not to pursue additional claims. Usually, severance agreements include “confidentiality” and “non-disparagement” provisions. Confidentiality clauses prohibit former employees from advertising either the agreement itself or the severance amount to coworkers or the general public. Nondisparagement clauses prevent departing employees from harming the reputation of the business or individual managers through public ridicule (including social media). There was a time when “confidentiality” and “non-disparagement” clauses were non-controversial. That began changing during the Bush and Obama Administrations when the National Labor Relations Board (NLRB) developed new theories. One new theory was that confidentiality and non-disparagement clauses have the effect of “chilling” an employee’s right to protest working conditions or to help coworkers. Remember, criticizing an employer (or manager) and coworker, “mutual aid and protection,” is protected by the NLRA. In 2020, the NLRB, comprised of a majority of Trump appointees, gave employers relief and additional guidance. The Trump-appointed majority declared that confidentiality 15 Nebraska Banker
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