3. CAN DEALERSHIPS REQUIRE CONFIDENTIALITY AND NON‑DISPARAGEMENT PROVISIONS? Historically, one of the primary incentives for dealerships to offer severance has been to gain the former employee’s cooperation and goodwill postemployment. As a result, most severance agreements include confidentiality provisions prohibiting employees from disclosing the details of the severance and other confidential dealership information to others, as well as non-disparagement provisions prohibiting the employee from unfairly criticizing the dealership to customers, co-workers, or vendors, whether in-person or on social media sites such as Glassdoor. However, this year, the National Labor Relations Board (NLRB) issued a decision narrowing the scope of permissible confidentiality and non-disparagement provisions in severance agreements. The NLRB held that employees are entitled to, among other things, discuss terms and conditions of employment with others, even when doing so reflects negatively on the dealership. As a result, dealerships must be sure to narrowly tailor confidentiality and non-disparagement provisions so as to provide the dealership with the best protection available while not prohibiting employees from engaging in legally protected speech. Again, dealerships should consult with legal counsel before drafting such provisions. 4. WHAT HAPPENS IF THE EMPLOYEE BREACHES THE SEVERANCE AGREEMENT? As with any agreement, dealerships must also consider what will happen in the event the employee does not live up to the promises contained in the severance package. It can be difficult to prove damages in the event of a breach — particularly with respect to confidentiality and non-disparagement provisions — which prompts some dealerships to include liquidated damages provisions setting forth the specific monetary amount an employee will owe per breach. Likewise, there is a disincentive for dealerships to pursue claims for breach where the cost of attorneys’ fees will outweigh the potential recovery; as a result, most severance agreements provide for payment of attorneys’ fees in the event of a breach. Finally, some dealerships prefer the practical, business-minded approach of an arbitrator when resolving disputes over severance, and therefore include arbitrations provisions in their agreements. Finally, while severance agreements are often useful, they are not appropriate in every situation. For example, a dealership would not want to reward an employee’s misconduct by offering severance, nor would a dealership want to pay an employee for leaving to work with a competitor. In the event you have questions about whether severance is or is not appropriate — as well as what terms should or should not be included in a severance agreement — please contact legal counsel for guidance. ► 19 THE GENERATOR
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