Departing employees no longer have to agree to keep silent about their former employers when signing a severance agreement or settling a legal dispute, the National Labor Relations Board (NLRB) ruled.

Requiring employees to agree not to disparage the company or to disclose confidential information about it or the agreement itself is a violation of a section of the National Labor Relations Act, the Board ruled, writing that that such agreements “require employees to broadly waive their rights” under the law. This decision reversed a 2020 decision that “abandoned prior precedent in finding that offering similar severance agreements to employees was not unlawful, by itself.”

“It’s long been understood by the Board and the courts that employers cannot ask individual employees to choose between receiving benefits and exercising their rights under the National Labor Relations Act,” NLRB Chairman Lauren McFerran said in a statement. “Today’s decision upholds this important principle and restores longstanding precedent.”   

“Employers often insert such provisions into severance agreements to preclude disclosure of things like trade secrets, customer lists and financial data,” James M. Cooney, a labor and employment law expert at the Rutgers School of Management and Labor Relations, told The Washington Post. “However, some employers also include broad waivers of a former employee’s right to disclose anything deemed disparaging or confidential, such as allegations of a discriminatory or unsafe work environment.”

The case before the NLRB involved 11 Michigan hospital employees who were furloughed in June 2020. They signed confidentiality and nondisparagement agreements in exchange for severance.

The ruling represents a “big departure” for companies because such clauses are “absolutely standard" in separation agreements and settlement agreements, Steven Suflas, a labor attorney with Holland & Hart, told the Post. Deleting such provisions entirely would be a “risk-free solution,” he added.

A properly drafted severance agreement, such as one with a confidentiality provision prohibiting the disclosure of trade secrets, can still be asked of an employee, Cooney told the Post.

The Post noted that the NLRB’s decision does not apply to agreements with managers or other supervisory employees, who are broadly exempted from the National Labor Relations Act. It also does not apply to public-sector employees, airline and railroad workers, and independent contractors.