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Severance breaches of confidentiality less likely now

On Behalf of | Mar 21, 2023 | Business Litigation

As a business owner, right now, you are optimizing operations. During chaotic economic times, savvy business owners always plan ahead. One way that larger businesses optimize operations is through layoffs. However, to ensure layoffs are done equitably and to avoid costly litigation, generous severance packages with severance agreements are included. Unfortunately, you may not be able to avoid Englewood, New Jersey, business litigation from confidentiality breaches as broadly written confidentiality clauses are no longer enforceable in most industries.

National Labor Relations Board

At the end of February, the National Labor Relations Board found that broadly written confidentiality clauses within severance agreements violated both Section 7 and 8(a)(1) of the National Labor Relations Act. In other words, broadly written confidentiality clauses violate New York and New Jersey employee rights.

To whom does this apply?

The NLRB’s holding applies to most employees across the United States, but not everyone. If you work for the government (federal, state, local, government corporations, public schools, etc.), your employer is likely outside of the NLRB’s jurisdiction. If your employer only employs agricultural laborers, they are likely exempt as well, as are employers subject to the Railway Labor Act, like airlines and railroads.

What does the opinion mean?

In practice, we do not know yet. Once there are subsequent decisions that flush out what the NLRB’s decision means, we will know more. And, while this opinion is appealable, remember, it goes into effect immediately. It is a law now.

That means that if you have or will have New York or New Jersey ex-employees subject to a severance agreement with broadly written confidentiality clauses and they violate those clauses, your business litigation against them will need to be based on something more than just that severance agreement. If the Englewood, New Jersey, business litigation is only based on that severance agreement, you will lose.


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