Severance for Silence No More

A recent US ruling prohibits non-disparagement clauses in severance agreements. How firms—and employees—should adjust to this new normal as layoffs continue. 

Jenny had spent countless weeks working late to meet the demands of her temperamental boss. So when the firm let her go, she planned on sharing some choice words about her experience via Twitter—except that the nondisclosure agreement in her severance package prevented her from doing so. 

No longer—or so it seems. In a blockbuster ruling that overhauls decades of employment practices, the National Labor Relations Board (NLRB) has banned the use of NDAs in severance agreements. Historically, these clauses have been used to prevent laid-off employees from criticizing firms publicly or revealing the details of severance packages. The NLRB’s decision comes on the heels of a different US agency curbing noncompete agreements, suggesting that employer-employee relations may be undergoing a transformation—just as more firms are letting people go. 

In this case, experts say workers and companies will both need to exercise discretion. An exiting worker’s disparaging comments can damage a company’s reputation, but they can also hurt that worker’s chance to be hired elsewhere. “People have a sense of wanting to talk about something that they think is incredibly wrong within a company,” says David Vied, global sector leader for Korn Ferry’s Medical Devices and Diagnostics practice. At the same time, he notes, “Firms hiring new people will say, ‘You know, I Googled this.’”

The NLRB’s decision was born out of a shift in political winds. In 2021, the Democratic party gained a majority on its board with a plan to enact sweeping changes that favored unions and labor. Supporters say the NDA ban will enable workers to call out bad behaviors—especially the mistreatment of marginalized groups. “For women and people of color, many times the non-disparagement clause is a tool to silence action on what really is egregious behavior,” says  Andrés Tapia, Korn Ferry senior client partner and DE&I strategist. Creating a culture of employee silence ultimately can be very damaging to all stakeholders, he adds.

Workers have always had the ability to file legal claims against employers. But these typically don’t lead to the kind of social-media shaming that companies have faced recently, experts say, in some cases for poorly handled layoffs.

Still, while workers may get to gripe openly, they may find that the government’s ruling reduces some firms’ incentives to offer severance. “I think it will affect the number and the size of severance payments—downwards,” says Tanya van Biesen, senior client partner in Korn Ferry’s Global Board and CEO Services practice. The rationale, she adds, is that firms were paying for the privilege of confidentiality. 

Other firms are considering what they can do to prevent employees from wanting to vent frustrations in the first place. Many HR specialists say they like to remind companies always to assign a neutral third party to conduct exit interviews, to try to help the departing employee feel more comfortable expressing their feelings. “Firms can then do something about the issue and nip it in the bud before somebody goes public with it,” says Ron Porter, senior client partner at Korn Ferry’s Global Human Resources Center of Excellence. A further measure, Porter offers, would be for firms to state their good faith intentions when providing severance packages. “Let the employee know that you’re going to be discreet up-front, and that it’s up to them whether they want to be discreet or not.”

Between this latest NLRB ruling and the Federal Trade Commission's proposal to curb noncompetes—as well as some firms deciding to require 120 days’ notice from exiting employees—a larger picture is emerging of an overhaul in the employer-employee relationship. To find a way forward, both parties will have to observe the spirit of these new laws as much as the letter, says Ed Brady, senior client partner in Korn Ferry’s Organization Strategy Consulting practice. “The rules of common sense don’t go away,” he says.


For more information, contact Korn Ferry’s Human Resources experts.