September, 2016

Add the federal Occupational Safety and Health Administration (“OSHA”) and the federal Securities and Exchange Commission (the “SEC”) to the list of federal agencies that have a problem with the typical language used by employers in most standard severance agreements. The National Labor Relations Board (the “NLRB”) recently began challenging any agreement which the NLRB believes “chills” employees’ protected and concerted activities, such as broad confidentiality provisions in severance agreements or provisions which generically prohibit disparagement. The Equal Employment Opportunity Commission (the “EEOC”) also has sanctioned employers that use severance agreements which the EEOC believes would discourage employees from reporting unlawful activities to the EEOC and/or participating in EEOC investigations. Now, OSHA and SEC have joined the pack.

OSHA recently issued a policy guidance criticizing the use of “gag clauses” by employers which would dissuade employees or former employees from whistleblowing to OSHA, including broad confidentiality and non-disparagement provisions. Similarly, the SEC recently issued cease and desist orders against two employers for using overly broad confidentiality provisions in severance agreements. (The SEC generally has jurisdiction over only publicly-traded companies, but many courts recently have interpreted the SEC’s authority to cover contractors of publicly-traded companies, as well). One of these cited employers resolved the issue with the SEC by paying a substantial fine and removing certain provisions from its standard severance agreement, including: a generic provision in which the employee agreed not to disclose third party confidential information; a provision in which the employee waived any rights to monetary recovery as a whistleblower under the laws enforced by the SEC; and a provision which required the employee to give advance written notice to the company’s legal department before providing confidential information in response to a subpoena or other legal process. Many of the positions taken by the federal agencies regarding these provisions likely will be addressed soon by the courts and may or may not be upheld. In the interim, employers should undertake a critical review of their form severance agreements and other employee agreements and consider whether edits are necessary.