Avoid business litigation by updating your severance agreements
Hubbard Snitchler & Parzianello
Business owners take a lot of precautions to avoid litigation. This is done through good human resources practices and policies, treating Southeast Michigan employees with respect and when layoffs occur, severance packages with severance agreements are used. These severance agreements include many clauses to avoid post-employment litigation, which can cost more than any layoff saves. However, after a recent National Labor Relations Board decision, business owners may need to update their severance agreements to avoid business litigation moving forward. What is the National Labor Relations Board? The NLRB is a federal agency, independent from other agencies. They are empowered to defend employer rights as they relate to labor practices and unionizing. Almost all businesses are covered by the NLRB. Is my business covered by the National Labor Relations Board? However, some businesses are specifically excluded by regulation or statute. These include government entities, like public schools, libraries, parks, etc. It also includes federal, state and local government employers. The Federal Reserve Bank and other wholly owned government corporations are also excluded. All employers who are subject to the Railway Labor Act (railroads, airlines, etc.) are excluded, as are any employers who engage in farming operations, only employ agricultural laborers, prepare commodities for delivery or harvest or cultivate agricultural commodities. National Labor Relations Act In recent years, the use of a broadly written confidentiality clause in severance agreements has become standard practice. This was because in prior administrations, these clauses were upheld under sections 7 and 8(a)(1) of the National Labor Relations Act. Under a recent decision by the NLRB though, that has now changed, and these confidentiality clauses are no longer legal. Avoiding business litigation While there has not yet been subsequent litigation, some courts may interpret this as invalidating, not just the broadly written confidentiality clause in severance agreements, but also the entire agreements themselves. In addition, some courts may invalidate existing severance agreements as well. This means that Southeast Michigan business owners should immediately contact their general counsels and outside counsels for consultations on this matter and to update their severance agreements going forward.The post Avoid business litigation by updating your severance agreements first appeared on Hubbard Snitchler & Parzianello PLC.