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🗞️ How One Telecom's Severance Agreement Crossed the Line

The NLRB ruled Prime Communications' severance agreements unlawfully silenced former employees, reaffirming federal protections against overbroad nondisparagement and confidentiality clauses in the workplace.

onthelaborfront

07 Apr 2026 — 4 min read

When Spencer Smith resigned from Prime Communications in November 2019, he accepted $5,000 in severance pay and signed away more than he may have realized. The agreement he received from the Sugar Land, Texas, telecom company required him to say nothing negative about the business or anyone connected to it, barred him from contacting any Prime employee at any location, and forbade him from disclosing even the existence of the agreement to anyone outside his spouse, tax adviser, or attorney. Violations carried the threat of injunctive relief, monetary damages, and attorney's fees.

On April 7, 2026, the National Labor Relations Board ruled that those terms were unlawful, affirming a prior ruling by Administrative Law Judge Eleanor Laws and ordering Prime Communications to rescind the offending provisions within 14 days.

The decision, Prime Communications, LP (Case 16-CA-309916), turns on Section 8(a)(1) of the National Labor Relations Act, which bars employers from interfering with workers' rights to organize, act collectively, and communicate freely about workplace conditions with other employees, unions, government agencies, or the public. Those rights, the Board has long held, do not disappear when an employee walks out the door.

The controlling precedent is the Board's 2023 ruling in McLaren Macomb, which marked a return to longstanding doctrine holding that the language of a severance agreement, taken on its face, determines whether it crosses the line. Employer intent does not matter, nor does whether any employee was actually deterred. What matters is whether a reasonable worker reading the agreement would feel constrained from exercising federally protected rights. Prime's agreements, the Board found, plainly failed that test. The nondisparagement clause was explicitly written to be "as broad as possible," covered the company's partners, officers, directors, agents, and employees, and carried no expiration date.

Three other former Prime employees were subject to similar agreements, two of which went even further. Those documents barred signatories from voluntarily assisting any agency or third party in any action adverse to the company and required them to contact Prime if approached by outside parties seeking information related to potential litigation. Each breach carried a $5,000 penalty. The Board found those provisions would reasonably chill cooperation with government investigators and former colleagues alike.

Prime was ordered to notify all former agreement signatories in writing that the unlawful provisions would not be enforced, and to post a workplace notice for 60 consecutive days.

The ruling lands at an unsettled moment for labor law. The McLaren Macomb standard remains binding Board precedent, but the Acting General Counsel appointed in early 2025 rescinded the guidance memorandum that had instructed regional offices on how to apply it. Whether the current NLRB will pursue cases of this kind with the same intensity as its predecessor is an open question. Employers and their counsel have been watching closely, with some already revisiting severance templates they revised after 2023. The Board members who decided Prime Communications acknowledged openness to reconsidering McLaren Macomb in a future proceeding but noted there was no majority to overturn it at this time.

Narrowly tailored restrictions are not categorically off the table. Confidentiality clauses protecting genuine trade secrets or limiting disclosure of specific financial settlement terms, and nondisparagement clauses tethered to the legal definition of defamation, remain potentially enforceable. What employers cannot do, under current precedent, is hand departing workers a blanket gag order and call it standard practice.

Key Points

The case: NLRB Case 16-CA-309916, Prime Communications, LP, decided April 7, 2026, by Chairman Murphy and Members Prouty and Mayer.
The violation: Severance agreements with overbroad nondisparagement and confidentiality clauses that chilled employees' Section 7 rights under the NLRA.
The standard: Under McLaren Macomb (2023), the legality of a severance provision is judged on its face, not on employer intent or whether coercion succeeded.
What made the provisions unlawful: No temporal limits; written to be "as broad as possible"; barred contact with any company employee; included financial penalties for disclosure; required employees to alert the company if contacted by outside parties.
The remedy: Rescind overbroad language within 14 days; notify all former signatories in writing; post a workplace notice for 60 days.
Narrowly tailored provisions are still permissible: Confidentiality clauses limited to trade secrets or financial settlement terms for a defined period, and nondisparagement clauses confined to defamatory statements, may still be lawful.
Shifting enforcement landscape: The Acting General Counsel appointed in early 2025 rescinded GC Memo 23-05, signaling reduced enforcement priority, though the McLaren Macomb board decision remains in effect.
Practical employer risk: Agreements with no expiration date containing unlawful provisions may be challenged at any time, with no statute of limitations bar under the prior GC's interpretation.

Source Information

Primary Source Author: ALJ Eleanor Laws (trial decision); affirmed by Chairman James R. Murphy, Member David M. Prouty, and Member Scott A. Mayer

Primary Source: Prime Communications, LP and Spencer D. Smith, 374 NLRB No. 88 (April 7, 2026)

Primary Source Link: https://www.nlrb.gov/case/16-CA-309916