The National Labor Relations Board (“NLRB” or the “Board”) has once again weighed in on employer use of confidentiality and non-disparagement language, this time in the settlement arena. Recently, the NLRB withheld its approval of a global settlement of Fair Labor Standards Act (“FLSA”) claims and Board charges, stating its objection to the negotiated non-disparagement and confidentiality provisions in the parties’ settlement agreement.

The employer, Liberato Restaurant, agreed to a $1 million settlement of an FLSA class action lawsuit brought by current and former employees who alleged non-payment of tips and overtime wages.  As part of the settlement, plaintiffs agreed to dismiss charges filed with the NLRB. The settlement agreement included promises by both parties to not disparage the other and not to disclose the terms of the agreement to the public. Such provisions are routinely included in settlement agreements, and have been accepted in settlements involving wage and hour claims.  On October 27, the United States District Court for the Southern District of New York, where the class action lawsuit was filed, found the parties’ settlement agreement fair and reasonable. In its order, however, the court noted that the NLRB would “have to approve the dismissal of the NLRB actions as part of this settlement.”

The NLRB, acting through one of its regional offices, reviewed the agreement and on November 25, 2015 notified the parties that he would not approve it. The NLRB explained that the non-disparagement and confidentiality language limited the employees’ ability to discuss with other employees their terms and conditions of employment, thus impinging upon their rights guaranteed under Section 7 of the National Labor Relations Act (“NLRA”). According to a 2006 NLRB Memorandum concerning non-Board settlement agreements, the Board was prohibited from approving agreements that contain prohibitions going “beyond the disclosure of financial terms.”  As a result, The Board provided the parties with two options: (1) the parties could modify the FLSA settlement agreement’s non-disparagement and confidentiality provisions to meet Board standards, or (2) the parties could enter into the NLRB’s informal settlement agreement, in which case the NLRB would not have to consider the terms of the FLSA settlement.

We don’t know yet whether the NLRB’s position will derail the settlement. We suspect that if the parties have come this far, they will figure out a way to get it done. The takeaway for employers, however, is that a global settlement of federal court wage/hour litigation accompanied by NLRB charges must pass muster not only with the judge, but also with the NLRB.