Navigating Non-Disparagement and Confidentiality Clauses: NLRB General Counsel Provides Additional Insight on Severance Agreements

Over the past three months, the National Labor Relations Board (the Board) has more actively scrutinized the use of severance agreements that contain confidentiality clauses which might prevent employees from sharing information about their terms of employment. This was particularly evident in the Board’s recent decision in McLaren Macomb, 372 NLRB No. 58 (2023), which we wrote about here. In McLaren Macomb, the Board ruled that that overly broad non-disparagement and confidentiality provisions included in severance agreements offered to certain employees violated Section 8(a)(1) of the National Labor Relations Act (the Act).

The Board’s General Counsel, Jennifer Abruzzo, provided further clarification on the meaning of McLaren Macomb in a memorandum that was issued on March 22, 2023.  Below are the most important takeaways from that memorandum.

  1. The Decision is Retroactive

The General Counsel’s memorandum maintained that even severance agreements entered into before McLaren Macomb are subject to the new standard.  Board cases are presumed to be applied retroactively, and as such, this decision has retroactive application. And, since the General Counsel’s position is that “maintaining and/or enforcing a previously entered severance agreement with unlawful provisions” is a continuing violation, severance agreements are not subject to the standard six-month statute of limitations set forth for NLRA violations.

  1. Overbroad Terms Do Not Render a Severance Agreement Null and Void

The General Counsel’s memorandum also revealed that overbroad terms in a severance agreement will not necessarily void that entire agreement. Regions typically analyze severance agreements by reviewing and potentially voiding only specific unlawful provisions. They typically do not seek the recission of entire agreements.  Given the decision’s retroactive application, this means that an overbroad clause in a previously executed severance agreement is not likely to invalidate the agreement itself.

  1. The Act Also Protects Former Employees.

The General Counsel’s memorandum confirmed that the McLaren Macomb decision applies to severance agreements with former employees as well as current employees. This is based on the statutory language of Section 2(3) of the Act, which states that “the term ‘employee’ shall include any employee and shall not be limited to the employees of a particular employer.

  1. Proffering an Invalid Severance Agreement Violates the Act

Interestingly, the General Counsel’s memorandum identified that even proffering an unlawful severance agreement violates the Act, regardless of whether an employee specifically signed the agreement.  The General Counsel explained that this was because the act of proffering the agreement is coercive to employees.  Presumably, this is intended to prevent employers from using unlawful waivers as a tool or ploy within severance negotiations.

  1.  Savings Clauses Will Not Remedy Violative Clauses

The General Counsel’s memorandum indicated that a typical “savings clause” ( a contractual clause providing that if part of the contract is invalidated the rest shall remain in effect) will not remedy an overly broad severance agreement. As a result, a “savings clause” will not provide a defense to an employers’ liability for impeding employees’ Section 7 rights through overly broad severance agreement provisions.

  1. Narrowly Tailored Confidentiality Clauses May Be Lawful 

While McLaren Macomb focused on broad confidentiality clauses, the General Counsel’s memorandum did instruct that some confidentiality clauses remain permissible so long as they are narrowly tailored for legitimate business reasons such as restricting the dissemination of proprietary or trade secret information.  Still, any confidentiality clauses that have a chilling effect and preclude employees from assisting others with workplace issues and/or from communicating with the Agency, a union, legal forums, the media, or other third parties remain unlawful.

  1. Financial Terms of Severance Agreements Can Remain Confidential

The General Counsel’s memorandum also explained that since “[Operations and Management Memorandum] 07-27 is consistent with the McLaren Macomb decision,” it remains that “confidentiality clauses that prohibit an employee from disclosing the financial terms of the settlement to anyone other than the person’s family, attorney and financial advisor are normally acceptable.” Employers can still keep the financial terms of a severance agreement confidential.

  1. Supervisor Coverage is Fact-Dependent

The General Counsel’s memorandum maintained that “supervisors are generally not protected under the [National Labor Relations] Act.” However, the memorandum did indicate that in some instances, supervisors could be protected by the act. For example, if an employer retaliated against a supervisor for refusing to proffer an unlawful severance agreement, or if an employer proffered a severance agreement to a supervisor in order to prevent their participation at a Board meeting, the employer would still violate the Act despite the subject of its actions being a supervisor.  

  1. The Board May Challenge Other Severance Agreement Clauses in the Future

The General Counsel’s memorandum hinted that the Board could challenge severance agreements in the future based on other potentially “problematic” clauses.  Specifically, the General Counsel identified non-competition clauses, non-solicitation clauses, no-poach agreements, broad liability releases and covenants not to sue that go beyond the employer/extend into the future, cooperation requirements involving any current or future investigation or proceeding involving the employer, as clauses that have the potential to interfere with employees’ ability to exercise their Section 7 rights.  

How should employers respond to this guidance?

As we stated following the McLaren Macomb decision, employers would be wise to review their severance agreements and practices, including past signed agreements (given the Board’s insistence that signed agreements from the past are continuous violations and subject to the decisions retroactive application).  Moving forward, employers must carefully analyze whether confidentiality and/or non-disparagement provisions are necessary in any particular case, and if so, employers should precisely review the extent to which any separation agreement can be more narrowly drafted to lower the risk of a violation. Employers should consider exactly what information they want to protect so that they can tailor standard severance agreements around that intent and similarly review agreements on a case-by-case basis to ensure that each confidentiality clause is appropriately but narrowly drafted.

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