The NLRB Issues a Decision Impacting Non-disparagement and Confidentiality Provisions in Severance Agreements
severance agreement

The National Labor Relations Board (NLRB) recently indicated that when drafting severance or general release agreements, employers have to rethink how they use standard non-disparagement and confidentiality clauses. On February 23, 2023, the NLRB issued a decision in McLaren Macomb, 372 NLRB No. 58, holding that, among other things, it is unlawful under the National Labor Relations Act (the “Act”) even to offer severance agreements that include broad confidentiality and non-disparagement provisions.

In McLaren Macomb, the employer permanently furloughed eleven employees and offered them each a severance agreement which included non-disparagement and confidentiality provisions. These provisions prohibited employees from: (a) disclosing the terms of the agreement to any third party other than their spouse, attorney, or tax provider; and (b) making statements to the employer’s other employees or to the general public which “could disparage or harm the image of employers…” Although the employees ultimately accepted the offers, the Board found that such an agreement violated the Act.

NLRB’s decision held that even the act of offering a severance agreement conditioned on such terms—which it found to be “broad”—violated the Act. Specifically, the non-disparagement terms were held to interfere with, restrain, or coerce employees’ exercise of their rights under Section 7 of the Act. Section 7 of the Act encourages public statements by employees about the workplace which are directly hindered by a broad non-disparagement clause. The NLRB held that the clause “ultimately encompassed employee conduct regarding any labor issue, dispute, or term and condition of employment…” Additionally, it was noted that the non-disparagement provision provided by the employer had no temporal limitation, and applied the provisions to not only the employer, but its affiliated entities, officers, directors, employees, agents and representatives.

Likewise, the NLRB found that the confidentiality provision was overly broad. By including the term “any third party” the NLRB concluded that the provision would prohibit employees from “disclosing even the existence of an unlawful provision contained in the agreement.” This would ultimately deter employees from filing any charges or participating in an investigation with the NLRB.

Now what? In light of the NLRB’s surprising decision, many employers’ counsel are suggesting that employers revise severance agreements to include a reservation of employee rights to engage in activity that is protected under the Act. Additionally, all language included in these agreements should be clear, defined and narrowly tailored so as to avoid any ambiguity that could be construed as an interference with an employee’s rights. Finally, it is worth noting that the decision does not apply to severance agreements offered to independent contractors or to most executives, managers, and supervisors, who generally are not protected by the Act.

If you need more information or assistance updating your severance agreements, or have questions regarding your current agreements, please contact any of our labor and employment attorneys.

Posted in Labor & Unions

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