Posted February 24th, 2023 in Top Stories, Legal Insights with Tags NLRB, NLRA, National Labor Relations Board, National Labor Relations Act, Severance Agreements

The National Labor Relations Board (NLRB or Board) recently issued a decision aimed at severance agreements with confidentiality and non-disparagement provisions. In McLaren Macomb, the Board held that an employer violates Section 8(a)(1) of the National Labor Relations Act (NLRA) when it offers employees a severance agreement with provisions—here, confidentiality and non-disparagement—that potentially restrict employees’ exercise of their NLRA rights. This decision comes at a time when states and the federal government are passing legislation limiting confidentiality and non-disparagement clauses in settlement agreements.

The severance agreement at issue in McLaren Macomb included a confidentiality clause with language permitting disclosure only (1) to a spouse, (2) to a professional advisor to obtain legal or tax advice, or (3) where legally compelled to do so by a court or administrative agency. The non-disparagement clause contained no limiting language and prevented the employee from making statements to other employees or the general public, which could disparage or harm the employer’s image. Although such provisions are commonplace, the Board found them impermissible. Employers should be aware that this decision impacts both unionized and non-unionized workforces.

We are advising employers to:

• Take a measured approach. Remember, the NLRB is not apolitical. Nor does it get the last word. Its decisions vacillate wildly based on political composition, and pronouncements often fail judicial scrutiny. Point in case, the NLRB’s 2012 decision in D.R. Horton, which held that mandatory arbitration agreements that contain class and collective action waivers violated Section 7. Employers who rushed to remove those waivers in the decision’s aftermath soon regretted it. In 2018, the Supreme Court reversed D.R. Horton and endorsed the legality of employers’ use of mandatory arbitration agreements that include class action waivers. Thus, we don’t recommend drastic changes, such as striking confidentiality and non-disparagement clauses altogether.
• Review your separation agreements. Carefully review your current separation agreements, including any confidentiality and non-disparagement clauses. Though the McLaren Macomb decision focused on these clauses, other clauses, such as a non-cooperation clause, could also violate employees’ Section 7 rights.
• Consider supplementing with disclaimers. Instead of striking, consider supplementing existing confidentiality and non-disparagement clauses with language confirming that the provisions are not intended to restrict an employee (or former employee) from exercising their Section 7 rights under the NLRA, including filing a Charge with or speaking to the NLRB. The NLRB analyzed the provisions at issue in McLaren Macomb in-depth, taking note of whether they included any temporal or other limitations. This suggests it is possible to draft confidentiality and non-disparagement provisions in a way that does not infringe on employees’ NLRA rights. Your separation agreements may already have language confirming the right to file a Charge with the EEOC or respond to a subpoena, in which case this addition may fit naturally into existing language.