On September 19, the Sixth Circuit Court of Appeals issued a decision enforcing the National Labor Relations Board (NLRB or Board) February 2023 McLaren Macomb decision. In doing so, the Sixth Circuit declined to comment on the Board’s most salient holding: that the text of severance agreements alone may violate the Section 7 rights of nonsupervisory employees under the National Labor Relations Act (NLRA). Accordingly, even after the Sixth Circuit’s decision, broad confidentiality and non-disparagement clauses may violate the NLRB unless they are narrowly tailored to restrict the dissemination of proprietary and trade secret information, or particular disparaging statements, for a fixed period of time based on legitimate business reasons.
We previously wrote about the February 2023 decision and provided guidance, in the form of Q&A, on the impact of the Board’s decision on confidentiality and non-disparagement provisions in severance agreements in light of the NLRB general counsel’s memorandum outlining the NLRB’s take on the decision
While commentators were looking forward to the Sixth Circuit’s decision to see whether it would enforce or vacate the Board’s decision, the panel’s decision to bypass McLaren Macomb’smost impactful holding – which reversed several Trump-era rulings – means that the Board’s decision that the text of broad confidentiality and non-disparagement may potentially violate the NLRA remains in effect. Thus, if a confidentiality agreement broadly prohibits nonsupervisory employees from disclosing the terms of the agreement to others (including co-workers and members of the general public) and the non-disparagement clause broadly prohibits employees from making remarks that could “disparage or harm” their employer, then such provisions still violate the NLRA, according to the Board.
To be sure, the Sixth Circuit did find that the severance agreements McLaren offered its employees violated the NLRA. But the panel made this determination based on previous Board precedent (i.e., the precedent the Board overruled), not for the reasons articulated by the Board in McLaren Macomb. Specifically, the court agreed with the NLRB that McLaren violated the NLRA by failing to bargain with the union about its decision to furlough employees or the effects on employees of those furloughs, and by failing to directly deal with those employees instead of the union. In light of these other unfair labor practices, proffering the severance agreements demonstrated McLaren’s disregard of the NLRA.
As a consequence, uncertainty remains for employers regarding the validity of broadly worded confidentiality and non-disparagement clauses. Employers must remain vigilant in reviewing their current severance agreements with the assistance of labor counsel to evaluate whether their severance agreements containing these provisions must be narrowly tailored in order to avoid Board scrutiny.
Takeaways:
- The NLRB’s holding, as set forth in the underlying McLaren Macomb – that broad confidentiality and non-disparagement clauses violate a nonsupervisory employee’s Section 7 rights – is still valid given the Sixth Circuit’s decision to sidestep the board’s holding.
- Confidentiality and non-disparagement provisions can still be lawfully drafted, according to the Board, but the Board, even after the Sixth Circuit decision, will consider language that is not narrowly tailored to serve specific confidentiality and non-disparagement goals violative of the NLRA.
- Employers should evaluate whether confidentiality provisions are necessary for all employees or just for employees who, for example, may have access to confidential and proprietary information. The same consideration should be made for non-disparagement clauses, with employers evaluating whether non-disparagement clauses are necessary only for employees likely to make remarks about an employer’s products and services – which are not protected by the NLRA. In such scenarios, the non-disparagement clause should state that it is intended only to prohibit disparagement of the employer’s products and services or statements that are maliciously untrue.
- If employers are intent on including confidentiality and non-disparagement provisions with broad language in their severance agreements, they should consider including disclaimers that such clauses are not intended to interfere with employees’ Section 7 rights under the NLRA, including the right to file unlawful-labor-practices charges or to participate, assist or cooperate in unfair labor practices investigations.
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