On March 22, 2023, the National Labor Relations Board’s (NLRB) General Counsel (GC) issued formal guidance in response to inquiries about applying McLaren Macomb, 372 NLRB No. 58 (February 21, 2023). McLaren Macomb, which was the subject of a prior blog post, made unlawful certain nondisparagement and confidentiality clauses in severance agreements for non-supervisory employees of both union and non-union employers.
The GC serves as the NLRB’s chief prosecutor. In the guidance, which is presented in a frequently asked questions format, the GC (as expected) took an aggressive, pro-union, and pro-employee stance antagonistic to most such clauses. While GC guidance is not binding, it does offer insight over which issues will be pursued in future cases. Among the key points that the GC made are:
- Severance agreements are not banned where the employee releases only the right to pursue employment claims and only as to claims arising as of the date of the severance agreement. The GC recognizes that such agreements may be enforced if they do not contain “overly broad” provisions that affect the rights of employees “to engage with one another to improve their lot as employees.” This leaves the door open for employers to draft severance agreements that meet the requirements of McLaren Macomb.
- The mere proffering of a severance agreement with overly broad provisions is itself unlawful, regardless of whether the employee proposes it or signs it.
- Severance agreements issued to supervisors are not directly affected by McLaren Macomb, but the GC counsels that supervisors who resist the proffering of such unlawful agreements are protected.
- McLaren Macomb applies retroactively, and to the extent an unlawful severance agreement is “maintained or enforced” within the last six months (the applicable statutory limitations period), that may be considered an unlawful act.
- The GC recommends that employers consider remedying violations in existing severance agreements by informing employees that overly broad nondisparagement or confidentiality provisions are “null and void” and the employer will not seek to enforce them or pursue any penalties for violations of those provisions.
- The GC notes that the Regions in the past have “penciled out” unlawful provisions rather than voiding the entire agreement, regardless of whether the severance agreement includes a severability clause. But she notes that such decisions are made on a case-by-case basis. For this reason, employers would be wise to include a strong severability provision in a post-McLaren Macomb severance agreement.
- Even if an employee requests overly broad nondisparagement or confidentiality/nondisclosure provisions—which the GC calls an “unlikely scenario”—those provisions would still be deemed unlawful because they protect “public rights” and not individual rights. The GC emphasized that “the Board protects public rights that cannot be waived in a manner that prevents future exercise of those rights regardless of who initially raised the issue.”
- The GC recognized that narrowly tailored confidentiality clauses may be considered lawful if restricting the dissemination of proprietary information or trade secrets for a period of time is based on legitimate business justification. But “confidentiality clauses that have a chilling effect that precludes employees from assisting others about workplace issues and/or from communicating with the Agency, a union, legal forums, the media or other third parties are unlawful.”
- Nondisparagement clauses, however, would be considered legitimate (as noted in the decision) only to the extent they are limited to employee statements about the employer that meet the definition of defamation as being maliciously untrue and made with knowledge of their falsity or with reckless disregard of their truth or falsity.
- Simple and general savings clauses will not save an otherwise overly restrictive clause. The GC outlines eight points that would have to be included to create a valid savings clause.
- The GC believes that other clauses frequently included in severance agreements may also be unlawful, including:
- noncompete, nonsolicitation, and no poaching clauses;
- broad liability releases and covenant not to sue that may go beyond the employer and employment claims as of the date of the effective date of the agreement; and
- cooperation requirements involving any current or future investigation or proceedings involving the employer that affects an employee’s right to refrain under Section 7 of the National Labor Relations Act (e.g., asking an employee to testify against co-workers that the employee assisted with filing a ULP charge).
It is worth noting that McLaren Macomb has not worked its way up through the appellate courts, so it is possible that we may have additional guidance from the courts on these issues. We will continue to follow closely and report on any federal court appeal of McLaren Macomb.
In the meantime, here is the upshot: whether you are a union or non-union employer, aggressive, overly restrictive confidentiality and nondisparagement clauses may land you in trouble with the NLRB. Post-employment restrictions in severance agreement with non-supervisory employees should be tailored to address legitimate business needs without infringing on employees’ right to communicate with one another.
If you have any questions, please contact the authors.
The legal issues impacting workplaces are ever-changing (Employment Law in Motion!) and since publication, new or additional information not referenced in this blog post may be available.
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.