In Labor & Employment Blog, Labor and Employment

On Tuesday, February 21, the National Labor Relations Board (“Board”) ruled that confidentiality and non-disparagement provisions contained in severance and separation agreements violate Section 8(a)(1) of the National Labor Relations Act (“NLRA”). The decision applies only to private employers covered by the NLRA, regardless of size and whether the workforce is unionized, and it is effective immediately; meaning employers who continue to use broad confidentiality or non-disparagement clauses in their severance/separation agreements may find themselves defending against an unfair labor practice charge. 

In the decision, McLaren Macomb, the Board reviewed confidentiality and non-disclosure provisions that restricted the employee from disclosing the terms of the severance agreement to “any third party” and barred the employee from making any statements “to Employer’s employees or to the general public that could disparage or harm the image of the Employer….” 

The Board used a “reasonable employee” standard, and held that broad restrictions have a tendency to interfere with, restrain, or coerce employees’ exercise of their rights under Section 7 of the NLRA, including filing a charge with the NLRB. The Board found the non-disparagement and confidentiality provisions to be unlawful because they:

  • Prevented the employee from making a statement that the employer had violated the NLRA to their former coworkers, their union, the Board, or otherwise;
  • Was not limited to the employee’s relationship with the employer;
  • Was not limited in time; and
  • Failed to limit its definition for “disparagement” to the narrow circumstances set out in the1953  Supreme Court decision, NLRB v. Electrical Workers Local 1229 (Jefferson Standard Broadcasting Co.)

Significantly, the ruling applies regardless of whether the employee had already been terminated prior to receiving the severance agreement. Simply offering an agreement with such unlawful terms will violate the NLRA, even if the employee declines to sign the agreement, and even if the employer never seeks to enforce the terms.

This ruling reverses prior decisions that took into consideration other factors in determining whether an agreement violated the law. We expect McLaren Macomb to be challenged in the federal courts of appeals. 

What do employers need to do?

It behooves employers immediately to review the severance/separation agreements they use and to eliminate broad confidentiality and non-disparagement clauses. This does not mean that confidentiality goes out the window completely. Employers may still restrict employees from disclosing proprietary information and trade secrets in severance/separation agreements; and they may certainly enter into separate confidentiality or non-disclosure agreements that are not tied to the receipt of severance or separation pay. However, employers may not bar employees from discussing the terms of the severance/separation agreement with other employees—or anyone else, including on social media. 

Employers should also work closely with legal counsel to revise their existing severance/separation agreements to include language and/or carve-outs stating explicitly that nothing in the agreement is meant to restrict the employee’s rights under Section 7 of the NLRA, including contacting the Board. Additionally, severability clauses are now more important than ever, so that any challenge to a non-disparagement or confidentiality clause does not invalidate the most important component of the agreement, namely, the release.  It is also advisable for employers to advise employees specifically, in the agreement, that they are not restricted from discussing their employment or the terms of the severance/separation agreement with their co-workers, assisting other employees with filing a charge, or assisting in the Board’s investigative process. The more specific and conspicuous these disclaimers are, the better. 

Finally, though the new ruling applies to severance/separation agreements issued to non-management employees (with limited exceptions, managers and supervisors do not have rights under Section 7), employers should review their current managerial severance/separation agreements to ensure that there is no language that could be deemed to limit the manager’s ability to facilitate other employees who wish to exercise their rights under the NLRA. 

The information contained in this document does not constitute legal advice.

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