NLRB Issues Guidance in Response to Inquiries Involving Non-Disparagement and Confidentiality Provisions in Severance Agreements

Legal Alert

March 24, 2023

Non-Disparagement and Confidentiality Provisions in Severance Agreements

As outlined in the February 22, 2023 SGR Client Alert, the National Labor Relations Board (“NLRB”) ruled in McLaren Macomb that severance agreements may not contain general non-disparagement or confidentiality/non-disclosures provision because they interfered with, restrained or coerced employees’ exercise of their Section 7 rights under the National Labor Relations Act (“Act”). On March 22, 2023, Jennifer A. Abruzzo, the NLRB General Counsel, issued Memorandum GC 23-05 (“Guidance”) to provide guidance regarding the February 21, 2023 McLaren Macomb decision.

In the McLaren Macomb decision, the NLRB ruled that the severance agreement at issue contained overly broad non-disparagement and confidentiality clauses that prohibited employees from making statements that could disparage or harm the image of the employer, its parent, affiliates, officers, directors, employees, agents and representatives. The confidentiality provision violated the Act because it advised employees that they were prohibited from discussing the terms of the agreement with anyone, except for a professional advisor or spouse. The severance agreement included injunctive and monetary sanctions for a breach of the provisions. As outlined in the February 22, 2023 SGR Client Alert, the McLaren Macomb decision created many unanswered questions for employers.

In an effort to clarify the decision, General Counsel Abruzzo’s Guidance stated that severance agreements are not banned as long as they do not contain overly broad provisions that restrict the rights of employees to access the NLRB, “their union, judicial or administrative or legislative forums, the media or other third parties.” She also explained that if an employee does not sign the proffered severance agreement, the employer would still be found to have violated the Act because “the proffer itself inherently coerces employees by conditioning severance benefits on the waiver of statutory rights[.]” Similarly, any other employer communication to employees such as pre-employment communications and offer letters that tend to interfere with, restrain or coerce employees’ exercise of Section 7 rights would also violate the Act. Further, employees and Unions do not have the right to waive such overly broad provisions and while a “savings clause” or disclaimer may help resolve ambiguity over vague terms, such a clause does not necessarily save overbroad provisions in a severance or settlement agreement. The Guidance also indicated that non-compete, no solicitation, and no poaching provisions and broad liability releases and covenants not to sue “might interfere” with employees’ exercise of Section 7 rights. Likewise, provisions requiring employees to assist the employer in litigation and/or investigations could adversely affect an employee’s right to refrain from such activities under Section 7.

The Guidance also outlined how supervisors could be covered by the McLaren Macomb decision. For example, the Act protects a supervisor who is retaliated against because of a refusal to act on the employer’s behalf to commit an unfair labor practice. A supervisor would also be protected by the Act if the supervisor refuses to proffer an unlawful severance agreement to an employee or is offered a severance agreement after refusing to commit an unfair labor practice.

The Guidance also states that the February 21, 2023 McLaren Macomb decision applies retroactively. Furthermore, even though there is a six-month statute of limitation covering an unlawful proffer of a severance agreement, the Guidance asserts that “maintaining and/or enforcing a previously-entered severance agreement . . . that restricts the exercise of Section 7 rights” would be a continuing violation of the Act and would not be time-barred. The NLRB might apply this interpretation to settlement agreements entered into in the past as well. General Counsel Abruzzo advised that to avoid a “meritorious charge solely alleging an unlawful proffer,” employers should consider remedying unlawful severance and settlement agreements by contacting former employees subject to such agreements and “advising them that the provisions are null and void and [the employer] will not seek to enforce the agreements or pursue any penalties, monetary or otherwise.”

The sliver of a silver lining in General Counsel Abruzzo’s Guidance is that NLRB regions generally “seek to have [unlawful provisions] voided out as opposed to the entire agreement, regardless of whether there is a severability clause or not.”

However, she also recommended that the NLRB create “a model prophylactic statement of rights . . . that [employees] had rights to engage in” for employers to include in handbooks and severance agreements. Her very broad proposed list of rights includes:

Organizing a union to negotiate with their employer concerning their wages, hour, and other terms and conditions of employment;
Forming, joining, or assisting a union, such as by sharing employee contact information;
Talking about or soliciting for a union during non-work time, such as before or after work or during break times, or distributing union literature during non-work time, in non-work areas, such as parking lots or break rooms;
Discussing wages and other working conditions with co-workers or a union;
Taking action with one or more co-workers to improve working conditions by, among other means, raising work-related complaints directly with the employer or with a government agency, or seeking help from a union;
Striking and picketing, depending on its purpose and means;
Taking photographs or other recordings in the workplace, together with co-workers, to document or improve working conditions, except where an overriding employer interest is present;
Wearing union hats, buttons, t-shirts, and pins in the workplace, except under special circumstances, and
Choosing not to engage in any of these activities.

Based on the General Counsel’s Guidance, employers should reassess their severance and settlement agreements with their labor and employment counsel to ensure compliance with the NLRA. If you have any questions regarding the issues raised in this client alert, please contact your Labor and Employment counsel at Smith, Gambrell & Russell, LLP.