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The End of Non-Disparagement and Confidentiality Provisions in Severance Agreements?


Analyzing the NLRB's Recent Decision in McLaren Macomb, 372 NLRB No. 58 (2023)

The National Labor Relations Board (NLRB or the Board) recently issued a decision in McLaren Macomb, 372 NLRB No. 58, affecting the enforceability of confidentiality and non-disparagement provisions in severance agreements with employees. Specifically, the Board ruled that the proffer of confidentiality and/or non-disparagement clauses in severance agreements violates Section 8(a)(1) of the National Labor Relations Act (the NLRA) if such provisions restrict workers from engaging in protected activity. Under the NLRA, protected activity includes, but is not limited to, criticizing employer policies or practices with coworkers and former coworkers and discussing severance terms, wages, and other terms and conditions of employment. Notably, the decision applies retroactively and to both unionized and non-unionized employees, including former employees. As a result of the decision, employers should consider whether changes may be necessary to their severance agreements.

In McLaren Macomb, a hospital laid off eleven employees and presented each with a severance agreement that included: (1) a confidentiality provision prohibiting the employees from discussing the terms of the agreement with anyone other than a spouse or professional advisor and (2) a non-disparagement provision prohibiting the employees from disparaging the hospital. Notably, both provisions were broad in scope without limiting language, and the agreements did not include a “savings clause” or other disclaimer language, which would typically operate to provide an exemption for certain protected activities. In analyzing the facts of the case, the Board ruled that the mere proffer of the severance agreements violated Section 8(a)(1) of the NLRA because it had a reasonable tendency to interfere with or restrain the prospective exercise of those rights – both by the separating employees and those who remain employed.

In March 2022, the NLRB General Counsel issued a non-binding memorandum voicing support for the McLaren Macomb decision and clarifying the Board’s stance on confidentiality and non-disparagement provisions in severance agreements. The General Counsel made the following points:

  • Whether an employee actually signs the severance agreement with problematic confidentiality and/or non-disparagement provisions is irrelevant. The mere proffer in and of itself violates the NLRA.
  • The protections of the McLaren Macomb decision do not necessarily extend to supervisors (as defined by the NLRA), but employers should still take care to avoid retaliating against supervisors for refusing to engage in unfair labor practices.
  • Not all confidentiality provisions in severance agreements are unlawful. Confidentiality clauses that are narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications may be considered lawful.
  • Not all non-disparagement clauses are unlawful. A narrowly-tailored, justified, non-disparagement provision that is limited to employee statements about the employer that meet the definition of defamation as being maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity, may be found lawful.
  • Overbroad confidentiality and/or non-disparagement clauses would not necessarily void an entire severance agreement. Instead, the Board will typically only seek to have the problematic provisions voided.
  • Employers are encouraged to take proactive action in addressing overboard restrictions in existing severance agreements by notifying individuals that the provisions are null and void and that the employer will not seek to enforce the provisions or pursue any penalties, monetary or otherwise, for breaches of those unlawful provisions.

Notably, because the severance agreements in question did not include a “savings clause” or other disclaimer language, the Board did not address the effect such language would have on otherwise overbroad confidentiality and non-disparagement provisions. However, the General Counsel suggests that disclaimer language alone may not be enough to salvage otherwise overbroad restrictions if the totality of the agreement creates any mixed or inconsistent messages for employees that could impede the exercise of Section 7 rights. Nonetheless, employers should consider including an express statement in severance agreements to make clear that nothing in the agreement precludes employees from exercising their rights under the NLRA. We note that such an express statement aligns with the NLRB’s long-standing position that specific language is necessary to put employees on notice of their rights to whistleblow and engage in similar protected activities.

While not squarely addressed by the McLaren Macombdecision, the Board’s reasoning could equally apply to other employer communications with employees, such as offer letters or covenants agreements. Therefore, employers are encouraged to work with legal counsel as necessary to closely examine existing employment-related agreements containing confidentiality and/or non-disparagement covenants to ensure that such provisions do not run afoul of the NLRB’s McLaren Macomb decision.

If you have any questions, please do not hesitate to reach out to a member of the Morris, Manning & Martin, LLP Employment Team