On March 22, 2023, National Labor Relations Board (“NLRB”) General Counsel Jennifer Abruzzo issued a memorandum clarifying the NLRB’s decision in in McLaren Macomb, 372 NLRB No. 58 (2023), which deemed non-disparagement and confidentiality provisions in severance agreements to be unlawful.  Specifically, the memorandum provides that the decision applies retroactively and therefore, agreements containing unlawful provisions that were entered into prior to the date of the decision will be in violation of the National Labor Relations Act (“NLRA”) and a charge alleging such would not be time-barred.

As we previously reported, in McLaren Macomb, the NLRB found that a severance agreement containing provisions providing that the terms of same were confidential and must not be disclosed and a non-disparagement provision that barred the employees from making statements to anyone that could disparage or harm the image of the employer, was in violation of the NLRA. The recent memorandum was issued in response to inquiries about implications stemming from that case and it provides guidance on the impact of the decision. Following are key points from the memorandum:

Is the decision retroactive?

The memorandum clarifies that the decision has a retroactive effect and therefore, it may invalidate agreements entered into prior to February 21, 2023.  In addition, “while an unlawful proffer of a severance agreement may be subject to the six-month statute of limitation language under Section 10(b), maintaining and/or enforcing a previously-entered severance agreement with unlawful provisions that restrict the exercise of Section 7 rights continues to be a violation and a charge alleging such beyond the Section 10(b) period would not be time-barred.”

Would the entire severance agreement be null and void if there is just one overbroad provision?

The memorandum further explained that generally, the unlawful provisions would be voided out as opposed to the entire agreement, regardless of whether there is a severability clause or not.

Are former employees entitled to the same protections under the NLRA as current employees?

The memorandum also reiterates that former employees are entitled to the same protections under the NLRA.  The Act states that “the term ‘employee’ shall include any employee, and shall not be limited to the employees of a particular employer.” The memorandum also points out that the NLRB found that Section 7 rights are not limited to discussions with coworkers, as they do not depend on the existence of an employment relationship between the employee and the employer.

Are there ever confidentiality provisions and non-disparagement provisions in a severance agreement that can be found lawful?

The memorandum states that, “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. However, 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.”

Are there ever non-disparagement provisions in a severance agreement that could be found lawful?

The memorandum provides that 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.

Would a “savings clause” or disclaimer save overbroad provisions in a severance agreement?

The memorandum provides that, “[w]hile specific savings clause or disclaimer language may be useful to resolve ambiguity over vague terms, they would not necessarily cure overly broad provisions. The employer may still be liable for any mixed or inconsistent messages provided to employees that could impede the exercise of Section 7 rights.”

Are there other provisions typically contained in severance-related agreements that you view as problematic?

Pursuant to the memorandum, “Confidentiality, non-disclosure and non-disparagement provisions are certainly prevalent terms. However, I believe that some other provisions that are included in some severance agreements might interfere with employees’ exercise of Section 7 rights, such as: non-compete clauses; no solicitation clauses; no poaching clauses; broad liability releases and covenants not to sue that may go beyond the employer and/or may go beyond employment claims and matters as of the effective date of the agreement; cooperation requirements involving any current or future investigation or proceeding involving the employer as that affects an employee’s right to refrain under Section 7, such as if the employee was asked to testify against co-workers that the employee assisted with filing a ULP charge.”

Key Takeaways

Employers should review their severance agreements to ensure that confidentiality and non-disparagement clauses are narrowly tailored to respect to the rights afforded to employees under the NLRA. In light of the new guidance, it is important for employers to review not only current and future severance agreements but any agreements or communications that could be construed to impede on employees’ Section 7 rights, including agreements that have already been signed. Should you have any questions or need assistance, please contact Ali Law Group.

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