On February 21, in a 3-1 decision, the National Labor
Relations Board overruled two Trump-era decisions, and
ruled that a Michigan employer violated the NLRA by
offering severance agreements to laid off employees that
conditioned benefits on their agreement to broadly-worded
confidentiality and non-disparagement clauses. The
decision involved severance agreements offered to
furloughed employees that prohibited them from making
statements that could disparage the employer and from
disclosing the terms of the agreement itself. The Board
majority ruled these provisions violated the Act because
employees could be discouraged from filing complaints with
the NLRB or publicizing labor disputes. McLaren Macomb,
372 NLRB No. 58 (Feb. 21, 2023).
“The nondisparagement provision on its face
substantially interferes with employees’ Section 7
rights. Public statements by employees about the
workplace are central to the exercise of employee
rights under the Act. Yet the broad provision at issue
here prohibits the employee from making any
“statements to [the] Employer’s employees or to the
general public which could disparage or harm the
image of [the] Employer”—including, it would seem, any
statement asserting that the Respondent had violated
the Act (as by, for example, proffering a settlement
agreement with unlawful provisions).
* * * * *
“Our scrutiny of the confidentiality provision of the
severance agreement leads to the same conclusion.
The provision broadly prohibits the subject employee
from disclosing the terms of the agreement “to any third
person.” (Emphasis supplied.). The employee is thus
precluded from disclosing even the existence of an
unlawful provision contained in the agreement. This
proscription would reasonably tend to coerce the
employee from filing an unfair labor practice charge or
assisting a Board investigation into the Respondent’s
use of the severance agreement, including the
nondisparagement provision. Such a broad surrender
of Section 7 rights contravenes established public
policy that all persons with knowledge of unfair labor
practices should be free from coercion in cooperating
with the Board.”
It is not unusual for employers to include confidentiality and
nondisparagement clauses in severance and settlement
agreements. The McLaren decision discusses only the
former and was focused on the broadly-worded language of
the agreement itself. The Board majority emphasized what it
saw as the coercive effect of these broad provisions,
regardless of whether any employee actually signed the
agreement. Thus, an employer potentially violates the Act
by offering severance conditioned on an agreement that
includes over-broad language like that described in the
decision.
It is unclear whether the Board’s ruling will apply to
provisions in severance agreements that are narrowly
tailored, for example, agreements that define
“disparagement” as maliciously false statements about the
employer’s products and services, that limit the
confidentiality provision in scope and duration, and which
contain a clear and conspicuous disclaimer that nothing in
the agreement should be construed to limit the employee’s
right to file an unfair labor charge with the NLRB, assist in
any Board investigation, or otherwise interfere with the
employee’s exercise of section 7 rights. Also unclear is
whether the ruling applies to confidential and
nondisparagement terms in negotiated settlement
agreements where the parties are represented by counsel.
In addition to the restrictions on severance agreements
imposed by the McLaren ruling, state law may raise
additional concerns. We advise that employers promptly
consult with their employment counsel to discuss options
that ensure compliance and best meet the needs of the
organization.
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