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  • Jess Gregg

NLRB Says Confidentiality and Nondisparagement Clauses in Severance Agreements Violate NLRA.

Updated: May 23, 2023

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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