The National Labor Relations Board (“NLRB” or the “Board”) issued a pendulum-swinging decision on February 21, 2023, in McLaren Macomb (372 NLRB No. 58) overruling longstanding precedent to hold that employers may not offer employees severance agreements containing confidentiality or non-disparagement provisions (in such cases where the agreement is governed by the National Labor Relations Act (the “Act”)). Note, however, that the Act only applies to non-supervisory roles, including most hourly and individual contributor employees, and does not cover supervisors, such as managers and executive-level roles. Thus, it is important to understand that severance agreements with employees in supervisory positions are not impacted by this decision.
The NLRB found that McLaren violated the Act by offering employees a severance agreement containing confidentiality and non-disclosure provisions that restricted employees’ Section 7 rights under the Act. Specifically, the Board found that an employer violates Section 8(a)(1) of the Act (which makes it an unfair labor practice to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7 of the Act) by simply offering employees a severance agreement with terms restricting employees’ rights to, among other things, assist coworkers or former coworkers with workplace issues and communicate with others about their employment.
As to the non-disparagement provision, the Board found that it interfered with Section 7 rights because statements by employees about the workplace (e.g., statements related to unlawful and unsafe practices) are central to the exercise of rights under the Act. The Board noted that the non-disparagement provision had no time limitation and that it was not limited to employee communications that are “so disloyal, reckless or maliciously untrue,” as to lose protections under the Act. The Board concluded that the non-disparagement restriction in the severance agreement could limit employees’ publicizing a labor dispute, efforts to assist other employees, and future cooperation with Board investigative processes. The Board similarly held that the confidentiality provision violated the Act because it prohibited employees’ discussions related to the severance agreement with other employees, union representatives, and NLRB agents as protected under the Act.
“It’s long been understood by the Board and the courts that employers cannot ask individual employees to choose between receiving benefits and exercising their rights under the National Labor Relations Act. Today’s decision upholds this important principle and restores longstanding precedent,” said Chairman Lauren McFerran. The decision did not explicitly state that it would apply retroactively.
The McLaren decision makes clear that the Board will closely scrutinize the language of severance agreements to determine any restriction of employees’ rights under the Act. It is important to note that although the opinion stops short of suggesting that any disclaimer would have resulted in a different decision by the Board, it does seemingly imply that any such disclaimer would need to affirmatively allow employees to: participate in Section 7 activity; file Unfair Labor Practice charges and assist others in doing so; and otherwise cooperate with the Board’s investigative process. Going forward, there will be no one, single, method that suits all employers in complying with this new standard. Responsive approaches will likely run the gambit – from immediately ceasing from including confidentiality and non-disparagement clauses in severance agreements to including comprehensive, broad disclaimers and other written safeguards.
We will continue to monitor and provide updates on further developments. For now, employers should review any non-disparagement and confidentiality provisions they are proffering to non-supervisory employees, regardless of the document in which the provisions are included. If you have concerns about how this will impact your current business practices and/or general questions about this decision, please reach out to schedule a consultation. Taylor Johnson’s experienced contract and labor law attorneys are here to assist with the process of adopting an approach that best works for your business.