NLRB Issues Guidance Memo on Enforceability of Confidentiality and Nondisparagement Provisions

On March 22, 2023, the National Labor Relations Board (NLRB) General Counsel, Jennifer Abruzzo, issued a memorandum to all Field Offices, providing guidance on the NLRB’s February 2023 decision in McLaren Macomb, NLRB No. 58. That decision found that employers violate the National Labor Relations Act (NLRA) when they offer employees severance agreements that require employees to broadly waive their rights under the NLRA.

Specifically, the Board held that where a severance agreement unlawfully conditions receipt of severance benefits on the forfeiture of statutory rights, the mere offer of the agreement violates Section 8(a)(1) of the NLRA because it has a reasonable tendency to deter the prospective exercise of those rights.

The severance agreement at issue in the McLaren Macomb case contained broad non-disparagement and confidentiality clauses that:

1. Restricted employees from making statements that could disparage or harm the image of the employer and its officers, directors, employees, and agents, and;
2. Prohibited employees from disclosing the terms of the agreement to anyone, except for a spouse or professional advisor, unless compelled to do so.

The Board determined that the provisions were unlawful because they restricted employees from engaging in activity protected by the NLRA.

The General Counsel’s March 22 memo provides further guidance on the scope and application of the decision, including:

• Severance agreements are not banned and can lawfully contain releases that waive only the employee’s right to pursue employment claims that arise as of the date of the agreement. However, “the future rights of employees as well as the rights of the public may not be waived in a way that precludes future exercise of section 7 rights, including engaging in protected concerted activities and accessing the Agency.”
• Whether the employee actually signs the severance agreement is irrelevant for purposes of finding a violation of the NLRA since the offer itself coerces or deters employees by conditioning severance benefits on the overbroad release.
• The Board decision is to be applied retroactively.
• An unlawful proffer of a severance agreement may be subject to the six-month statute of limitation language under Section 10(b) of the NLRA; but 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 six-month statute of limitations would not time-barred.

In light of the decision and guidance, employers should review their existing severance agreements and any nondisparagement and confidentiality provisions in other agreements to determine if modifications are necessary to stay compliant with the law.