Impact of the NLRB’s McLaren Macomb Decision on Confidentiality and Non-Disparagement Provisions in Severance Agreements
Published: March 13, 2023
Section 7(a) of the NLRA Applies to More Than Just CBA Employees
In general, Section 7 of the National Labor Relations Act (“NLRA”) provides employees nationwide with certain rights relating to organizing with other employees and collective bargaining, whether or not they are subject to collective bargaining agreements (“CBAs”). These rights include the right to self-organize; join or assist labor organizations; cooperate in NLRB investigations; and engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection, including criticizing employer policies and discussing severance, wages and other terms and conditions of employment with co-workers and former co-workers.
The NLRA’s protections generally extend to most private sector employees. However, supervisors, managers, government employees, agricultural laborers, and independent contractors, are exempt from NLRA protections, with limited exceptions.
The McLaren Macomb Decision
On February 21, 2023, the National Labor Relations Board (“NLRB”) ruled that employers may not offer severance conditioned on an employee’s agreement to broad confidentiality and non-disparagement clauses because such an agreement violates Section 7 of the NLRA.
The provisions of the relevant severance agreement that the NLRB ruled violated the NLRA stated:
- Confidentiality. “The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than a spouse, or as necessary, to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.”
- Non-disparagement. “At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.”
For all intents and purposes, the above provisions are standard and common in employment severance agreements. However, the NLRB held that these clauses stifled the Section 7 rights of the 11 employees offered the severance agreements. Specifically, the NLRB ruled that simply requesting those employees to sign the severance agreements could be an NLRA violation because these clauses had a reasonable chance of coercing the employees into not utilizing their rights under Section 7.
In its reasoning, the NLRB noted that these provisions: appeared to prohibit an employee from making any statement asserting that the employer had violated the NLRA; were not limited to matters regarding past employment with the employer; provided no definition of “disparagement”; extended to statements relating to the employer’s parents and affiliated entities and their officers, directors, employees, agents and representatives; and lacked time limitations.
What This Means Going Forward
This decision does not apply to supervisors, managers, government employees, agricultural laborers, or independent contractors, to whom the NLRA generally does not apply.
Unfortunately for employers, with respect to other employees to whom the NLRA applies, the NLRB’s decision appears to void severance agreements with confidentiality and non-disparagement terms similar to those in the McLaren Macomb case, to the extent those terms may not be severed from the remainder of those agreements.
Employers may still be able to include confidentiality provisions in severance agreements, provided they have no effect on an employee’s Section 7 rights. For example, an employer could require an employee to agree to keep confidential all of the employer’s trade secrets upon departure from the company.
Also, although the NLRB may find some non-disparagement agreements to violate Section 7, this decision is not a blanket protection for disparaging speech, because the NLRA does not protect speech relating to concerted or collective action if it is “disloyal, reckless, or maliciously untrue.”
Finally, in the wake of McLaren Macomb, employers will have to decide how they wish to handle the restrictions imposed by the NLRB in this decision. The most conservative approach may be to delete confidentiality and non-disparagement provisions from their severance agreements. However, more risk-tolerant employers may take other actions, like including carve-out language that addresses McLaren Macomb, but otherwise preserves confidentiality and non-disparagement provisions to the fullest extent possible. Employers should consult with legal counsel to discuss this case and review their options.