Key Takeaways:

  • On February 21, 2023, the National Labor Relations Board ("NLRB" or the "Board") issued a decision in McLaren Macomb providing that employers violate federal labor law when they require employees to sign severance agreements containing broad non-disparagement and/or confidentiality provisions.
  • On March 22, 2023, NLRB General Counsel Jennifer Abruzzo issued a memo on the McLaren Macomb decision and warned employers that their enforcement of past severance agreements with overly broad non-disparagement and confidentiality provisions will be treated as unlawful by her office.
  • In light of this guidance, employers should exercise caution not only in drafting new severance agreements, but also when attempting to enforce non-disparagement and confidentiality provisions in existing agreements, even if the agreements were signed years ago.

On March 22, 2023, NLRB General Counsel Jennifer Abruzzo issued a memo, GC 23-05, (the "Memo") in response to widespread questions from employers, labor organizations, and workers about the scope and impact of the Board's February 22, 2023 decision in McLaren Macomb, 372 NLRB No. 58. In McLaren Macomb, the Board departed from Trump-era precedent and found that broad confidentiality and non-disparagement provisions in severance agreements violate the National Labor Relations Act (the "Act"). The Board reasoned that such provisions can have the effect of interfering with employees' (including former employees') rights to discuss their terms and conditions of employment. (Our alert on the decision can be found here.)

In the Memo, Abruzzo clarifies that confidentiality clauses that are "narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications may be considered lawful." Similarly, a narrowly-tailored non-disparagement provision that is limited to defamation-like statements (e.g., those that are maliciously untrue) may be found lawful. Other, broader types of provisions would seem to run afoul of the Act.

The Memo does helpfully address one major question about the impact of invalid clauses on the rest of a severance agreement. Abruzzo explained in the Memo that generally the Board seeks to have overbroad or otherwise illegal clauses voided out as opposed to the entire agreement. She confirmed that a severability provision is useful to ensure that a finding that certain provisions of the agreement are unlawful (i.e., the confidentiality and non-disparagement provisions) will not be used as a basis for striking down other provisions, such as the general waiver and release of claims.

Abruzzo also confirms in the Memo that the McLaren Macomb decision does not apply to severance agreements offered to managers and supervisors, since managers and supervisors are not covered by the Act. However, in Abruzzo's view, the Act does protect supervisors or managers who are retaliated against based on their refusal to offer an overly broad severance agreement to an employee.

Further, Abruzzo makes clear that the mere proffer of an unlawful severance agreement—i.e., one with overly broad confidentiality and/or non-disclosure provisions—violates the Act whether or not the employee actually signs the severance agreement. This is because the proffer itself inherently coerces employees by conditioning severance benefits on the waiver of statutory rights such as the right to engage in future protected concerted activities and the right to file or assist in the investigation and prosecution of charges with the Board. That the employee did not sign the agreement does not render the employer's conduct lawful. Abruzzo also states her view that employees cannot waive their rights under the Act and request or agree to broad confidentiality and non-disparagement provisions in a severance agreement.

The Memo also answers the question about the retroactivity of the McLaren Macomb decision. Abruzzo explains that Board decisions are generally retroactive, unless the decision says otherwise, and McLaren Macomb does not. Thus, unlawful severance agreements proffered in the last six months since the decision are subject to prosecution. But more than that, whenever an employer tries to enforce an overbroad confidentiality or non-disparagement provision in a severance agreement – even when the agreement was entered years ago – this enforcement is considered a present-day unlawful act.

Finally, the Memo provides some suggestions on how employers can come into compliance with the McLaren Macomb decision. As to existing severance agreements, Abruzzo states that employers can avoid liability by informing workers subject to these agreements that any overbroad confidentiality and non-disparagement provisions in their existing severance agreements are now null and void, and that the employer will not seek to enforce the provision(s) or pursue any penalties, monetary or otherwise, for breaches of those provisions. Abruzzo expresses the view that, although voiding existing provisions may not cure a technical violation of an unlawful proffer, such action by an employer could still justify dismissing a case based solely on the proffer of the agreement.

When crafting new severance agreements, Abruzzo recommends that employers tailor confidentiality provisions to target the dissemination of specific, confidential information, such as trade secrets, based on legitimate business justifications. As to non-disparagement clauses, she suggests these provisions will be lawful in very limited circumstances, such as clauses prohibiting statements that are made with knowledge of their falsity or with reckless disregard for their truth or falsity. This might include knowingly false statements and attacks on the employer's products, services, or customers.

Abruzzo also signals that disclaimers or "savings" clauses may be effective, but only if they specify several categories of conduct which are not prohibited by the employee's severance agreement. Specifically, the Memo states that a disclaimer must make clear to employees that they have rights to engage in: (1) organizing a union to negotiate with their employer concerning their wages, hours, and other terms and conditions of employment; (2) forming, joining, or assisting a union, such as by sharing employee contact information; (3) talking about or soliciting for a union during non-work time, such as before or after work or during break times, or distributing union literature during non-work time, in non-work areas, such as parking lots or break rooms; (4) discussing wages and other working conditions with co-workers or a union; (5) taking action with one or more co-workers to improve working conditions by, among other means, raising work-related complaints directly with the employer or with a government agency, or seeking help from a union; (6) striking and picketing, depending on its purpose and means; (7) taking photographs or other recordings in the workplace, together with co-workers, to document or improve working conditions, except where an overriding employer interest is present; (8) wearing union hats, buttons, t-shirts, and pins in the workplace, except under special circumstances; and (9) choosing not to engage in any of these activities. However, the guidance states that, even with a disclaimer, employers retain liability for any mixed or inconsistent messages provided to employees that could impede the exercise of their Section 7 rights. Thus, according to Abruzzo, any disclaimers should be specific and only used in addition to the narrow tailoring of the confidentiality and non-disparagement clauses described above.

It is important to note that Abruzzo's guidance is not an expression of the views of the Board; rather, it is expressing the views of the office of the NLRB General Counsel, and Abruzzo in particular, in interpreting and applying the McLaren Macomb. However, this Memo sends a clear signal that Abruzzo's office has adopted a broad, employee-friendly interpretation of the decision and will seek to develop Board law endorsing those views should it receive cases that present that opportunity. Accordingly, employers should review their existing and future severance agreements, weigh the risks of retaining confidentiality and non-disparagement language that could be interpreted as overly broad, and decide what, if any, changes to make. Lastly, questions still remain as to the application of McLaren Macomb to other types of employment agreements and policies. The McLaren Macomb decision relates to severance agreements, but it is possible, and perhaps even likely right now, that the decision's confidentiality and non-disparagement limitations would apply to other types of agreements, like settlement agreements or employee handbooks. For now, there is limited direction on this point, but Foley Hoag will continue to advise as there are further developments on this topic.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.