Did the NLRB Just Ban Confidentiality and Non-Disparagement Agreements?

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On February 21, 2023, the National Labor Relations Board (NLRB) issued a decision in McLaren Macomb holding that confidentiality and non-disparagement provisions in severance agreements were prohibited under the National Labor Relations Act (NLRA). See McLaren Macomb, 372 NLRB No. 58 (2023). The Board found that these terms unlawfully interfered with employees’ rights under Section 7 of the NLRA to publicly discuss working conditions.

Who Is Affected?

Many people misconstrue the NLRA’s impact to be limited to union employees. In fact, the protections of the NLRA apply to most private sector employees and employers, excluding management and supervisory employees. This means that most employee separation agreements may be affected by this ruling. Even employment agreements and confidentiality agreements that contain non-disparagement terms may need to be revised as a result of the McLaren Macomb decision.

The employer in McLaren Macomb offered furloughed employees severance agreements that contained a confidentiality provision preventing the employees from discussing the terms of the agreement. The agreements also included a non-disparagement provision requiring the employees to refrain from disclosing the employer’s confidential information and from disparaging the company to employees or the general public.

Section 7 of the NLRA gives broad rights relating to employees’ ability to speak about the employer and the terms and conditions of employment with coworkers and the public. It is a violation of Section 7 for an employer to prohibit or to interfere with employees’ ability to speak about working conditions. The Board has issued rulings in the past related to employees’ social media posts and employment policies in employers’ handbooks.

What Did the NLRB Say?

In McLaren Macomb, the Board found that the employer’s offer of severance agreements containing these terms violated the NLRA. The Board held that the provisions on their face restricted employees from publicly discussing their terms and conditions of employment and otherwise exercising rights under the NLRA. Whether the employees signed the agreements was irrelevant because it was the act of proffering the agreements that violated the NLRA. The Board stated that “[a] severance agreement is unlawful if it precludes an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about his employment.”

In particular, the Board did not like that the agreements’ non-disparagement provision could be read to prohibit employees from asserting that their employer had violated the NLRA in any way. It could also dissuade employees from participating in NLRB investigations into a company’s actions. Similarly, the Board found that the confidentiality clause disincentivized employees from disclosing any of their employer’s potential violations of the NLRA, filing an unfair labor practice complaint, or aiding the NLRB in an investigation. Further, the promise of confidentiality forbade employees from discussing their severance offers with past employees who had already signed the agreements or with others in the workplace interested in organizing.

This holding is an expansion of prior decisions that limited the protections of Section 7 to current employees. By restricting the terms of severance agreements, the Board is espousing a right of employees to discuss the terms of severance agreements with coworkers, whether or not such coworkers are offered similar severance terms.

What Should Employers Do?

This NLRB decision has created concern about previously executed severance agreements. The decision implied that certain carve-out language may be available to employers, meaning that non-disparagement and confidentiality provisions might still be valid under the NLRA as long as they allow for some exceptions, such as talking with other employees about the terms of the agreement. The Board, however, did not offer any specific guidance to ensure employers avoid an unintended violation of employees’ rights.

While the McLaren Macomb decision remains subject to appeal and could be vacated in the future, for now, employers must sift through the uncertainty and cautiously review their standard severance language. It would be wise to work with employment counsel familiar with employment agreements to ensure that employers are remaining compliant as this area of law is rapidly evolving.